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From The Mailbag: Post-Service Residency Questions

I've recently received these two questions regarding state residency after the service member leaves the military.  It is an important part of post-military financial planning to understand that once you leave the military, you lose the protections of the Servicemember's Civil Relief Act (SCRA) and you will have to be a legal resident of the place where you actually live.  Understanding why the law exists can help to understand when and why it applies to certain situations.

This first question is paraphrased because it was very jumbled:

My wife was in the military and died.  Can I continue to claim her home of record for tax purposes?

There are two issues here.  First, home of record and state of legal residence are very different concepts.  They may be the same state, but they are not the same thing.

More importantly, the short answer to the question is no.  The Military Spouses Residency Relief Act (MSRRA)/SCRA allows the spouses of actively serving military to maintain their state of legal residence when Permanent Change of Station (PCS) orders require them to move elsewhere. Survivors no longer receive these protections because the service member is no longer on active duty, and because the survivor can choose where to live.

The second question comes from a retiree:

Before retiring from the military, I lived in Virginia but was a resident of Oregon. Now that I've retired, I continue living in Virginia. How can I continue to claim Oregon as my legal residence and continue living in Virginia. I would like to do this so that at I don't have to pay personal property or state income tax on my retirement pay.

Similar to the question above, the military retiree loses the protections of the SCRA because he or she is no longer on active duty, and he or she is permitted to choose his or her own place to live.  If you choose to live in Virginia, you are a resident of Virginia and you must pay Virginia taxes.  If you find the tax structure of another state more attractive, then you need to move to that state.

The Military Spouses Residency Relief Act and Servicemember's Civil Relief Act are great benefits for active duty military and their spouses, but those protections are based upon the concept that the service member and his or her family are moving under PCS orders and not living where they would otherwise choose.  When no longer on active duty, whether due to separation, retirement or death, the service member and/or survivors may choose where to live, and therefore there is no reason for them to receive protections under SCRA.

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