Military - Domicile

[peggysioux5]

Taxpayer was domiciled in CA when entered the military service.  Taxpayer now lives in North Carolina due to permanent change of station orders.  Taxpayer owns a home in North Carolina.  She has an Alaska driver license due to previous order.  Taxpayer still has CA state income tax withheld.  CA states “California military servicemembers who leave California under PCS orders become nonresidents of California for income tax purposes and military income is not taxable to CA.”  North Carolina states “Under the Servicemembers Civil Relief Act, if you are a legal resident of another state who is stationed in North Carolina on military orders, you will not be taxed on your military pay by North Carolina.

To which state, if any, is the military income taxed?  Taxpayer does not keep up home in CA while in military (joined right out of high school).  Taxpayer stated at some point, she might return to CA.  Taxpayer stated she purchased home in North Carolina being cost of rent is about the same as purchasing home.  How would other tax preparers handle?

Peggy Sioux

[Lion EA]

Military have special rules. IIRC, he's still a CA nonresident for tax purposes until he officially declares he is a resident of another state. I think he pays to no state, with the combination of states you say.

Military will use their station in a non-income-tax state or a state that doesn't tax military pay to declare their change of residency and then remain a resident of that state until they retire. IF CA doesn't tax military pay, then he has no reason to change.

Military wives have special rules, also.

See IRS Pub. and Pub 4940.