According to the CA Publication 1032, "Under the Federal Military Spouses Residency Relief Act (MSRRA), the income of a non-military spouse of a military Servicemember for services performed in California is not considered to be from sources within California if the spouse is not a California resident because the spouse is in California solely to be with Servicemember solely in compliance with military orders and both have the same out-of-state domicile. *Note: California may require nonmilitary spouses of Servicemembers to provide proof that they meet the criteria for California personal income tax exemption as set forth in the MSRRA."
California is a community property state. Therefore, if one spouse is a California resident, the return must include one half of the non-resident spouse's pay. Consult CA Publication 1032 for more information on how to split income in the community property state.
To claim tax-exempt from California withholdings:
The Employee’s Withholding Allowance Certificate (DE 4) provides a specific line and signature for the servicemember spouse to attest under penalty of perjury, that they are requesting an income tax exemption from the State of California. The following records (not inclusive) may be requested from the employer or employee to verify the tax exemption:
- Spouse’s military ID card.
- Servicemember’s Leave and Earnings Statement (LES).
- Servicemember’s W-2.
- Spouse’s driver’s license
- Spouse’s voting registration.
- Department of Defense Form DD 2058, Declaration of servicemember’s “permanent state of residency.”
- Marriage license.
- Divorce decree.
To claim a refund of taxes withheld from your California income, follow these steps in the program:
- State Section
- Nonresident CA return
- Basic Information
- Residency and Nonresidency information During 2023. Complete the CA Resident Status indicating you were a nonresident of the state.
- Scroll down to 'If you were a nonresident of California for the entire year' and enter your state of residence.
- Scroll down to 'If you are military" and enter the state you were stationed in. Click Continue until Exit California Return.
The military member's income will also need to be subtracted from the state return. To do so, follow these steps in the program:
- Subtractions from Income
- Military Pay Adjustments
- Enter the military servicemember's pay as a positive number
- Continue until Exit California Return
Military Spouse income may be taxable on your state return where you file as a resident.
Refer to your resident state instructions for filing requirements.
If you have any questions, please refer to Publication 1032.