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Individual Income Tax

Federal Military Spouses Residency Relief Act

The Military Spouses Relief Act was signed into law on November 11, 2009, effective for tax years beginning on or after January 1, 2009. It may affect the state income tax filing requirements for a spouse of an individual in the military.

Under the Act, the spouse of an individual in the military is a non-resident of a state and consequently not subject to that state's taxation if:

  • The service member is present in that state due to military orders
  • The spouse is in that state solely to accompany the service member
  • The spouse maintains a domicile in another state

Therefore, a military spouse who is a Michigan resident and plans to return to Michigan as his/her permanent home should include income earned in the other state on his/her Michigan Income Tax return. A Michigan military spouse may not claim a credit for the income taxes paid to another state. The military spouse must file a non-resident return with the other state to obtain a refund of taxes paid to that state.

Example one: A service member and his/her spouse are Michigan residents. The service member is on active military duty stationed in Dover, Delaware. The spouse also lives and works in Dover. Prior to 2009, Delaware could tax the spouse's income. The taxpayer would have to file a Delaware return and pay tax on the spouse's wages. The taxpayer would then file an MI-1040. On the Michigan return, the taxpayer would compute tax on the spouse's wages and take a credit for tax paid to another state. Beginning with 2009, the spouse's wages could not be taxed by Delaware, and the taxpayer can no longer take a credit for taxes paid to Delaware.

Example two: Jack is a Michigan resident stationed in Dover, Delaware. While in the Air Force, he marries a woman who is a Virginia resident and works in Delaware. She is not in the military and never gives up her Virginia domicile. Her wages are not taxable in Delaware or Michigan but instead are taxable to Virginia.

Problem Unique to 2009: Most spouses working for private employers outside of Michigan will have had state income tax (in this example, Delaware) withheld from their wages for 2009. It will be necessary to file a return with Delaware as a non-taxable, non-resident to recoup that withholding. This should be done as soon as possible because Michigan tax on those earnings will be due April 15, 2010.

Beginning with tax year 2010, if the non-military employer of a Michigan military spouse in another state does not file Michigan withholding (and most will not), the Michigan taxpayer should make estimated payments to avoid penalty and interest for underpayment of estimates. The taxpayer may be able to:

  • Request their employer(s) withhold Michigan taxes, or
  • Request that no taxes be withheld from their salary and wages for the other state.

Statements verifying non-residency may be required by either state.