Income Subtractions - Military

  1. Can a Wisconsin resident in the armed forces change his or her legal residence (domicile) to another state? If so, how?
  2. Are Wisconsin residents serving in the armed forces liable for Wisconsin income taxes? What if the person is stationed outside Wisconsin or overseas?
  3. Can a Wisconsin resident serving in the armed forces be taxed by any other state on military pay?
  4. Is a legal resident of another state, who is stationed in Wisconsin on military orders, liable for Wisconsin income taxes on military pay?
  5. If I am a Wisconsin resident in the armed forces, is my spouse also liable for Wisconsin income taxes? Or if I am a legal resident of another state stationed in Wisconsin on military orders, is my spouse liable for Wisconsin income taxes?
  6. Does Wisconsin exempt any portion of military pay?
  7. Does Wisconsin tax military retirement income?

  1. Can a Wisconsin resident in the armed forces change his or her legal residence (domicile) to another state? If so, how?

    Yes, a person can abandon his or her Wisconsin legal residence (domicile) and establish a legal residence in another state. A Wisconsin legal resident (domiciliary) who enters the armed forces remains a Wisconsin legal resident unless positive action is taken to abandon Wisconsin residency and establish legal residence in another state. Changing legal residence requires: (1) physical presence in the new locality, (2) an intent to remain there permanently or indefinitely, and (3) an intent to abandon the old legal residence. Actions which express intent may include, but are not limited to: (1) changing legal documents, such as a will or insurance policies, to reflect the new legal residence, (2) changing home of record upon reenlistment, (3) registering to vote in the new locality, (4) paying state taxes in the new locality, (5) applying for a driver’s license in the new state of residence and relinquishing the Wisconsin driver’s license, (6) registering a car in the new state of residence and relinquishing Wisconsin car registration, (7) purchasing a home in the new state of residence and selling a Wisconsin home, and (8) consistently using the new permanent address on all appropriate records and correspondence. Moving from one duty station to another does not by itself constitute a change of legal residence.

    Persons claiming change of legal residence (domicile) from Wisconsin to another state should file a "Legal Residence (Domicile) Questionnaire" form with the Wisconsin Department of Revenue.

  2. Are Wisconsin residents serving in the armed forces liable for Wisconsin income taxes? What if the person is stationed outside Wisconsin or overseas?

    Yes. Wisconsin residents in the armed forces are liable for Wisconsin income taxes on their entire annual Wisconsin net taxable income, regardless of the income source. If a Wisconsin resident is serving in the armed forces outside Wisconsin, including overseas, the person is liable for Wisconsin income taxes on the entire annual Wisconsin net taxable income, wherever earned, just as if the person was physically present in Wisconsin throughout the year. (See Question and Answer 6 for information on exempt military pay.)

    A member of the armed forces on active duty who receives military pay from the federal government for services performed while stationed outside the United States may be eligible for a credit of up to $300 against Wisconsin income tax.

  3. Can a Wisconsin resident serving in the armed forces be taxed by any other state on military pay?

    No. Under the federal Servicemembers Civil Relief Act, a Wisconsin resident in the armed forces cannot be taxed on military pay by any other state. However, a Wisconsin resident can be taxed as a nonresident by another state on income, other than military pay, earned from employment or property in that state. In such a case, a tax credit would usually be allowed by Wisconsin.

  4. Is a legal resident of another state, who is stationed in Wisconsin on military orders, liable for Wisconsin income taxes on military pay?

    No. However, this person is liable for Wisconsin income taxes on any income, other than military pay, from employment in Wisconsin, a business conducted in Wisconsin, property located in Wisconsin, a Wisconsin state lottery or a multi-jurisdictional lottery ticket purchased in Wisconsin, Wisconsin pari-mutuel wager winnings and purses, or winnings from a Native American casino or bingo hall located in Wisconsin. The person must file a Wisconsin tax return if such income is $2,000 or more.

  5. If I am a Wisconsin resident in the armed forces, is my spouse also liable for Wisconsin income taxes? Or if I am a legal resident of another state stationed in Wisconsin on military orders, is my spouse liable for Wisconsin income taxes?

    If your spouse is a legal resident of Wisconsin, he or she is liable for Wisconsin income taxes as any other resident, regardless of where he or she resides.

    If your spouse is a legal resident of another state, he or she is not liable for Wisconsin income taxes on income from personal services performed in Wisconsin if he or she is in Wisconsin solely to be with you while you are in Wisconsin under military orders. (See Form W-221, Nonresident Military Spouse Withholding Exemption.)

    If your spouse is a legal resident of another state, he or she is only liable for Wisconsin income taxes on income from a business conducted in Wisconsin, property located in Wisconsin, a Wisconsin state lottery or a multijurisdictional lottery ticket purchased in Wisconsin, Wisconsin pari-mutuel wager winnings and purses, or winnings from a Native American casino or bingo hall located in Wisconsin.

    (NOTE: Even though the nonresident spouse’s personal service income (wages) may not be taxable to Wisconsin, it would be taxable to the nonresident spouse’s state of legal residence.)

  6. Does Wisconsin exempt any portion of military pay?

    Military pay that is exempt for federal tax purposes is also exempt for Wisconsin. For example, military pay that qualifies for the federal combat pay exclusion is also exempt for Wisconsin tax purposes.

    Military pay received by certain members of the Reserves and National Guard may also be exempt for Wisconsin tax purposes. To qualify for the exemption, the military pay must have been received from the federal government after being called into active federal service under 10 USC 12302(a) or 10 USC 12304 or into special state service authorized by the federal Department of Defense under 32 USC 502(f). The pay must have been for a period of time during which the Reserve or National Guard member was on active duty. This exemption does not apply to military pay that members of the Reserves or National Guard receive during their weekend and two-week annual training, or to a person serving on active duty or full-time duty in the active guard reserve (AGR) program.

  7. Does Wisconsin tax military retirement income?

    No. All retirement payments received from the U.S. military retirement system (including payments from the Retired Serviceman's Family Protection Plan and the Survivor Benefit Plan) are exempt from Wisconsin income tax.

FOR MORE INFORMATION PLEASE CONTACT:

WISCONSIN DEPARTMENT OF REVENUE
Customer Service Bureau
PO Box 8949
Madison, WI 53708-8949
Phone: (608) 266-2486
Fax: (608) 267-1030
Email additional questions to DORIncome@revenue.wi.gov

November 20, 2013