Tax Scams

Scammers have always bothered the crap out of me.  Tax scams are of particular irritation because they prey on people's fear of the IRS or the knowledge of supposed tax "experts."  This gives honest tax guys and gals a bad reputation.  The link at the bottom of this post is to the latest IRS warning about tax scams.

Remember, the IRS will never e-mail you and ask for your personal information.  Generally speaking, your tax preparer won't either, unless you have already established a relationship and the request for information was expected based on an on-going relationship or directly related to tax preparation already in progress.  Even in this case, the e-mail should be recognizable to you as coming from your tax preparer and should contain information that makes it obvious that they are sending the e-mail.

http://www.irs.gov/newsroom/article/0,,id=255122,00.html?portlet=107

Minnesota Combat Zone Credit

Minnesota offers a $120 per month credit for Military Service in a combat zone in 2011, 2010 and 2009.  They also offered it in 2008 for $59 per month.  A tax return is not necessary to get the credit.  You simply fill out Form M99 for the appropriate year, attach LES's for each combat zone month, fill in your Direct Deposit information and send the information to the address on the bottom of the form.

I have attached a link for the forms:

2013
2012
2011
2010

I got a 1099C - Now What?

If you like the blog, buy my book: Everyday Taxes 2016 contains over 70 chapters sorted by life events!  Book owners have access to an exclusive excel spreadsheet version of the Insolvency Worksheet.

Form 1099-C:  This represents debt owed by the taxpayer that is written off by the lender as noncollectable.   Form 982 is used on the tax return to determine any exclusion from income and any non-excluded income is reported on Line 21 of Form 1040 as "Canceled Debt"

The following exceptions MAY apply:

Bankruptcy
To the extent insolvent (liabilities exceed assets)*
Certain Farm debts
Non-recourse loans (box 5 of 1099C not checked)
Qualified personal residence debt**
Qualified real property business debt

*When you receive a 1099C that is not personal residence debt or from bankruptcy, the most important thing to do is establish the extent of your insolvency.  Using the date on the 1099C, determine how much you owe and how much you own.  Include the debt amount from the 1099C.

What you own includes the FMV of your home and cars (use kbb.com for cars) as well as all money you have in bank accounts and investments along with the value of anything else you own.

What you owe includes the canceled debt, credit card bills, car loans, home loans, student loans and anything else you owe to anyone.

If what you owe is more than what you own, the difference can be subtracted from the canceled debt before including it as income.  If it is larger than the canceled debt, none is included as income.  Use Form 982 to record this.

Be careful!  If the numbers are close, you need to get accurate information as to the value of your assets.  Appraisals are the best, but website and realtor comps may be accepted.

Obviously, if the numbers are dramatic ($100000 upside down on your house with no other significant assets and $5000 canceled debt) you don't need to be quite as psycho in record keeping.  Still, take the time to get the best possible numbers NOW, while the records are easy to get, so you don't have to backtrack later.

**It has to be your personal residence at the time of foreclosure.  There is some debate on this as to whether you need to be living in the home the day of foreclosure, but most take the reasonable position that if you leave the home due to imminence of foreclosure, you can exclude it as personal residence.  The 2 out of 5 year rule for excluding gain does not apply here, though the code can make you think it does.  The definition of "personal residence" from that part of the code applies, not the time rules.  This provision expired January 1st, 2017.

http://www.irs.gov/pub/irs-pdf/i1099ac.pdf
http://www.irs.gov/taxtopics/tc431.html

Common Tax Return Errors

Don't rely on this list for tax prep - it is just a brainstorming guide - do your due diligence

Military:

South Carolina Tax Treatment of Working Spouse

MSRRA mistakes

-Not establishing domicile

-Not the same state as military member

-Shifting residence to state that is tax free to mil but not spouse (NY, CA, MI, ME etc.)

-Not taking advantage of MSRRA

Not taking Sales Tax Deduction

Not adding tax-free allowances to income for Sales Tax Deduction

(Subtract W2 wages from YTD entitlements on Dec LES to get amount)

Not getting all taxes back from certain states (exclusions apply)

ME, MI, NY, NJ, CA, AZ, ID, IL, KY, MN, MO, MT, NM, OH, OR, PA, WV, CT

Not filing required returns:

MI is good example since you can get EIC even with all income excluded

PA is another example that requires copy of orders

Not subtracting Military Wage Deductions (these are portions not full exclusions)

AR, IN, LA, MD*, CO*, VA

*Need to meet overseas conditions

Boomer Deduction

Not getting $120/month MO deployment credit (actually a direct payment.)

Repayment of Bonuses (Claim of Right repayment)

Retirement Pay:

Tax treatment of federal, state, local, military retirement pay

Treatment of employee contributions to retirement (worksheet)

Roth distributions

5329 - medical expenses, IRA exceptions

For SC - not deducting retirement pay from reserve time periods

Itemized Deductions:

Failing to claim Goodwill contributions

Undervaluing Goodwill (FMV is not what the Goodwill store sells it for)

Employee Bus Expense (especially mileage)

Deducting Commuting Mileage

Missing Health Insurance Deduction

Fertility Treatments

Glasses and Contacts

Birth Control Pills

Auto Taxes

Points paid by seller (points always go to buyer)

Taxes paid by seller (taxes always go by date of ownership

VA/FHA funding fee

Not amortizing points on a refinance

Moving Expenses not taken

Rental Property:

Not depreciating - not adding improvements to basis

Missing: HOA, Termite Bond

Not properly accounting for things that are rent

Not deducting Sch E and associated forms cost as expense (from prior year tax return)

Deducting vice depreciating items

Not adding out of state rental loss back to SC

Adding out of state rental loss back to states not required (GA)

Not realizing what "Active Participation" means and thus not getting $25000 loss

Not tracking or accounting for passive losses not allowed in prior year

Completely messing up the sale of rental property

Allocation of first year expenses

Your roommate is often your tenant!

Businesses (Sch C):

Hobby vs. Business

Missing mileage

Office in Home mess-ups

Failing to take tax prep fees from prior year as expense (allocable to the business)

Failing to depreciate items

Not properly figuring out best use of Sec 179 or bonus depreciation

EIC considerations

Likelihood of conversion or sale

Future income level considerations

Inventory/Cost of Goods Sold issues

Investments:

Improper treatment of Qualified Dividends or Long Term Capital Gains

Not reporting Gross Proceeds or improperly calculating basis

Failing to take foreign tax credit

Failing to exclude municipal bond interest from residency state

Failing to add back municipal bond interest to state tax return (except as above)

Messing up Schedule K-1's

Failing to carryover capital losses

Missing Education Credits or deductions (books etc.)

For SC:

Subsistence allowance for FF/Police

Base security are often police for the above

Volunteer FF deduction

Rental Property Guide for Homeowners

If you like the blog, buy my book: Everyday Taxes only $5.99 for Kindle! 

Tax Guide for Renting your Home

This document represents the author's opinion and interpretation

of current tax law and does not necessarily represent the interpretation or

opinion of H&R Block or the Internal Revenue Service

This guide is designed for the average homeowner who is converting his personal residence into rental property, either because they are unable to sell it, intend to reside in it later, or simply hope to use it as an investment. It does not cover all the specifics of how to file a Rental Property tax return, rather it covers record keeping and tax issues that an owner of Residential Rental Real Estate should be aware of. This document does not discuss Alternative Minimum Tax implications of Rental Property.

When is it Rental Property?

It's rental property the day it is available for rent. This is when you can start deducting expenses. Generally, when you put the sign out front, put the ad in the paper, or tell your co-workers to find you a tenant, you have made it available for rent.

What is Rent?

Rent is the full amount of rent received. If you have a property manager who deducts a commission, the rent is the full rent paid (including the commission) and the commission is a deduction. Similarly, if your tenant performs a repair and deducts the cost from the rent, the rent is the full amount of the rent and the deducted amount is a repair expense. If someone pays advance rent, include it in the year received. If a security deposit is paid, it becomes rent when you keep it to cover an expense (and the expense is deductible.) If the deposit is agreed as non-refundable (such as a pet cleaning deposit) it is rent when received. If the tenant is supposed to pay rent and doesn't, do not include the amount not paid as rent. This means there is no "bad debt" deduction for rental - if you don't get it, it's not rent.

Deductible Expenses:

You can deduct all reasonable and necessary expenses for the rental of your home. Some items must be depreciated (see the Depreciation section.) These must be expenses you pay for - your labor is not an expense. A fairly comprehensive list of expenses:

Mortgage Interest (pro-rate by day for the first year of rental)

Taxes (pro-rate by day for the first year of rental)

Insurance (pro-rate by day for the first year of rental)

Mortgage Insurance Premiums (pro-rate by day for the first year of rental)

HOA dues

Pest Control

Utilities you pay (including those paid when unoccupied but available for rent)

Advertising Expenses

Repairs

Landscaping

Painting

Legal expenses for collecting rent, preparing leases

Tax prep fees for rental related forms

Management Fees

Cleaning Expenses

Travel and Mileage to manage the rental property (the primary purpose of the trip must be to manage the rental property - don't try to deduct a vacation during which you "check on" the rental.

Save receipts for all of these and report the amounts to your tax preparer.

Depreciation:

Depreciation is how you deduct the cost of major items with a life longer than 1 year. You will deduct a portion of the cost a little at a time over a specified number of years. Don't let someone tell you not to depreciate so you can avoid recapture - you have to recapture any depreciation allowed (whether deducted or not.)

You will depreciate the building, appliances and any improvements to the property, as well as certain landscaping items (fences, trees etc.) It's important to understand that if you have a major expense that increases the value, or prolongs the life of your property, it will be depreciated vice deducted. Repairs that do not increase the value or extend the life may be deducted. Examples of improvements are: A/C replacement, roof replacement, additions. Examples of repairs are painting, replacing garbage disposal, repairing hole in roof, repairing A/C unit.

When converting your home to rental you need to know the Basis. This is generally the price you paid for the home, plus any improvements you made to it (see Pub 551, below, for other things that might affect it.) If the Fair Market Value (FMV) the day you convert it to rental property is less than this value, then this is your basis. The FMV is what your house would sell for to a willing buyer. You also need to know what the land is worth. You subtract this from the basis before depreciating the basis. You can determine the land value from your property tax card or by comparing to other similar properties sold in the area. You will depreciate the house by taking an even portion of the basis every month for the next 27.5 years (this means the first year's deduction will be smaller, and the deduction for the rest of the years will be about the same.) Your tax preparer will need the basis, land price, FMV, date purchased and date available for rent for your house.

Improvements are depreciated for 27.5 years just like the house. Appliances are depreciated for 5 years and Landscaping improvements are depreciated for 15 years. See Pub 527, below, for how to depreciate 5 and 15 year property. Your tax preparer will need to know the date you bought these items and the price you paid for them (including installation if you paid for it.)

Do I need a Property Manager?

I like property managers. They will keep about 10% of your rent, but if they can save you 1 month of vacancy, they've paid for 10 months of commissions. If you try to rent without one, and can generally keep the place occupied, you probably are okay without one. If you try to rent it and it goes more than a month empty, get referrals and hire a property manager. Similarly, if you have a property manager and your house goes vacant more than a month, find a new property manager.

Active Participation:

It generally behooves you to be an active participant in the renting of your property. You can be an active participant even if you have a property manager. If you make the decisions about what rent to charge, what repairs to make, and whether to allow pets, you are actively participating. Even if the manager says: "I think we should raise the rent to $1200." and you have to give the OK, you are actively participating. By being an active participant, you can generally deduct up to $25000 of rental loss from the rest of your income (subject to income and filing status limitations.) If you are totally passive in the rental than you cannot deduct any losses. If you are passive, or you have losses in excess of the limit, you will have to carry them over until you have a gain or dispose of the property.

At Risk Issues:

You may be asked if you are "At Risk" for the full amount of your rental. This means that you are not protected from losses on the property should everything go south on you. Generally speaking, unless you have some sort of a loan that you would not have to pay back (such as from a family member) you are At Risk for the full amount.

Tax Implications When Selling:

When selling a house that has been used as rental property it is generally treated as a sale of a business asset. Thus, it is a fully taxable transaction. It will be reported on Form 4797 (Sale of Business Assets.) The form will ask for the date purchased, date sold, the sale price (minus expenses of sale) and the Basis. Other than basis, these entries are fairly self explanatory. The basis is that which you are using to depreciate the home. It is the price paid (or FMV when converted to rental if this was lower than the basis) + the cost of any improvements - any depreciation taken or allowed. There are other things that might affect the basis but they are unusual and won't normally be seen. The gain or loss is the difference between the basis and the sales price.

It is possible to use the exclusion for the Sale of Main Home if you meet the requirements. This will normally only occur if you lived in the home for at least two years before you rented it out and sold it within three years of renting it. If this is the case you may be able to exclude up to $250000 of the gain ($500000 if Married Filing Jointly.) You may use this exclusion for all gain except that attributable to depreciation.

Personal Use or Part Year Rentals:

If you rent your property for only part of the year, or you rent only a portion of your property (such as a room or a duplex) you need to pro-rate your expenses. Your tax preparer will need to know the status of the property for each day of the year (rented, occupied by you, occupied by family, vacant, vacant but available for rent.) He will also need to know the square footage of the property that is rental use, personal use and communal use, as well as which expenses cover the whole property (mortgage, taxes, etc.) and which are exclusive to the rental portion (repairs to that portion, utilities billed separately etc.) There are more intricacies of this - contact your tax preparer for more details.

State Issues:

If you rent out a property in a state that is not your state of residency, make sure you make this clear to your tax preparer and make sure you understand how each state handles it. South Carolina, for example, requires you to add an out of state rental loss back as income to SC.

If you have any questions, feel free to contact me, Kirk Taylor, at taxadvisor@email.com.

I have made a pdf of this available HERE.  Please consider using the Amazon link for your purchases or buying a copy of one of my Books if you print copies.

Feel free to share this information with anyone who can use it.

Pub 551 - Basis of Assets

Pub 527 - Residential Rental Property

Schedule E Instructions

Schedule E

More Boomer Deduction Information

I did some Boomer Deduction scenarios based on one particular submarine's schedule for 2011 to demonstrate how useful the Boomer deduction is.  They do not take into account the fact that any other itemized deductions (such as charity or car taxes) will now change the return.  It also doesn't take into account State benefits.  The numbers are from a Kings Bay boat.  The worksheet I made is HERE.

A Single sailor making around $30000 with rent of $750 and utilities of $250 with no roomates and who lives 12 miles from base should get a boomer deduction of around $13201 which translates into a $1103 difference in taxes.

A Single sailor making around $30000 with rent of $1000 and utilities of $300 with one roomate and who lives 10 miles from base should get a boomer deduction of around $11029 which translates into a $780 difference in taxes.

A Single sailor making around $20000 with rent of $1000 and utilities of $250 with two roomates and who lives 7  miles from base should get a boomer deduction of around $8878 which translates into a $421 difference in taxes.

A Single sailor making around $40000 with rent of $1100 and utilities of $300 with no roomates and who lives 24 miles from base in Florida should get a boomer deduction of around $18968 which translates into a $1988 difference in taxes.

Married taxpayers and homeowners can vary greatly based on kids and the higher standard deduction, but they generally still benefit.

Simplified Boomer Deduction Worksheet

Military Submariners serving on two crew ballistic missile or guided missile boats are eligible to deduct lodging and other expenses when their "Tax Home" (the sub) is unavailable.  There are many discussions of what exactly is deductible, but this worksheet will work in most situations and make it easy to determine what amounts to enter on various forms or enter into tax prep software.  For 2012 Taxes, click HERE

Boomer Deduction Worksheet for Tax Prep 2011

Numbers are for entries into software or initial form entries.

(A) Days of Refit assist in 2011 before July 1^st __________

(B) Days of Off Crew in 2011 before July 1^st __________

(C) Days of Refit assist in 2011 after June 30^th __________

(D) Days of Off Crew in 2011 after June 30^th __________

(E) Distance from Home to Off Crew Bldg __________

(F) Distance from Home to Waterfront __________

(G) Rent (do not include any mortgage info here)*__________

(H) Average Monthly Utilities __________

(I) Do you go home for lunch every day? __________

(J) Number of people (including wife and kids) sharing your residence___________

(K) Total Days with boat unavailable (A) + (B) + (C) + (D) = _____________

(L) Monthly Housing Costs (G) + (H) = ______________

Form 2106 Computation Worksheet Entries:

Lodging and Incidental Expenses ((K) / 30 x (L))/J = _____________

Laundry and Cleaning Expenses (K) / 7 x $10 = ______________

Meal Expense (K) x Per Diem Rate from Table below = ______________

If (I) is NO:

Business Mileage before July 1^st:

( (A) x (F) x 2 ) + ( (B) x (E) x 2 ) = ______________

Business Mileage after June 30^th:

( (C) x (F) x 2 ) + ( (D) x (E) x 2 ) = ______________

If (I) is YES:

Business Mileage before July 1^st:

( (A) x (F) x 4 ) + ( (B) x (E) x 4 ) = ______________

Business Mileage after June 30^th:

( (C) x (F) x 4 ) + ( (D) x (E) x 4 ) = ______________

Per Diem Rates (assumes reasonable distance form base):

Glynn County, GA $56

Other GA Counties $46

Florida $51

Kitsap County, WA $66

King County, WA $71

Pierce County, WA $61

Other counties look up in IRS Pub 1542 or http://www.gsa.gov/portal/category/21287
*You deduct mortgage interest, taxes and mortgage insurance premiums directly on Schedule A

Military State Tax Guide - 2011

State Guidelines for Military (2011 values)

This information is provided by the author and does not necessarily represent the opinion of the IRS, State Dept's of Revenue, or the author's employer. Information is for general guidelines only and should not be relied upon for filing taxes without referencing state or federal instructions. Questions may be asked via email at taxadvisor@email.com

The 2013 version can be found HERE
The 2012 version can be found HERE
Consolidated list of military posts HERE

Military Spouses Residency Relief Act (MSRRA)

Most states have begun to treat this in a similar manner to each other. In general, the spouse of a service member has two choices for state of residency: the state they are stationed in, or the military member's state of residency. In order to claim the military members state, they must have established a domicile in that state at some time before moving to the current state. For those qualified to make the election to claim the military members state, it is important to weigh the benefits properly, for example, a spouse who works in SC married to a military resident of MI might assume that since MI does not tax the military member that they should choose this state. This would be wrong because MI will tax the non-military income of the spouse. SC is far more generous to the spouse of a service member stationed in SC. Expert assistance may be required making this determination. It can also be difficult to get the current state to stop withholding from the spouses wages. Each state Dept of Revenue has different procedures for handling this.

Residency

A military member normally retains residency in the state they resided in when they joined the military unless action is taken to change this. The W-2 can generally be relied upon as to the state of residence of the military member. The states in which a service member are stationed will not tax the members military income unless they are residents. They will tax any income earned from other employment or business activities conducted in the state by the member and their spouses (subject to the MSRRA discussed above.) The discussions below talk about the taxation of military income for residents of the respective state.

 

Filing Requirements:

Not having to file discussed below assumes there is no withholding from the given state. A member may file even if not required and should do so if they have withholding from the given state so they can get the money back. If a member would not be required to file except for the existence of withholding, they should adjust their state withholding through MyPay so no taxes are withheld from that state. They may also consider stopping withholding even if they are required to file, for states that do not tax their income (MI for example.) Many people do not file required tax returns when there is no refund or balance due. This could result in a letter from the state requesting a return but rarely any penalties – but there can be!

 

Death Benefits:

Many states exclude death benefits and military pay for service members killed in a combat zone or while on active duty. The specifics are not discussed here. Survivors of service members killed on active duty can obtain assistance for this from CACO personnel.

 

Alabama:

Alabama treats military residents the same as all other residents

 

Alaska:

Alaska does not have an income tax. Alaska Permanent Funds Dividends are taxable on the Federal Return.

 

Arizona:

Arizona does not tax active duty military pay, and does not require filing if the only AZ source income is active duty pay.

 

Arkansas:

The first $9000 of Military compensation is not taxed to AR. Total military income is reported on line 9 and the income -$9000 is reported on line 8 (but not less than 0)

 

California:

California does not tax military pay of CA residents stationed outside of the state of CA. They do tax military income of their residents when stationed in CA. They also treat military spouses generously, similar to SC. Form 540NR is used to account for this. You write “MPA” to the left of column A for non-resident military income and enter the military income in column B but exclude it from column E.

 

Colorado:

Colorado taxes military residents the same as other residents unless the member is stationed outside the US for >305 days in the year.

 

Connecticut:

Connecticut allows resident military personnel stationed outside of CT to be treated as non-residents for tax purposes. This can be confusing but the point is that they are still a resident, just not treated that way for tax purposes. In order to be treated as a non-resident they must meet all three of the following requirements: 1) Not maintain a permanent place of abode in CT for the entire year (a parents house is not a permanent place of abode.) 2) Maintain a permanent place of abode outside of CT for the entire year. 3) Spend no more than 30 days in CT for any reason during the year. If they meet these requirements they can file as a non-resident and exclude any military wages from gross income and need not file unless they have other CT source income.

 

Delaware:

DE taxes military residents the same as all other residents.

 

Washington DC:

DC taxes resident military personnel the same as all other residents (I think).

 

Florida:

Florida does not have an income tax, however they do have an intangibles tax. Most military members will not have any filing requirement.

 

Georgia:

GA taxes military residents the same as all other residents

 

Hawaii:

Hawaii taxes military residents the same as all other residents except that they do not tax the first $5881 of reserve pay or HI national guard pay.

 

Idaho:

ID residents stationed in ID pay taxes on all military income; however, if the member was on active duty >120 days and stationed outside of Idaho they can exclude any military income earned while stationed outside of ID. If they are stationed outside of Idaho the entire year they do not need to file an ID tax return.

 

Illinois:

IL does not tax military pay; however, the member must file a tax return if they file a Federal return. Military members with children who get Federal Earned Income Credit may get up to 5% of the Federal amount even if they have no taxes due to IL.

 

Indiana:

Indiana taxes military income but allows a deduction of the first $5000 of military income for the taxpayer and/or the spouse ($10000 for military couple.) If a military member changes state of residency to another state they must submit the DD Form 2058 with the tax return for the year they changed state of residency.

 

Iowa:

IA does not tax military income and military income is not used in determining filing requirements (if the only significant sources of income are military income, a tax return is not required.)

 

Kansas:

Kansas taxes military income but allows a deduction for recruitment, sign-up and retention bonuses paid that are included in Federal taxable income (if the bonus was tax free to federal do not deduct it from KS. Kansas starts with Federal AGI so it is already excluded.)

 

Kentucky:

Beginning with 2010, KY does not tax military income and does not require a tax return if the only KY source income is military pay.

 

Louisiana:

Louisiana requires a tax return from military personnel the same as any other resident; however, LA gives an exclusion of up to $30000 of military pay if the person has been on active duty for at least 120 days during the tax year. The subtraction is taken as a Schedule E subtraction, Code 10E, by entering military pay up to $30000 on the schedule.

 

Maine:

Maine allows resident military personnel stationed outside of ME to be treated as non-residents for tax purposes. This can be confusing but the point is that they are still a resident, just not treated that way for tax purposes. In order to be treated as a non-resident they must meet all three of the following requirements: 1) Not maintain a permanent place of abode in ME for the entire year (a parents house is not a permanent place of abode.) 2) Maintain a permanent place of abode outside of ME for the entire year. 3) Spend no more than 30 days in ME for any reason during the year. If they meet these requirements they can file as a non-resident and exclude any military wages from gross income and need not file unless they have other ME source income. Maine calls this the General Safe Harbor Rule.

 

Maryland:

Maryland taxes military residents just like other residents; however, they allow a subtraction for up to $15000 of military pay earned outside of the U.S. (Military Overseas Income.) The deduction phases out dollar for dollar as ALL military income goes above $15000 and there is no exclusion if the total military income exceeds $30000. The subtraction is taken on Form 502SU and the Military Overseas Income Worksheet is used to calculate the deduction.

 

Massachusetts:

There are no special tax benefits for military, however, the Massachusetts Dept of Veterans Affairs will give a one time payment of $500 to any resident after they served at least 6 months active duty in the military. They also have a $1000 benefit for personnel who serve in Iraq or Afghanistan.

http://www.mass.gov/veterans/benefits-and-services/bonus/bonuses-only/

 

Michigan:

Michigan requires military members to file a tax return; however, they subtract active duty pay from income. Military members with children who receive Earned Income Credit on their Federal return may collect 20% of the federal amount, even if they pay no taxes to MI.

 

Minnesota:

Minnesota subtracts Active Duty Military pay from income of MN residents. If Gross Income on Federal return other than military is less than $9500, no MN return is required.

Minnesota pays $120 per month a military resident spends in a combat zone. This is paid separately from the tax return and is claimed on Minnesota form M99

http://taxes.state.mn.us/Forms_and_Instructions/m99_onscreen.pdf (2011 Form)

 

Mississippi:

Mississippi taxes military residents the same as other residents except that they do not tax National Guard and Reserve pay up to $15000.

 

Missouri:

MO allows resident military personnel stationed outside of MO to be treated as non-residents for tax purposes. This can be confusing but the point is that they are still a resident, just not treated that way for tax purposes. In order to be treated as a non-resident they must meet all three of the following requirements: 1) Not maintain a permanent place of abode in MO for the entire year (a parent's house is not a permanent place of abode.) 2) Maintain a permanent place of abode outside of MO for the entire year. 3) Spend no more than 30 days in MO for any reason during the year. If they meet these requirements they can file as a non-resident and exclude any military wages from gross income and need not file unless they have other MO source income.

 

Montana:

Montana requires military residents to file a tax return but exempts active military pay from taxation. Verification of active duty status must be attached to the return.

 

Nebraska:

Nebraska taxes military residents just like other residents.

 

Nevada:

Nevada does not have an income tax.

 

New Hampshire:

NH does not have an income tax but they do tax interest and dividends. Generally these would need to exceed $2400 for an individual and $4800 for a couple.

 

New Jersey:

NJ allows resident military personnel stationed outside of NJ to be treated as non-residents for tax purposes. This can be confusing but the point is that they are still a resident, just not treated that way for tax purposes. In order to be treated as a non-resident they must meet all three of the following requirements: 1) Not maintain a permanent place of abode in NJ for the entire year (a parent's house is not a permanent place of abode.) 2) Maintain a permanent place of abode outside of NJ for the entire year. 3) Spend no more than 30 days in NJ for any reason during the year. If they meet these requirements they can file as a non-resident and exclude any military wages from gross income and need not file unless they have other NJ source income.(NJ does not consider barracks maintaining a permanent place of abode outside NJ)

 

New Mexico:

New Mexico does not tax active duty military pay however; NM residents are required to file a NM return if they were required to file a Federal return.

 

New York:

NY allows resident military personnel stationed outside of NY to be treated as non-residents for tax purposes. This can be confusing but the point is that they are still a resident, just not treated that way for tax purposes. In order to be treated as a non-resident they must meet all three of the following requirements: 1) Not maintain a permanent place of abode in NY for the entire year (a parents house is not a permanent place of abode.) 2) Maintain a permanent place of abode outside of NY for the entire year. 3) Spend no more than 30 days in NY for any reason during the year. If they meet these requirements they can file as a non-resident and exclude any military wages from gross income and need not file unless they have other NY source income. NY specifically excludes barracks as an abode outside of NY for the purpose of this rule. Also, if a NY return is required to be filed to get back state taxes withheld and this exemption results in zero income (as it usually does) the return will have to be mailed in vice electronically filed.

 

North Carolina:

NC taxes military residents the same as other residents.

 

North Dakota:

ND taxes military residents the same as other residents.

 

Ohio:

Ohio does not tax military pay of OH residents stationed outside of the state of OH. They do tax military income of their residents when stationed in OH.

 

Oklahoma:

Oklahoma allows military members to exclude active duty pay. This exclusion is accomplished using Schedule 511-C. Military members are required to file an OK tax return if they were required to file a federal return.

 

Oregon:

Oregon allows a subtraction of all military pay earned while stationed outside of OR and up to $6000 earned while stationed in Oregon (Subtraction Code 319). OR also allows military residents to be treated as non residence if they spent less than 31 days in OR, did not have an abode in OR and had a permanent abode outside OR the entire year.

 

Pennsylvania:

Pennsylvania does not tax Active Duty Military Income of residents stationed outside of PA and does not require a tax return; however, they do require the service member to mail or fax a copy of their orders stationing them outside of PA and their W-2.

PA DEPT OF REVENUE

NO PAYMENT OR NO REFUND

2 REVENUE PLACE

HARRISBURG PA 17129-0002

 

Rhode Island:

Rhode Island taxes military residents the same as other residents. 

 

South Carolina:

SC taxes military residents just like regular residents except that it does not tax reservist drill pay. SC is very generous to the spouses of military (residents of another state) in that they allow you to exclude the active duty income of the non-resident military member from the calculation of what percentage of deductions to allocate to the spouse. This generally results in 100% of the deductions against only the spouses SC income. It is very difficult to get tax software to handle this correctly. Line 1 of the SCNR should have no active duty military income in the Federal column.

 

South Dakota:

SD does not have an income tax.

 

Tennessee:

TN does not have an income tax but they do tax interest and dividends. Generally these would need to exceed $1250 for an individual and $2500 for a couple.

 

Texas:

Texas does not have an income tax.

 

Utah:

Utah taxes resident service members the same as other residents.

 

Vermont:

Vermont does not tax military pay of VT residents stationed outside of the state of VT. They do tax military income of their residents when stationed in VT. Military pay is subtracted on line 32. A tax return is not required if the only income is military pay while stationed outside VT.

 

Virginia:

Virginia taxes military residents just like other residents except that they give a subtraction of basic military pay of up to $15000. The subtraction phases out dollar for dollar as income goes from $15000 to $30000 and is completely gone at $30000 of income. (If a military member made less than $15000, it would all be subtracted. If they made $20000, they get to subtract $10000.) The subtraction code is 38.

 

Washington:

Washington does not have an income tax.

 

West Virginia:

West Virginia taxes military residents unless they spent less than 30 days in WV. In this case they file as a non-resident. WV does not tax military income of reserves or national guard called to active duty by Executive Order of the President.

 

Wisconsin:

Wisconsin taxes military residents the same as other residents except that they do not tax military pay of reserves or national guard called to active duty.

 

Wyoming:

WY does not have an income tax.

 

Feel free to send questions to Kirk at taxadvisor@email.com

I am available to prepare taxes via mail, e-mail, fax and online approval. No fees are charged until the return is complete and you are 100% satisfied. If the fees are too high, refund too low, or we determine that a cheaper filing method is appropriate, I will return all materials and charge no fees.

I will check any individual tax return from 2008, 2009, 2010 or 2011 for free. If I find an error, I will offer to fix it for a fee if desired

 

I have made every effort to ensure the above information is 100% accurate, but I am human and the various governments love to change the rules. If you think something is wrong please inform me via e-mail.