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Congress Finally Fixes Service Member Residency Requirements.

One of the most - I think - was the tax rule concerning those whose join the military was that your state of residence for tax purposes was where you signed up for the military.   So, if you joined the military from a state that has state income tax laws, you had to pay state taxes to to that state - even if you currently live in a state that had no tax.

Congress finally fixed it.

The Veterans Auto and Education Improvement Act of 2022 (VAEIA) was signed into law Jan. 5, 2023. The Act expands existing legislation protecting military service members’ and their spouses’ residency. 

Section 18 of the VAEIA amends the existing Servicemembers’ Civil Relief Act (SCRA) and Military Spouses Residency Relief Act (MSRRA) state tax residency provisions for both servicemembers and their spouses. 

This provision prevents the spouse of a service member from either losing or acquiring a residence or domicile because of being absent or present in any U.S. tax jurisdiction when joining the service member in compliance with the service member’s military orders. 

The VAEIA expands the military spouse residency election by allowing both the service member and spouse to choose between the spouse's residence, the service member's residence, or the permanent duty station of the service member for tax purposes. 

Thus, service members and their spouses now have three residency options which they may elect. These options apply regardless of their date of marriage. 

  • The residence or domicile of the servicemember 
  • The residence or domicile of the spouse 
  • The permanent duty station of the servicemember