How do I deduct the military spouse’s income on the Oregon return?

According to Oregon Revenue Bulletin 2011-02, "To qualify for the exemption for income earned from services performed in Oregon, you must: 

• Be domiciled outside Oregon;
• Be married to a military member stationed in Oregon who is domiciled outside Oregon 
• Live in Oregon only to be with your spouse.

To claim exempt from Oregon withholding:

If Oregon taxes were withheld from your exempt wages, you should file Form W-4 with your employer. At the top, write "For Oregon Only—Exempt Military Spouse" and write "Exempt" on line 7. Your employer may require proof that you qualify for the exemption.

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

1. State Section
2. Oregon Nonresident Return
3. Income Subject to Tax
4. Amount to adjust state wages pulled from federal
5. Enter the state wages as shown in Box 16 of your W-2
6. Save 

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