Once a month, Coast Guard All Hands will feature “Dear Coast Guard Family,” a column for Coast Guard families by Coast Guard spouse Rachel Conley. Rachel is married to her high school sweetheart, Chief Warrant Officer James Conley, and is the mother of three children. Rachel passionately serves as a Coast Guard Ombudsman and advocate of Coast Guard families. She is the recipient of numerous awards, including the United States Coast Guard Ombudsman of the Year Award.
Written by Rachel Conley
For military spouses, residency can be a somewhat complicated matter, but thanks to the Veterans Benefits and Transition Act of 2018, they now have greater flexibility! Mr. Christopher Dunne, U.S. Coast Guard Chief of Legal Assistance and the service representative on the Armed Forces Tax Council, shares that this statute contains four amendments to the Servicemembers Civil Relief Act (SCRA), one of which offers spouses of servicemembers the option of electing to use the same residence as their servicemember for purposes of taxation under certain circumstances.
The Servicemembers Civil Relief Act (SCRA) is a federal law that provides a wide range of protections to military members, and in some cases, their dependents. Part of that protection allows military members to maintain their state of domicile – also called residence – for voting and taxes regardless of where they may move on military orders. “If they choose to adopt a new domicile where they’re living, they’re free to do that too,” Dunne said. This option can be especially appealing when assigned to a state without income tax.
Historically, that protection only applied to military members and not to their spouses, but in 2009 the law was changed. The new law protected military spouses from losing their state of residence if their legal residence aligned with the servicemember’s. Given the frequency of military moves, the ability to maintain residency was of significant benefit to eligible spouses. However, for many spouses, their state of residence was not the same as their servicemember’s and they were not eligible for protection under this law.
That all changed on December 31, 2018 when the President signed the Veterans Benefits and Transition Act of 2018. “The change in the law says that for any taxable year of the marriage – regardless of when they were married during that year, the spouse may elect, for tax purposes, to use the servicemember’s domicile or residence,” Dunne said. This is a really groundbreaking change — conceivably, for tax purposes, a spouse could be a resident of a state they’ve never been to, he explained.
But, Dunne cautions that the law is not cut and dry. “Legal residency is defined as a physical presence and an intent to return when absent. It’s important for the servicemember to maintain clear ties to the state that they’re claiming as their domicile,” he said. If they don’t, this puts both the member’s and the spouse’s residency at risk, because the spouse’s protection under the law is based on the residency of their servicemember. Additionally, when the law was originally changed in 2009, it stipulated that the spouse must accompany the member on military orders to be eligible for the protections. This meant that in a geo-bachelor situation, spouses were not protected under this law. Dunne shares that while some states have already taken the position that this requirement is included in the new law, not all have done so. The law is so new and unique that the states and tax experts are still sorting through the details.
While the law allows military spouses to elect to use the same residence as their servicemember for tax and voting purposes, it does not fully establish the spouse as a legal resident of that state for other purposes. For example, it does not necessarily allow the spouse to obtain a driver’s license, car registration, or homestead exemptions in that state.
Because this change is retroactive to last year, eligible spouses can elect to use the same residence as their servicemember for their 2018 income tax returns, Dunne shares. In some situations, that may mean that they get money back. For example, if the servicemember is a resident of Florida (a state that doesn’t tax income) and the spouse was considered a resident of Virginia during 2018 (a state that does tax income), the spouse can now elect to use Florida for tax purposes and file a Virginia non-resident tax return to recoup income taxes paid to Virginia during the 2018 tax year. “Those who have already filed their 2018 income taxes can choose to file an amended tax return,” said Dunne, but bear in mind, some states may not have had an opportunity to update their forms to reflect these changes. In that case, individuals should contact the state taxing authority to determine if they have special filing instructions.
Residency and taxes can be quite complex. Dunne encourages Coast Guard members and spouses with questions or concerns to contact a Coast Guard Legal Assistance Attorney.
Free Online Tax Filing through CG SUPRT: File your taxes for free with H&R Block through the CG SUPRT website! To access this service, go to www.CGSUPRT.com, select “My CG Support Site” and enter the password “USCG”, select the “Free Tax Filing” tile and click the link provided. This service is available to Coast Guard active duty members, civilian employees, members of the selected reserve and their dependent family members.