Members of the military and their spouses remain domiciled in the state in which they have established permanent residency until they take the necessary steps to change their residency (see Military Spouse Residency Relief Act information below). This is true regardless of where you are stationed during the year. Therefore, if you enter the armed forces as a Minnesota resident, you remain domiciled in Minnesota unless positive action is taken to abandon your Minnesota residency and establish a domicile in another state.
If you are a Minnesota resident, you must file a Minnesota return as a resident, regardless of where you were stationed during the year. However, if your gross income included on your federal return, minus any compensation received for active duty performed outside Minnesota, is less than $9,750, you are not required to file a Minnesota return.
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If you are a resident of another state who is stationed in Minnesota, being in Minnesota for over half of the year does not make you a resident of Minnesota. The 183-day rule does not apply to military members or their spouses, unlike civilian nonresidents. Military personnel who are part-year residents or nonresidents: When determining if you are required to file a Minnesota
do not include:
• active duty military pay for service outside Minnesota, or
• active duty military pay for service in Minnesota
If you are a military person who lives with your spouse, both you and your spouse will usually have the same state of residence for tax purposes (see Military Spouse Residency Relief Act ). An exception to this rule is if you and your spouse had different states of residence at the time of your marriage. In this case, you may maintain your separate states of residence until positive action is made to change your residency.
Note: If you have had an actual change of residence, be sure to change your state of residence with your paymaster (use Military Form DD2058). Keep in mind that changing your state of residence with your paymaster or moving from one duty station to another does not in itself constitute a change of residence
Resident military spouses: If you are the spouse of an active duty military member who is stationed outside of Minnesota, any income you earned in the other state is assignable to Minnesota.
Nonresident military spouses: Nonresident military spouses may be exempt from Minnesota tax on personal service income performed in Minnesota if all of the following requirements were met:
• The servicemember was present in Minnesota in compliance with military orders,
• The servicemember was a resident or domiciled in a state other than Minnesota,
• The spouse was in Minnesota solely to be with the servicemember, and
• The spouse had the same state of residency or domicile as the servicemember.
Credit for Military Service in a Combat Zone
If you served in a combat zone or hazardous duty area at any time during 2012 and Minnesota was your home of record, you are eligible for a credit of $120 for each month or part of a month you served. To claim the credit, complete Form M99, Credit for Military Service in a Combat Zone.
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Military extensions. Military personnel serving in, or in support of, presidentially declared combat zones are allowed the same extensions of time to file and pay their state income taxes as they are allowed for federal taxes. When you file Form M1, enclose a separate sheet stating you were serving in a combat zone.
The Military Spouses Residency Relief Act
Federal legislation signed into law on November 11, 2009 amended the Servicemembers Civil Relief Act to allow spouses of active duty members of the military to keep their state of residence when moving with their military spouse. This legislation prohibits states from taxing the income for services performed by the non-military spouse who is a nonresident.
Resident spouse of a military member stationed outside of Minnesota:
Spouses of active duty military members may now keep their state of residence when moving to be with their military spouse. If your nonmilitary spouse is a Minnesota resident, his or her income is fully taxable to Minnesota and a return is required to be filed with Minnesota when they are required to file a federal return. If your spouse is not required to file a return, he or she may wish to file in order to claim any refundable credits for which they may be eligible. The income exclusion applies to “personal service income,” outlined below.
Your non-military spouse should apply for exempt status with their employer so that withholding to the other state is not taken out of their pay. However, they may be required to make estimated tax payments to Minnesota, since there will be no withholding to Minnesota on that income.
Nonresident spouse of a military member stationed in Minnesota
For Minnesota income tax purposes, a spouse of an active duty military member may be exempt from Minnesota tax on personal service income performed in Minnesota, if the following four requirements are met:
• The servicemember is present in Minnesota in compliance of military orders,
• The servicemember is a resident or domiciled in a state other than Minnesota,
• The non-military spouse is in Minnesota solely to be with the military member, and
• The non-military spouse has the same state of residency or domicile as the servicemember.
If your nonresident spouse meets these requirements, they should apply for exempt status with their Minnesota employer. If withholding was taken out of their wages, they must file a return with Minnesota in order to get the money refunded using Form M1 and Schedule M1NR.
Since most of Minnesota’s credits are based on the percentage of income taxable to Minnesota, you may not qualify for credits.
To support your non-military spouse’s exempt withholding status, you should provide the following documents when requested:
• a copy of your current military orders, assigning you to your post of duty, and
• Form DD 2058, State of Legal Residence Certificate.