facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause
Transition Tax Topics: State Taxes Thumbnail

Transition Tax Topics: State Taxes

Taxes Videos

- Welcome to Curt's Chalk Talk, the transition tax topics series. I'm Curt Sheldon with C.L. Sheldon and Company and today I want to talk to you about something you may have heard of, state income taxes.

Now, the reality is most of us, while we're on active duty, are able to establish residency without income taxes. That will change when you retire, and more importantly, it could change even before your official retirement date.

Now, let's say you're a Texas resident working in the Pentagon, you have my sympathies, and living in Virginia. Your official retirement date is the first of September, but you start terminal leave in June and start working for a local company in July. You assume that since you're a Texas resident, you don't have to pay any Virginia income taxes. You'd be wrong. Virginia has the right to tax that income as a non-resident.

The Service Members Civil Relief Act only applies to your military pay. So any compensation you earn inside Virginia that is not military compensation is subject to Virginia income taxes and you would be required to file a non-resident tax return for the income during that period. Then once you become a resident Virginia, basically your retirement year, your retirement date, you would file a part year return for the remainder of the year.

Now, interestingly this does not apply to your spouse. The spouse carve out under the Service Members Civil Relief Act and the Military Spouse Relief Act does not limit it to military compensation. So your spouse, if working and earning income inside Virginia, will still be able to be a Texas resident for tax purposes and will not have to pay taxes on the income until your official retirement date.

Are you a little concerned about your finances as you make the transition from active duty to the civilian world? Well check out our checklist. You can get it at www.clsheldon.com/tax. That's a financial checklist at www.clsheldon.com/tax and oh, by the way, it's free.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by C.L. Sheldon & Company, LLC ), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. C.L. Sheldon & Company, LLC does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to C.L. Sheldon & Company, LLC website or incorporated herein, and C.L. Sheldon & Company, LLC takes no responsibility therefore. All such information is provided solely for convenience, educational, and informational purposes only and all users thereof should be guided accordingly. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from C.L. Sheldon & Company, LLC . To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. C.L. Sheldon & Company, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the C.L. Sheldon & Company, LLC ’s current written disclosure statement discussing our advisory services and fees is available for review upon request. DISCLAIMER OF TAX ADVICE: Any discussion contained herein cannot be considered to be tax advice. Actual tax advice would require a detailed and careful analysis of the facts and applicable law, which we expect would be time consuming and costly. We have not made and have not been asked to make that type of analysis in connection with any advice given in this blog post. As a result, we are required to advise you that any Federal tax advice rendered in this blog is not intended or written to be used and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS. In the event you would like us to perform the type of analysis that is necessary for us to provide an opinion, that does not require the above disclaimer, as always, please feel free to contact us.