According to the Kentucky Department of Revenue website, "The Military Spouses Residency Relief Act (MSRRA) (Public Law 111-97) was signed into law on November 11, 2009. This law is effective for taxable years beginning 2009 and after. The MSRRA allows the same residency benefits permitted to military personnel under the Servicemembers Civil Relief Act (SCRA) to also apply to a military spouse's nonmilitary service income under certain circumstances".
To claim tax-exempt from Kentucky withholdings:
Form K–4M is to be used for employees claiming exemption from Kentucky’s income tax withholding requirements because they meet the conditions set forth under the Servicemembers Civil Relief Act, as amended by the Military Spouses Residency Relief Act.
Under the Military Spouses Residency Relief Act, the spouse of an armed forces member is exempt from Kentucky income tax when:
- The employee’s spouse is a military service member
- The employee is NOT a military service member
- The military service member spouse has a current military order assigning him or her to a military location in Kentucky
- The employee and military service member reside at the same address
- The employee’s domicile is a state other than Kentucky
- The employee’s and military service member’s domicile is the same
- The employee is present in Kentucky solely to be with the military service member spouse.
If all of the above conditions are met, the employee is exempt from Kentucky withholding tax.
To claim a refund of taxes withheld from your Kentucky income, follow these steps in the program:
- State Section
- Kentucky Nonresident Return
- Basic Information
- Complete the Residency Information
- Adjustments to Income
- Military Spouse Income
- Complete the entries for military spouse income included in Federal AGI
- Complete military spouse income included in Kentucky AGI.
Military Spouse income may be taxable on your state return where you file as a resident.