Are You Aware of the Veterans’ Auto and Education Improvement Act of 2022?
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What the Law Actually Says | No Income Tax States | Common Misconceptions | What it Doesn’t Cover | Why This Matters
If you’ve ever tried to figure out which state you owe income taxes to as a service member, you know how quickly it can get confusing. The Veterans’ Auto and Education Improvement Act of 2022 was signed into law on January 5, 2023, to simplify this process. Section 18 of the act covers everything from GI Bill protections to vehicle modifications for disabled veterans. It’s a meaningful addition to the Servicemembers Civil Relief Act (SCRA) that gives military couples a choice in how they handle state taxes by providing three options for which state laws they file under.
What the Law Actually Says
A military spouse cannot be forced to gain or lose a state residency just because they moved to follow their servicemember, which isn’t new, and has been that way for years. What Section 18 added is a formal election. For any tax year of the marriage, the couple can choose to use one of three states as the basis for the spouse’s tax residency:
- The servicemember’s home state of legal residence
- The spouse’s own home state
- Wherever the servicemember is currently stationed
No Income Tax States
State income taxes vary. Some states have no income tax at all, such as:
- Texas
- Florida
- Nevada
- Wyoming
- Washington
- South Dakota
- Tennessee
If a servicemember’s legal residence is one of these states, and the couple elects to use that for the spouse’s tax filing, the spouse owes no state income tax even if they’re physically living and working in a state that requires it.
Meaning, for a spouse working a civilian job in a state like Virginia or California or New York, where their partner is stationed and paying state income taxes there, they no longer have to. Depending on income, that’s potentially thousands of dollars a year left unclaimed all because they never knew this election existed.
Common Misconceptions
Your Tax State
Despite this election, many still think their spouse’s physical location determines their tax state.
For example, people assume that if they live in North Carolina, they file in North Carolina. The SCRA says that’s not true for the servicemember, and the 2022 Act made clear it doesn’t have to be true for the spouse either, giving them the ability to elect something different.
Revisiting Your Tax State
The second most common misconception is thinking the election is permanent – it’s not. Each tax year stands on its own, meaning you can change your elected tax state annually to fit your financial situation.
Your Tax State vs. Your Spouse’s
Both spouses have to agree on an election. The law requires both the servicemember and the spouse to make the election together. It’s a joint decision for the given tax year, so you cannot choose a different tax state from your spouse.
What It Doesn’t Cover
This election applies to state income taxes on the spouse’s income and personal property.
For example, property taxes are usually decided by where the property is physically located. Some states even have their own rules on top of federal law that require close attention. This is also not a tool for tax evasion; this election has to be made to make it easier for military families to file their taxes, knowing the constant relocation the military may sometimes ask of its service members.
Why This Matters
Military families move frequently which leaves little time to think about their finances. State tax residency is often forgotten or overlooked. Section 18 of the Veterans’ Auto and Education Improvement Act introduced a structured way to deal with the confusion that comes with constant relocation.
Sources:
Veterans’ Auto and Education Improvement Act of 2022 – Official PDF of Public Law 117-333
IRS Publication 3, Armed Forces’ Tax Guide – Spouse Election
DoD MilTax (free filing resource for military families, multistate filings)