Effective for tax year 2010, Form IT-2104-E, Certificate of Exemption from Withholding, has been updated. Changes have been made to allow an exemption from New York State personal income tax withholding for military spouses qualifying under the Servicemembers Civil Relief Act (SCRA). SCRA provides certain tax relief for a military spouse when he or she is present in a state solely to be with a servicemember who is in that state so he or she can comply with military orders.

Is my military pay subject to New York State and City income taxes?

• If you are a New York State resident and your permanent home (domicile) was in New York State when you entered the military but you were assigned to duty outside the state, you are still a New York State resident. Your military pay is subject to New York State income tax to the same extent it is subject to federal income tax.
• If your permanent home (domicile) was in New York State when you entered the military but you meet the conditions for nonresident status, your military pay is not subject to New York State income tax.
• If your permanent home was not New York State when you entered the military but you were assigned to duty in New York State, you do not become a New York State resident even if you have a permanent place of abode there. You are a nonresident and your military pay is not subject to New York State income tax.

If you are a nonresident, other income that you receive from New York State sources (including your spouse’s income) may be subject to tax. See Publication 88, General information for New York State Nonresidents and Part year Residents.

These rules apply for both New York City and Yonkers income tax purposes.

When do I have to file?

• April 15, 2010
• June 15, 2010, if you are stationed in a foreign country when your return is due
• For combat zone extensions, see Publication 361, New York State Income Tax Information for Military Personnel and Veterans

Combat zone pay

Military pay received for active service as a member of the armed services of the United States in an area designated as a combat zone is exempt from New York State, New York City and Yonkers taxes.  You are entitled to a New York subtraction modification in computing your New York adjusted gross income for the amount of combat pay included in your federal adjusted gross income.

New York State organized militia

The New York State organized militia includes the New York Army National Guard, the New York Air National Guard, the New York Naval Militia, and the New York Guard.

If you are a member of the New York State organized militia, you are entitled to a New York subtraction modification in computing your New York adjusted gross income (AGI) if:

• Your federal AGI includes any pay received as a member of the New York State organized militia for performing active service within New York State due to:
  • state active duty orders issued under New York Military Law section 6.1, or
  • active service of the United States pursuant to federal active duty orders, for service other than training, issued under United States Code Title 10. 

However, income received for regular duties in the organized militia (for example, pay received for the annual two-week training program) does not qualify for this subtraction modification.

Military pensions

Pension payments received by retired military personnel or their beneficiaries are totally exempt from New York State, New York City, and Yonkers income taxes.

Publications 

TSB-M-10(1)I, Military Spouses Residency Relief Act 

Links 

• IRS (specific military page) 
• State of New York Division of Military & Naval Affairs