If you search "MSRRA" today, most of what you will read is wrong, or at least three legal amendments out of date. The rule changed in 2009, changed again in 2018, and changed a third time effective for tax years beginning on or after January 1, 2023. Plenty of tax guides never noticed the last one.
Here is the current law, from the statute itself. For any taxable year of the marriage, regardless of when you got married, a servicemember and spouse may elect to use for tax purposes any one of three options:
- The residence or domicile of the servicemember.
- The residence or domicile of the spouse.
- The permanent duty station of the servicemember.
That is 50 U.S.C. 4001(a)(3), as amended by the Veterans Auto and Education Improvement Act of 2022, which was signed January 5, 2023.
Why option three is the one that matters
Options one and two are useful. Option three is the one nobody expected.
The duty station qualifies even if neither of you has ever been domiciled there. A couple who are both from a high-tax state, stationed at a post in Texas, Florida, Washington, Tennessee, or another state with no income tax on wages, can elect the duty station and file there.
Before 2018, the spouse had to already share the servicemember's domicile. Between 2018 and 2022, under the Veterans Benefits and Transition Act, the spouse could elect the servicemember's residence, but that was the only election on offer. Since tax year 2023, the duty station is on the menu for both of you.
What this does not do
This is where families get into trouble, so read this part twice.
It shields military pay, not all income. Military OneSource states it plainly: the SCRA covers an active duty servicemember's military income, and any other income the servicemember earns is taxable by the state where it is earned. That includes rental property. A spouse's wages are covered by the residency election, but a business, self-employment income, and rental income can pull you back into the duty state's return. If you own a business or rental property, get a professional to look at it.
It does not cover your kids. The SCRA's residency provisions do not extend to military children. A teenager with a part-time job files where the income was earned.
It is a tax election, not a general change of domicile. Electing a state for taxation is not the same as establishing domicile there for every purpose. Voting residence, in-state tuition, and estate matters follow their own rules.
Home of record is not your state of legal residence
This trips up more people than the election rules do, and it appears in a lot of otherwise-decent military tax content.
| Home of Record | State of Legal Residence | |
|---|---|---|
| Set when | You enlist or commission | Whenever you establish domicile |
| Can it change | Essentially no, absent a break in service | Yes, with intent plus evidence |
| What it drives | Travel and transportation entitlements | State income tax, and it appears on your LES |
| How to change it | Not a thing you elect | DD Form 2058, plus real evidence |
"Real evidence" means you actually did the things a resident does: driver's license, vehicle registration, voter registration, where your will is executed, where you return between assignments. If a state ever asks you to prove domicile, a DD 2058 by itself is a piece of paper. The pattern of your life is the argument.
Run the Numbers Before You Change Anything
The election is worth real money in one direction and can cost money in the other. A household earning $85,000 combined, moving from a state around 5% to a duty station with no income tax, is looking at several thousand dollars a year. But if your current state exempts military retirement or offers a large military pay exclusion, staying put can beat a no-tax state once you look past the headline rate.
Compare all three candidate states before you touch your withholding, and remember the election happens per taxable year of the marriage. Our Veteran Benefits by State comparison covers what each state actually exempts, and the Compensation Calculator will show what the change does to take-home.
Frequently Asked Questions
Do we have to have lived in the state we elect?
Not for the duty station option, and not for the spouse electing the servicemember's residence. That is precisely what the 2018 and 2022 amendments fixed.
Does my spouse's paycheck get shielded?
A spouse's wages earned in the duty state follow the residency election. Self-employment, business, and rental income generally do not. Get advice if that is your situation.
Can we switch states from year to year?
The statute grants the election "for any taxable year of the marriage," and states have implemented it with varying paperwork. Read your state's instructions, and expect to document withholding changes with your employer.
Does the SCRA protect my professional license too?
The same 2022 law added license portability for servicemembers and spouses who relocate on orders, with law licenses specifically excluded. Requirements include providing your orders and remaining in good standing.
General information, not tax or legal advice. Free help is available through Military OneSource MilTax and your installation legal assistance office. Related: The SCRA, Actually Explained, PCS Financial Planning, and Military Tax Advantages You're Missing.