Best Tax Tips for Military Spouses in 2020

It's that time of year, again! Tax Season! Whether you're a new military spouse or a seasoned spouse, it never hurts to brush up tax tips and money saving advice. From being employed in one state and claiming residency in another or freelancing on the side, there seem to be more questions than answers when it comes to taxes. Who better to ask than a fellow military spouse who understands the lifestyle and finances! We asked Linda Nemeth, an Air Force spouse ( and who just happens to be a licensed Personal Banker and financial counselor ) a few inside tips for military spouses about taxes and finances. Military Spouse: Give us the top three "inside" tax tips for military spouses? Nemeth: Yes! 1. Become familiar with the Military Spouses Residency Relief Act and what it means. A military spouse is exempt from paying state income taxes when he or she: a. Lives in a state that is different from his or her permanent residence; b. Lives in the state solely in order to live with the servicemember; and, c. The servicemember is living in the state in order to satisfy military orders. d. Some states may require both the spouse and servicemember be residents of the same state. What does this mean for our taxes? If the above requirements are met, then the spouse is entitled to a refund of any taxes already paid to such state that is paid through withholdings. However, the spouse will have to pay tax to the state of residence, assuming that state has an income tax. For example, if you live and work in Ohio, but are a Florida resident you will receive a refund of any withholdings collected for Ohio state taxes and not pay Florida state tax since Florida does not collect state taxes. Some employers will elect not to withhold any state holdings if you inform them that you are a military spouse. If you are in the workforce or thinking of joining the workforce inquire with Human Resources about amending your W-4 to either not have state taxes withheld from your paycheck (if you are a resident of a state that doesn't collect state tax) or have state taxes withheld for the state you are a resident of. 2. Open a SPOUSAL IRA! If you are a "Domestic Engineer", i.e. non-employed spouse it's important to recognize the economic role you play in the family. In order to qualify for a Spousal IRA the spouse has to either have no earned (wages, salaries, tips, etc.) income or not enough income and pass the earned income test to qualify for a Spousal IRA. The maximum contribution limits for 2016 follow the traditional and Roth IRA guidelines of $5,500. For taxpayers age 50 and over, he or she may have a special catch-up period that allows them to add another $1,000 per year. The entire amount contributed to the Spouse IRA may be tax deductible, thus lowering your taxable family's taxable income. Planning for the future begins now. 3. You don't have to do your taxes by yourself. Most installations offer free tax counseling. Find out where the service is located. There are also various tax businesses that offer deep discounts for military members who use their services. Do your research and find the best resources that suit your tax situation. Even if you do enjoy doing your own taxes, don't be afraid to get a second opinion. You may have over looked something that the "professionals" know that you don't. Turbo Tax is an awesome way to have you hand-held through the tax process! Military Spouse: What advice would you give those spouses who work as independent contractor or freelance on side? Nemeth: Many spouses have careers as freelancers or work as consultants; it's work from home jobs for military spouses and ideal for the military lifestyle. Although being a freelancer, consultant, or independent contractor provides a new set of tax issues to consider, it also offers you plenty of new ways to trim your tax bill. If you are paid $600 or more for your work for any business or client, you should receive a 1099-MISC from your customer (they will also send a copy to the IRS, too) As a side note, if your net earnings from self-employment exceed $400, you will have to pay self-employment tax (for Social Security and Medicare). Military Spouse: What advice you give to a newly married spouse this tax season? Nemeth: Hire a professional accountant who is aware of the nuances of the military lifestyle. I.E. PCS expenses, deployment income, rental income, dry cleaning expenses, Foreign Service income, allowances, and other income and expenses related to the military way of life. More than likely without a guarantee a good accountant will make his or her fee. An initial cash outlay may reap more benefits in the long run. Another great resource is Military OneSource. Military OneSource provides access to an online tax service at no cost to you. The service allows you to complete and electronically file your federal and up to three state tax returns or filings. Your calculations are guaranteed to be 100 percent accurate or the online tax service provider will pay the penalties and interest. Military Spouse: Any financial tips you can share with our readers? Nemeth: Don't be afraid of money! Know what your family's financial picture looks like! I often hear "My spouse handles the finances, I'm not sure." That's great that partners are willing to shoulder the responsibility of the house by themselves, but that's not necessarily supporting a stable financial family picture. What if that family member was unavailable? I have met people who have no idea what their spouse had in the bank or even where their bank accounts are. It's tragic to witness a spouse, who can't access her husband's bank account where the family money is located because neither spouse created a financial back up plan, i.e. making each person a joint account holder or completing other necessary documents. Talk to each other about the family budget. Ask questions about how the bills are paid, when are they paid, who is paid. In the absence of one partner, would you be ready to shoulder the family financial plan? It's also important not to hoard money at home. It can be stolen, destroyed, forgotten, or lost. Place your funds in a secure location of your choosing. However, I wouldn't recommend placing them at home. Connect with us on Facebook! Linda Nemeth is an Air Force spouse living in Texas. She's has a decade of experience in the banking industry as well as a front row seat into military life. She is a Key Spouse supporting hundreds of spouses at Goodfellow AFB. She's been through three PCS's, three deployments and 18 TDY's. Outside of having a Masters of Business Administration and a fistful of awards, she is currently working for Wells Fargo as a personal banker. Any information contained in her advice is from personal experience, not from professional associations or education. She recommends consulting your accountant or tax advisor for advice and information concerning particular tax situations. This article has been modified to meet updated editorial standards at Military Spouse, which may include the augmentation of material that reflects the expertise and experiences of our staff.

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