Missouri Income Tax on Military Pay

Missouri deducts military pay in three separate provisions and they do not cover the same people. Section 143.174 covers the regular force. For tax years beginning on or after January 1, 2016, one hundred percent of income received as salary or compensation in any form as a member of the active duty component of the Armed Forces of the United States is deducted from Missouri adjusted gross income, to the extent it is in federal adjusted gross income. "Salary or compensation" expressly includes a signing bonus. There is no cap, no residency condition inside the section, and no requirement that the duty be outside Missouri. Read the words "active duty component". This is the regular component, not a reservist who happens to be on active duty orders, and the distinction matters because the reserve side is handled separately and reached one hundred percent only in 2024. Section 143.175 covers the reserve side, and it was phased. Income received in performance of inactive duty for training or annual training status of the National Guard, or in reserve components of the Armed Forces of the United States, was deductible at twenty percent for tax year 2020, forty percent for 2021, sixty percent for 2022, eighty percent for 2023, and one hundred percent for all tax years beginning on January 1, 2024 and thereafter. For tax years beginning on or after January 1, 2025 the section also covers a bonus from the National Guard or a reserve component for joining, reenlisting, or for any other reason. Subsection 2 of that section is the trap and it is unusually blunt: the deduction does not apply to compensation received while engaging in civilian federal service, "including civil service positions requiring the wearing of military uniform and military affiliation". That is the dual-status military technician, and Missouri has a lot of them. The technician's drill pay is deductible; the technician's civilian salary is not, however military the job looks. Combat pay has its own provision. Section 143.121.3(8) subtracts, for all tax years beginning on or after January 1, 2005, the amount of any income received for military service while the taxpayer serves in a combat zone which is included in federal adjusted gross income and not otherwise excluded from it. "Combat zone" means an area the President designates by executive order, and the service must fall between the commencement and termination dates in those orders. What never enters the computation at all, because it is outside federal gross income to begin with, is VA disability compensation, VA pension, Dependency and Indemnity Compensation and military disability retired pay for a service-connected injury. Missouri gives a filing and payment extension to a service member serving in a combat zone, deployed outside the United States during a contingency operation, or hospitalised for an injury, illness or disease received during that service. Section 41.950(8) separately extends any state income tax or property tax obligation for a member on qualifying active duty of thirty days or more until 180 days after completion of the service, without penalty or interest. A nonresident spouse of a nonresident service member stationed in Missouri on orders is not taxed by Missouri on wages earned here, under the federal Servicemembers Civil Relief Act as amended, which also lets the couple elect the service member's residence, the spouse's residence, or the permanent duty station.