According to the North Carolina Department of Revenue, "...effective for tax years beginning in 2009, the income earned for services performed in North Carolina by the spouse of a service member who is legally domiciled in a state other than North Carolina is exempt from North Carolina income tax if:
- the service member is present in North Carolina solely in compliance with military orders
- the spouse is in North Carolina solely to be with the service member
- the spouse is domiciled in the same state as the service member.
Important: All three conditions must be met to qualify for exemption.
How do I claim Tax-Exempt from North Carolina tax withholdings?
If you qualify for the exemption, you must complete form NC-4 EZ and file it with your employer. A new form must be filed by February 15th each year.
How do I claim a refund if my employer withheld North Carolina taxes from my exempt income?
To subtract the exempt income log in and follow these steps:
- Nonresident North Carolina Return
- Income Subject to Tax
- Federal Income Subject to North Carolina Tax
- Wages that qualify for Military Spouse Residency Relief Act. Enter the wages as shown in box 16 of the spouse's W-2 as a positive number.
If you had taxes withheld from your North Carolina income but qualify for the Military Spouse Relief Act, you will need to file a non-resident return to receive a refund.
Military Spouse income may be taxable on your state return where you file as a resident.