This month's column will look at both current and coming state level tax breaks for members of the armed forces. In addition to federal level tax breaks and credits, many individual states are considering compelling tax savings for military personnel and their families. And before you file your taxes this year, check with your accountant or service branch financial advisor to see if you are eligible for one tax break that could save you big money.
Utah Property Tax Exemption
Utah residents who are on active or reserve duty and perform a minimum of 200 days of active duty in a year are exempt from Utah property taxes the following year.
No-income Tax States
Most individuals and families must pay state income tax in the state in which they reside. However, by law servicemembers are able to maintain a legal residence in one state even if they are stationed in another. This means that if you legally reside in a state with no income tax, then you can avoid paying state income taxes even if you are currently stationed in one with a high state income tax.
There are restrictions on qualifying for this benefit – primarily that you must show legal residence or intent to maintain a residence in a specific state. Generally, your home state is the one where you enlisted, but it can change if you are deployed elsewhere and make it your primary or full-time residence.
The law has also been expanded to cover spouses of military members. So income earned by your husband or wife may also be protected from state income tax if you legally reside in a non-income tax state.
Be sure to check with a tax professional or your base legal assistance office before filing for this benefit, as income earned from a second job may be taxed by the state where you currently live. You should also make sure that you meet the threshold for legal residence. This may involve voter registration, registering your car, or other proof of residence.
Examples of no-income tax states include Florida, Nevada, Texas, and Wyoming. In combination with federal tax credits, servicemembers living or residing in these states can save significantly on their taxes this year.