Servicemembers Civil Relief Act and taxes Published May 9, 2018 By Capt. Cortland Bobczynski 20th Fighter Wing Legal Office SHAW AIR FORCE BASE, S.C. -- All service members should be familiar with the advantageous legislation that is the Servicemembers Civil Relief Act, which enables service members to focus on their military duties without the distractions of certain civil obligations. It offers protections pertaining to evictions, installment contract termination, mortgage foreclosures, civil proceedings and judgments, and lease terminations. The SCRA effectively provides a wide range of protections, such as allowing a military member to cancel a housing lease if they receive orders to permanently change stations or deploy for more than 90 days. - It caps interest rates on pre-service debts at 6 percent for the duration of the service member’s period of military service. - It postpones or suspends certain civil obligations to include civil lawsuits such as paternity and child custody suits. - It allows service members to unilaterally terminate pre-service contracts after following certain procedures. - It also prohibits both creditors and insurers from pursuing adverse actions against service members solely because they exercise SCRA rights. Overall, the SCRA enables service members to devote full attention to duty. However, SCRA protections are not automatic. Typically, service members must request them and show their military service has materially impaired their ability to meet their civil obligations. It is also important to know that the SCRA has a tax-related provision. It states that a member does not lose legal residence solely because of a transfer pursuant to military orders. Only a service member’s state of legal residence may tax military income. For example, if a Florida resident receives permanent change of station orders to Shaw Air Force Base, South Carolina, the member does not lose Florida residency, nor will he or she be subject to pay South Carolina state income tax on military pay. The SCRA outlines that a nonresident service member’s pay may not be used to “lift” a spouse’s pay into a higher tax bracket. This is what is referred to as the “Kansas rule.” In 2009, Congress revised the SCRA by enacting the Military Spouse Residency Relief Act, which means military spouses do not involuntarily get a new residence for tax purposes just because of a military move. Furthermore, while only military income is protected from nonresident income tax for the service member, the MSRRA exempts all income for the nonresident spouse. However, to receive this protection, the spouse’s residence must be the same as the service member. Additionally, service members are offered an extension deadline for filing their tax returns if they are deployed. They are entitled to an extension for the period of service in the combat zone, plus an additional 180 days. For service members who are deployed overseas during tax filing season, they are automatically granted a two-month tax extension to June 15; however, if they miss this deadline, they can file a tax Form 4868 for a further extension to October 15. For more information, call the legal office at 803-895-1560.