NC releases FAQs on Military Spouse Residency Relief Act
Answers to frequently asked questions regarding the North Carolina personal income tax treatment of income earned by military members and their spouses under the Military Spouse Residency Relief Act (Pub. L. No. 111-97) have been issued by the North Carolina Department of Revenue.
Beginning with the 2009 tax year, a spouse will neither lose nor acquire domicile or residence in a state when the spouse is present in the state solely to be with the servicemember in compliance with the servicemember's military orders if the residence or domicile is the same for both the servicemember and spouse. Additionally, the spouse's income may not be taxed by a nondomiciliary state provided specified conditions are satisfied.
The exemption applies only to earned income, which includes salaries, wages, tips, professional fees, and other compensation received for personal services. The exemption does not apply to income received from North Carolina sources attributable to the ownership of any interest in real or tangible personal property in North Carolina, or is derived from gambling activities in North Carolina. In addition, income from a North Carolina partnership, S corporation, or sole proprietorship is subject to North Carolina income tax unless the spouse was actively involved in the business.
The exemption applies even if the military spouse is sent out of state combat duty, but ceases to apply if the military spouse is stationed in another state and the spouse remains in North Carolina. The exemption also does not apply to the military spouse's nonmilitary income.
Finally, the FAQs provide detailed instructions regarding claiming a refund of income tax withheld during the 2009 tax year, how to claim the exemption on a part-year resident/nonresident return, and the filing of a withholding exemption certificate. (Frequently Asked Questions Regarding the Military Spouses Residency Relief Act of 2009, North Carolina Department of Revenue, January 6, 2010.)
Reprinted with permission. © CCH
<p>NC releases FAQs on Military Spouse Residency Relief Act Answers to frequently asked questions regarding the North Carolina personal income tax treatment of income earned by military members and their spouses under the Military Spouse Residency Relief Act (Pub. L.</p>