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

Wages for Spouses of Military Personnel: Under the Servicemember Civil Relief Act” refers to a special exemption allowed under the Military Spouses Residency Relief Act (MSRRA), which is part of the Servicemember Civil Relief Act (SCRA).

If you're a military spouse living in Virginia only because your spouse is stationed there on military orders, you may be exempt from paying Virginia income tax on wages earned in Virginia if:

1. The servicemember is stationed in Virginia in compliance with military orders;
2. The spouse is present in Virginia solely to be with the servicemember;
3. They both maintain the same non-Virginia domicile state.

How can I exclude the wages from Virginia taxable income? 

To enter the amount of military spouse exempt wages from your Virginia income, follow these steps in the program:

1. State Section
2. Nonresident Virginia Return
3. Income Subject to Tax
4. Wages for Spouses of Military Personnel: Under the Servicemember Civil Relief Act
5. Enter the wages as a positive number
6. Click Continue to save your entries

How to claim tax exempt from Virginia withholding?

If you qualify, you can stop your withholding by submitting a revised Form VA-4 to your employer.  If you are claiming exemption under the Military Spouses Residency Relief Act, check the box on Line 4 and attach a copy of your spouse's military ID card to the Form VA-4. This form must be filed annually with your employer. 

How to claim a refund of taxes withheld from your Virginia income? 

The VA Special Non-resident Claim form (VA-763S) also known as Virginia Form 763-S is used by nonresidents of Virginia to claim a refund for Virginia state income tax that was withheld in error or under special circumstances.

Virginia Form 763-S Virginia Special Nonresident Claim For Individual Income Tax Withheld may be used when:

• You are a military spouse temporarily in Virginia.
• Your employer mistakenly withheld Virginia taxes even though you didn’t work or live in Virginia.
• You live in a state that has a reciprocal tax agreement with Virginia.

You may qualify to file this form if you meet one of the following exemption categories:

1. Commuter State Exemption - You live in Kentucky or the District of Columbia and commute daily to work in Virginia. You are not a Virginia resident and only earned wages in Virginia.
2. Domiciliary State Exemption - You are a legal resident of Maryland, Pennsylvania, or West Virginia, and your only Virginia income was wages. You did not live in Virginia for more than 183 days.
3. Military Spouse Exemption - You are in Virginia solely to be with your spouse who is on active military duty. You share the same legal state of residence as your spouse.
4. Tax Withheld in Error - You were not a Virginia resident and did not perform any work in Virginia, but your employer withheld Virginia taxes by mistake.

To create the form, go to the state return and follow the pathway below:

• Miscellaneous Forms
• VA Special Non-resident Claim form (VA-763S)
• Special Nonresident Claim

While Virginia Form 763-S can be electronically prepared, the Virginia Department of Taxation requires it to be paper filed by mail. Your refund cannot be issued unless all required items are attached to the 763-S Form.

Please Include:

• Copies of your W-2 Forms to document the Virginia income tax withheld,
• If your state of legal residence imposes an income tax, you must also attach a complete copy of the return you filed with that state,
• A copy of your military spouse ID card,
• Proof of your spouse's state of legal residence, such as a copy of a Leave and Earnings Statement (LES), current driver's license from the state of residence, or DD Form 2058 (State of Legal Residence Certificate).

Please note: your military spouse income may be taxable on your state return where you file as a resident.

More information is available in Tax Bulletin 09-10 and Tax Bulletin 10-1available on the website at www.tax.virginia.gov.