Important Tax Information Regarding Spouses of United States Military Servicemembers

Spousal Income

The Servicemembers Civil Relief Act provides that a spouse shall 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 the spouse. The income earned for services performed in North Carolina by a spouse of a servicemember who is legally domiciled in a state other than North Carolina is not subject to North Carolina income tax if:

  1. the servicemember is present in North Carolina in compliance with military orders,
  2. the spouse is in North Carolina solely to be with the servicemember, and
  3. the spouse is domiciled in the same state as the servicemember.

All three of the conditions must be met to qualify for the exemption. For tax years beginning January 1, 2018, the Veterans Benefits and Transition Act of 2018 amended the Servicemembers Civil Relief Act to allow the spouse of a servicemember to elect to use the same residence as the servicemember for state tax purposes. A spouse making this election will be considered to be domiciled in the same state as the servicemember. Note that the first two conditions must also be met in order for the spouse to qualify for the exemption.

There is no presumption as to the residence of a spouse of a member of the armed forces because of marriage. Legal residence will be determined based on the facts in each case.

For more information, see the Personal Taxes Bulletins and the Individual Income Tax Instructions.

Filing Status

If you are the spouse of a servicemember who is a legal resident of North Carolina, the Revenue Department does not assume that you are a North Carolina resident because of marriage. Your residency is based on your individual circumstances. If you filed a joint federal return and either you or your spouse was a nonresident of North Carolina with no North Carolina taxable income, you may still file a joint state return. Once you file a joint return, you cannot choose to file separate returns for that year after the due date of the return. Alternatively, you have the option of filing your state return as married filing separately. If you choose to file a separate North Carolina return, you must complete either a federal return as married filing separately reporting only your income, deductions, and exemptions, or a schedule showing the computation of your separate income, deductions, and exemptions and attach it to your North Carolina return. You must also include a copy of your joint federal return unless your federal return reflects a North Carolina address.

To order the forms you will need to file your return, you may call toll-free at 1-877-252-3052 or go to our Individual Income Tax Forms page.

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