How do I deduct the military spouses income on the Iowa return?

According to the Iowa Department of Revenue, "Under the MSRRA, income from services you perform may be excluded from Iowa income tax if: 

• your spouse is a member of the armed forces;
• your spouse is present in Iowa in compliance with military orders;
• you are present in Iowa solely to be with your spouse; and
• you and your spouse maintain your domicile in a state other than Iowa.

If you qualify for the MSRRA, income for services you perform while present in Iowa is sourced to your domicile state and not Iowa."

To claim tax-exempt from Iowa withholdings:

If you qualify to claim tax-exempt from Iowa withholdings, you need to complete Form IA W-4 with your employer. To claim the exemption, you will need to provide the employer a copy of your spousal military identification card as well. 

To claim a refund of taxes withheld from your Iowa income, follow these steps in the program:

1. State Section 
2. Nonresident Iowa Return
3. Basic Information
4. Are you a Resident of Iowa- No
5. Repeat for Spouse 
6. Select the County where you lived on December 31st,Part Year/Non Resident
7. Continue
8. Subtractions from Income
9. Other Subtractions from Federal Taxable Income
10. Enter amount
11. Select Military Exemptions -  from the Adjustment Type drop-down menu
12. Continue

Military Spouse income may be taxable on your state return where you file as a resident.