Members of the Armed Forces Residency is established according to military domicile as established by the Servicemembers’ Civil Relief Act of 2003 (SCRA), formerly known as the Soldiers’ and Sailors’ Civil Relief Act of 1940 (SSCRA). The Veterans Auto and Education Improvement Act of 2022 (VAEIA) changed existing provisions under the SCRA on election of state residency for tax purposes for military servicemembers and their spouses.
Military Spouse Income Exemption
A qualifying nonresident military spouse may be exempt from Oklahoma income tax on wages or other earned income from services performed in Oklahoma if the requirements of the applicable federal law are met. This exemption applies to the spouse's earned income and does not apply to the servicemember's military pay.
Residency Election for Married Couples
Federal law allows a military servicemember and spouse to elect a state of residence for state income tax purposes, if eligible. The election may be based on the servicemember's residence, the spouse's residence, or, when permitted under federal law, the servicemember's permanent duty station. Any residency election must satisfy the requirements of the applicable federal law.
Allocation of Deductions and Exemptions
When one spouse is an Oklahoma resident and the other is a nonresident, income, deductions, exemptions, and credits must be allocated according to Oklahoma law. Taxpayers should complete Form 574, Resident/Nonresident Allocation, to determine the proper allocation between the resident and nonresident spouses.
Nonresident Filing Requirements
A nonresident spouse with Oklahoma-source income may be required to file Form 511-NR, Oklahoma Nonresident/Part-Year Income Tax Return. However, if all Oklahoma wages qualify for exemption under the Military Spouses Residency Relief Act, the spouse may not owe Oklahoma income tax on those wages. Taxpayers should retain documentation supporting their eligibility for the exemption.
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Disclaimer: Always verify with the most current Federal or State Department of Revenue Forms and Instructions. Tax rules may vary by state and year. For complex situations, consult a CPA or tax attorney.