Military State Income Tax Exemption: The Price Tag on a Home State

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Every year, active duty service members are asked to uproot their families and move across state lines. Such a move to a new station isn’t only stressful for military families, but it can also mean extra money coming out of their pockets due to state income taxes. Today, there are 23 states that tax active duty military at the state level and nine states that currently do not impose any income taxes on their residents. Roughly 60 percent of active duty military members are stationed in states without military state income tax exemption, according to a 2012 demographics report published by the Office of the Deputy Assistant Secretary of Defense. But how does this affect today’s modern military family, and what steps are being made to change it?

Family Welcoming Husband Home On Army Leave

The Frequent Interstate Military Migration

As the spouse of an active duty military member, Stella Reynoso has moved four times in the last six years. These permanent change of station (PCS) moves are a standard way of life for military families, occuring when an active duty member receives new orders from above. While this can mean an international move, many new orders are domestic, interstate relocations. But new states often come with a new price tag.

“When we had California residency, we paid income taxes each month,” said Reynoso.

Reynoso and her husband moved from California to Georgia, to Texas, back to Georgia, and then to North Carolina. With the exception of Texas, which has no state income tax in general, each state Reynoso and her family moved to required active duty military to pay state taxes.

“While in Texas, we changed our residency to Texas since we purchased a home there, knew we could never afford to move back to California, and wanted to stop having to pay over $100 from each check for state taxes.”

Change Is in the High-Altitude Air for Colorado

A new bill from state representative-elect Jon Keyser could change the status quo in Colorado. Keyser, an Air Force reservist, plans to present the Honoring Our Military Exemption (HOME) Act as his first piece of legislation. This piece of legislation would provide a military state income tax exemption for active duty military members stationed in Colorado; it will also provide welcomed financial relief for their families. According to the Act:

The general assembly hereby finds and declares that the intended purpose of the state income tax exemption created in this act is to encourage Colorado residents who serve on active duty in the armed forces of the United States to retain their resident status in Colorado… so that no matter where they serve, they can always call Colorado their home.

A Plea for Military Families

After moving several times, Reynoso understands the positive effect that the HOME Act and similar legislation could have on the military, especially younger military members. “The military makes such a small population of each state, but contributes so much more to the country and the world, as a whole,” Reynoso said. “It would be such a wonderful thing to apply no state income taxes [for military members] across the board, especially with having to up and move all the time.”

With interstate moving being a key portion of the military lifestyle, “coming home” can mean something different to everyone. Paying for it is another story.