According to Hawaii Tax Information Release No. 2010-01, "Income received by the servicemember’s civilian spouse for services performed by the servicemember’s spouse in Hawaii is not considered Hawaii sourced income and therefore, not subject to Hawaii income tax if all of the following conditions are met:
- The servicemember is present in Hawaii solely in compliance with military or naval orders
- The spouse is in Hawaii solely to be with the servicemember
- The spouse and servicemember are domiciled in the same state and that state is not Hawaii."
To claim tax-exempt from Hawaii withholdings:
A nonresident spouse whose salary, wages, tips, or other compensation is exempt from Hawaii income tax under the Military Spouses Residency Relief Act (MSRRA) may claim an exemption from Hawaii income tax withholding by filing the following forms with his or her employer:
- Copy of the service member's military orders
- Copy of Leave and Earnings Statement (LES)
- Valid military spouse ID card
To claim a refund of taxes withheld from your Hawaii income, follow these steps in the program:
- Federal Section
- Wages and Salaries
- Edit the Military Spouse's W-2 Remove the entry in box 16. Leave the amount listed in Box 17 to claim the refund. Click Continue to save the information.
Write “MSRRA” at the top of Nonresident Tax Return Form N-15, and attach a copy of the following documents:
- Form W-2 showing the amount of Hawaii income tax withheld.
- The servicemember’s military or naval orders assigning the servicemember to a post of duty in Hawaii
- A valid, unexpired military spouse identification card that identifies the cardholder as a spouse and not merely a dependent, and
- The servicemember’s Leave and Earnings Statement (LES)indicating that the servicemember’s legal residence for purposes of withholding state income taxes from military pay is a state other than Hawaii. The nonresident spouse’s income that is exempt from Hawaii income tax under the above requirements should only be reported in Column A. Do not report any income that is exempt under the above requirements in Column B (Hawaii income).
Military Spouse income may be taxable on your state return where you file as a resident.