Jen Lindstrom
May 15, 2025
To further ease financial burdens, Congress passed the Military Spouses Residency Relief Act (MSRRA) in 2009 amending the SCRA. MSRRA allowed spouses to retain legal residency if they originally shared the same resident state as the servicemember. It also expanded the provision for personal service income by the spouse to be taxed by the resident state only.
In 2018, the Veterans Benefits and Transition Act (VBTA) further expanded MSRRA protections, allowing military spouses to claim their servicemember’s legal residence even if they never physically lived there. This simplifies state tax filings for military families when both spouses have the same state of legal residence.
The Veterans Auto and Education Improvement Act (VAEIA) of 2022 enhanced residency options, allowing both servicemembers and spouses to maintain residency in the civilian spouse’s home state, even if they no longer physically reside there. This provides more flexibility in choosing legal residency.
We live in Oklahoma, but my spouse and I maintain our legal residence in Arkansas. Do we file an Oklahoma tax return?
Income from services performed by the servicemember’s spouse in Oklahoma is not taxable to Oklahoma. In short, if your spouse is receiving a W-2, the wages are only taxable to Arkansas. If the W-2 does not report Oklahoma withholding and this is the only income apart from your military wages, there is no filing requirement in Oklahoma. If Oklahoma withholding was applied, Form 511-NR, Oklahoma’s nonresident income tax return, must be filed to request a refund.
Note that this does not apply to a servicemember’s civilian earned income.
My spouse has a job at a local retail store and they are withholding Oklahoma state taxes. Is there anything we can do?
Yes. A military spouse can file Form OW-9-MSE with their employer to exempt themselves from Oklahoma state withholding tax. Employers may also request an updated OK W-4 to allow exempt status.
Does that mean that all income earned in Oklahoma is nontaxable?
No. MSRRA only protects “income for services provided” by the servicemember’s spouse (50 U.S.C. 571(a)(2)). Typically, this is wages reported on a W-2, but can also include personal service business income such as childcare or landscaping. If the spouse runs a home business that makes, buys, or sells goods, such as a cake business, this income is taxable in Oklahoma and may also be reportable to the resident state. Additionally, rental income earned on Oklahoma property is always taxable to Oklahoma.
The SCRA, MSRRA, and VBTA simplify state tax filings for military families. With the addition of the VAEIA of 2022, spouses now have greater flexibility in selecting their legal residence. Since tax laws evolve, consulting a tax professional is essential to ensure compliance and maximize financial benefits.