Under the Federal Servicemembers Civil Relief Act (SCRA), Nebraska cannot tax the income of a nonresident servicemember's spouse when the spouse is a nonresident of Nebraska. The Veterans Auto and Education Improvement Act of 2022 amended the SCRA to provide an election for married military servicemembers and spouses that applies to any taxable year of marriage, regardless of the date of the marriage, for taxable years beginning on or after January 1, 2023. Military servicemembers and spouses may elect to use one of the following for tax purposes:
- The residence of the military service member
- The residence of the spouse of the military service member, or
- the permanent duty station of the military servicemember.
Note: The income earned from services performed by the nonresident spouse should not be included as Nebraska source income on line 1, Schedule III.
To claim tax-exempt from Nebraska withholdings:
Qualified spouses must complete and file the Nebraska Employee Certificate for Allocation of Withholding Tax, Form 9N, with their employers. On Form 9N, check the box certifying that you are a qualified spouse. If your employer has done any withholding for the current year, an adjustment can be made on a future paycheck to refund this prior withholding. This form needs to be completed annually.
To claim a refund of taxes withheld from your Nebraska income, follow these steps in the program:
- State Section
- Edit Nebraska Nonresident state return
- Income Subject to Tax
- Amounts Derived from Nebraska Sources
- Income of Servicemembers Spouse - Enter military spouse's income not taxable to Nebraska
- Continue to save
Military Spouse income may be taxable on your state return where you file as a resident.