How do I deduct the military spouse's income on the Maine return?

According to the Maine Tax Alert Publication, MSRRA provides that a military spouse cannot lose or acquire residence or domicile in a state when the military spouse is absent from, or located in, a state solely to be with the service member who is complying with military orders. Consequently, for Maine income tax purposes, a military spouse will not be treated as a resident of Maine if the following conditions are met:

• The military spouse is located in Maine solely to be with the service member;
• The service member is located in Maine in compliance with military orders;
• The service member and the spouse were resident or domiciled in a state other than Maine immediately prior to being located in Maine; and
• The service member and the spouse have the same state of residency or domicile.

Maine law imposes income tax on the Maine-source income of a nonresident individual. Under provisions of SCRA, income of a military spouse for the performance of services in Maine will not be treated as Maine-source income subject to Maine income taxation if: 

• The military spouse is a not a resident or domiciliary of Maine;
• The military spouse is located in Maine solely to be with the service member;
• The service member is located in Maine in compliance with military orders; and
• The service member and the spouse have the same state of residency or domicile."

To claim tax-exempt from Maine withholdings:

A military spouse can claim exempt from Maine income tax withholding if the income is excluded from Maine-source income under MSRRA.

To claim the exemption, line 6e of Form W-4ME  needs to be completed and submitted to the employer. The military spouse must attach a copy of the service member’s latest Leave and Earnings Statement (LES) and present a valid military ID as proof that the employee is the spouse of a service member. The exemption form expires at the end of the year and another must be filed or the military spouse will be subject to withholding (single with one exemption).

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

1. State Section
2. Edit Nonresident Maine state return
3. Residency Information
4. Complete the Residency Information requested here and under the section marked 'Complete for your period of Non-Residency during 2024'.
5. Click Save until returned to 'Maine State Return' screen 
6. Credits
7. Nonresident Credit (Worksheet B)
8. Income Modifications
9. Report the spouse's Maine income in the box labeled "Additions to Income". This entry will identify the amount entered as non-Maine income. 
10. List "MSRRA" for the description of Additions to Income
11. Continue

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