Military Tax Tips
Members of the Military
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For information on the following topics, just click on the topic or scroll down the page.
- Filing Requirements
- Resident Military Personnel
- Nonresident Military Personnel
- Spouses and Dependents
- Filing Separate Returns
- Deduction for Military Basic Pay
- Exemption for Virginia National Guard Income
- Subtraction for Combat and Hazardous Duty Pay
- Claiming more than one Subtraction
- Filing and Payment Extensions
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Members of the armed forces on active duty are taxed on their military pay only by their legal states of residence (home of record). If your legal state of residence was Virginia when you entered the armed forces, and you have not legally changed your residency to another state, you are still a Virginia resident, although you may be stationed elsewhere. Report all of your income on your Virginia return, Form 760, whether it was received from within or outside of Virginia. If your spouse is also a Virginia resident, you should file a joint return, using Filing Status 2.
Members of the armed forces who are not Virginia residents are not subject to Virginia income tax on their military pay, or on interest received from accounts held in Virginia banks. However, if you have other income from Virginia sources, such as a part-time job, or a business or trade conducted in Virginia, you are subject to tax on this income. You should report the income on a nonresident return, Form 763. Your residency status as a member of the military does not extend to your spouse or dependents. Non-military spouses and dependents living in Virginia are subject to the same residency and filing requirements as all other individuals.
Spouses (for taxable years prior to 2009) and dependents of military personnel are subject to the same residency and filing requirements as all other individuals who are not members of the armed forces. For more information, see Who Must File and Residency. For taxable years 2009 forward, spouses may be eligible for relief, based on federal provisions with respect to legal residency. For additional information, see the Military Spouses Residency Relief Act: Frequently Asked Questions.
If you are a resident and your spouse is a nonresident (or vice versa), you and your spouse must file separate returns. Income, dependent exemptions and itemized deductions must be allocated under federal rules for separate filing, as if you had filed separate federal returns. As a general rule, the spouse claiming an exemption for a dependent must be reporting at least half of the total federal adjusted gross income. In addition, the spouse must be able to support his/her claim of itemized deductions. If it is not possible to account for the deductions separately, the deductions may be allocated based on each spouse's share of the federal adjusted gross income. When filing a separate return, the other spouse's income, exemptions and deductions should not be included.
Military personnel stationed inside or outside Virginia may be eligible to subtract up to $15,000 of military basic pay received during the taxable year, provided they are on extended active duty for more than 90 days. For every $1.00 of income over $15,000, the maximum subtraction is reduced by $1.00. For example, if your basic pay is $16,000, you are entitled to deduct only $14,000. You are not eligible for the subtraction if your military basic pay is $30,000 or more.
The wages or salaries received by any person for active and inactive service in the National Guard of the Commonwealth of Virginia, not to exceed the amount of income derived from thirty-nine calendar days of such service or $3,000, whichever amount is less. However, only those persons in the ranks of 03 (Captain) and below shall be entitled to the deductions specified herein.
If a National Guard service member has been in an active duty status for 90 consecutive days or more during the taxable year, they may also qualify for the exemption for the first $15,000 of basic military pay. However, if a National Guard service member has been on active duty status for less than 90 consecutive days of the taxable year, they will not qualify for the exemption for the first $15,000 of basic military pay. If their extended active duty status rolls into the following taxable year and lasts for more than 90 consecutive days, they will qualify for the exemption on the following year income tax return, but only for the pay earned in that taxable period.
Military personnel on active duty service in a combat zone or a qualified hazardous duty area may subtract their combat or hazardous duty pay, to the extent that the pay was included in federal adjusted gross income and not otherwise subtracted, deducted or exempted. Any military pay allowances earned while serving by order of the President of the United States with the consent of Congress in a combat zone or qualified hazardous duty area treated as a combat zone for federal tax purposes pursuant to Section 112 of the Internal Revenue Code qualify for the subtraction. Note: Combat pay reported as "Code Q" wages on Form W-2 is excluded from federal adjusted gross income and may not be subtracted on the Virginia return.
It is possible to meet qualifications for and claim more than one military subtraction; however, a double exclusion of military income is prohibited for military subtractions. For example, the income used to calculate the $15,000 Military Subtraction could not be used to calculate the National Guard Subtraction and vice versa.
If you are stationed outside the United States or Puerto Rico on the date your return is due (May 1), the due date for filing and payment of your Virginia income tax is automatically extended to July 1. When filing under this provision, be sure to write "Overseas Rule" at the top of your return, and attach a statement explaining that you were out of the country. For general information on extensions, see When to File. You may also wish to review the extension information for personnel serving in combat zones.
Extensions for Noncombat Assignments Outside the US: Under current Virginia law, members of the Armed Forces serving in a combat zone receive either the same individual income tax filing and payment extensions as those granted to them by the IRS, plus an additional fifteen days, or a one-year extension, whichever date is later. All extensions apply to spouses of military personnel also. Service members who claim this extension write "Combat Zone" at the top of their tax returns and on the envelopes used to file the returns, as well as on any notice issued by the Virginia Department of Taxation regarding tax collection or examination.
Effective for taxable year 2008, every member of the armed services deployed to noncombat service outside of the United States is also allowed an extension of his or her due date for filing and payment. The extension will expire 90 days after the completion of deployment. Service members who claim this extension should write "Overseas Noncombat" at the top of their tax returns and on the filing envelopes.