Spouse Tax & License Wizard

MSRRA in Plain English

The Military Spouses Residency Relief Act of 2009 — commonly MSRRA — exists for one reason: military families move constantly, and tax residency rules written for civilian families penalize them. Without MSRRA, a spouse who moves to a new state because of a PCS would owe state income tax to the new state on every dollar earned there. With MSRRA, the spouse can keep their tax residency in the home state, even when physically working at the new duty station.

The 2018 Veterans Benefits and Transition Act extended MSRRA in a meaningful way: the spouse can now elect the service member's state of legal residence (SLR) for tax purposes, even if the spouse never lived there. Before 2018, the two had to share an SLR through prior physical presence — which was unworkable for a spouse who married a service member already stationed at a third state.

When MSRRA Actually Saves You Money

MSRRA only saves money when there's a tax-rate gap to exploit. The big wins:

• SLR is a no-income-tax state. If the service member is a legal resident of Texas, Florida, Tennessee, Nevada, Washington, Wyoming, Alaska, South Dakota, or New Hampshire (interest/dividends only), the spouse can pay zero state income tax under MSRRA election regardless of where they're currently working.
• Duty station is a high-tax state. California (13.3% top), Hawaii (11.0%), New York (10.9%), New Jersey (10.75%), DC (10.75%), Minnesota (9.85%), Oregon (9.9%), and Massachusetts (5.0% base, 9.0% above $1.083M) all have meaningful top marginal rates per the 2026 Tax Foundation tables. Stationed at a base in any of these with the spouse's SLR in a low-tax state? The differential is real money.
• Dual-income family. The savings scales with the spouse's W-2 income. A spouse earning $75K in California whose SLR is Texas saves the full California rate on every dollar.

When MSRRA doesn't meaningfully help: when both states are similarly low-tax, when the spouse has no W-2 income (MSRRA is about earned income; passive income generally follows different rules), or when the spouse's employer is in the SLR state and is already withholding correctly without MSRRA paperwork.

How to Actually Claim MSRRA

Mechanics vary by state, but the typical sequence:

1. Update the W-4 with the new employer. Most duty-station employers have a state W-4 (or equivalent withholding form). The spouse claims MSRRA exemption from duty-station state withholding by indicating military-spouse status. Some states have a dedicated form (Virginia VA-4, Georgia G-4, etc.). Carry a copy of the service member's PCS orders and military ID — HR usually wants to see them.
2. File a non-resident return at the duty-station state. If withholding wasn't corrected during the year, you may have over-withheld at the duty-station state. File the non-resident return showing zero duty-station-source income (after MSRRA exemption) to recover it.
3. File a resident return at the SLR state. The spouse's earned income is reported as resident income at the SLR. If SLR is no-income-tax, no return is required there.
4. Keep documentation. Marriage certificate, service member's PCS orders, military ID copies, current LES showing SLR. State revenue departments occasionally request these, especially in the first MSRRA year for a new PCS.

Dual-Military and Same-State Couples

Two service members married to each other follow SCRA, not MSRRA — both spouses have independent tax residency in their own SLRs. The 2018 election doesn't apply between two service members.

Couples where both already share the same SLR (often through prior physical presence) don't need to make the 2018 election; they were already covered by the original MSRRA. Filing under the original rule is fine and avoids confusion with state revenue departments that haven't fully updated their MSRRA guidance for the 2018 amendment.

License Portability: The Other Half of the Move

A licensed military spouse who PCSs to a new state usually can't practice immediately — license portability is regulated state-by-state. Three regimes apply:

• Interstate compacts. Some professions have multi-state compacts that auto-recognize the home-state license: the Nurse Licensure Compact (NLC) for nurses (41+ states), the Counseling Compact for licensed counselors, PSYPACT for psychologists, and the PT Compact for physical therapists. If both your home state and the new state are compact states, you can practice immediately.
• Military-spouse expedited licensure. Most states have laws specifically for military spouses that expedite licensure transfer (typically 30-60 days, sometimes with a temporary license issued same-week). The exact rules vary; the Military OneSource license-portability guide is the cleanest starting point.
• Full new licensure. The slowest path — required when neither compact membership nor expedited military-spouse licensure applies. Plan on 60-180 days depending on the profession and state board responsiveness.

Common Mistakes That Cost Real Money

• Letting duty-station state withholding accrue all year, then trying to fix it on the return. The refund eventually comes, but the float is a year of cash you didn't need to lose. Update the W-4 before the next pay period.
• Assuming MSRRA covers passive income. Rental income, royalties, and self-employment income are not always protected the same way as W-2 wages. State rules vary; the Wizard flags this and so should your CPA.
• Filing as a duty-station state resident in error. H&R Block and TurboTax sometimes default the new-state return to resident filing because the spouse's mailing address is in the new state. Override that — under MSRRA the spouse is a non-resident there.
• Missing the expedited-license window at the new station. Most state boards have a 30-60-day fast-track for arriving military spouses, but the application paperwork takes time to produce. Start before the move date, not after.
• Paying for a paid MSRRA service. Some preparation services charge $300+ for what is structurally a W-4 update and a non-resident return. Military OneSource tax consultants are free and they handle MSRRA constantly.

How This Calculator Works

The Wizard takes the service member's SLR, the duty-station state, the spouse's expected W-2 income, and (optionally) the spouse's professional license. It computes the state-tax differential using current top marginal rates from each state's revenue department, identifies MSRRA eligibility based on the federal rule, and surfaces the most-relevant license-portability path for the new state. It does not file your return; the output is educational and designed to help you make a decision before you walk into an HR office or a tax appointment.

Related Garrison Ledger Tools

Spouse-tax decisions don't live in a vacuum. A few related tools military families use in the same window:

• PCS Planner — Estimate DLA, TLE, per diem, and PPM profit before the move that triggers the MSRRA reset.
• Salary Calculator — Compare military total comp against a civilian offer for the spouse's next career step.
• TSP Calculator — Spouse's civilian 401(k) match value vs. service member's TSP match — model both in the same household retirement plan.
• Ask the Military Expert — Five free questions a month with citations for the "what about my specific situation" follow-ups (mid-year PCS, dual-military, retirement timing) this guide can't cover.
• Monthly Military Financial Briefing — Tax-season state-rate changes and MSRRA / SCRA updates delivered once a month. Useful when state revenue departments publish guidance updates that change the math.

Sources

Veterans Benefits and Transition Act of 2018 (H.R. 2147) · Military OneSource: State of Legal Residence · Military OneSource: License Portability · Nurse Licensure Compact · IRS Military Tax Resources