California Tax Information for Military Personnel

Tax Information for Military Personnel
2023 Tax Information for Military Personnel, FTB Publication 1032
1032

FTB Publication

2023
Tax Information
for Military Personnel

Table of Contents
What’s New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Filing Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Are You a Resident?  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Examples of Resident Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Joint or Separate Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Income Subject to California Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Tax Computation for Part-Year Residents or Nonresidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Nonrefundable Renter’s Credit  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Nonrefundable Child and Dependent Care Expenses Credit  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Refundable California Earned Income Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Alternative Minimum Tax (AMT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Extensions – Combat Zone, Military Overseas, or Contingency Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Examples of Income Reporting Requirements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Military Spouses Residency Relief Act (MSRRA)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
Examples of Income Reporting Requirements (MSRRA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  13
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
  What if I am involved in an audit or have received correspondence from the Franchise Tax Board? . . . . . . . . . . . . . . . .  15
  What if I owe back taxes?  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
Where to Get California Tax Forms and Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
Franchise Tax Board Privacy Notice on Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
Volunteer Income Tax Assistance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
General Phone Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

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Page 2  FTB Pub. 1032  2023

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2023 Tax Information for Military Personnel
What’s New
Federal Veterans Auto and Education Improvement
Act (VAEIA) of 2022 – The VAEIA was enacted on
January 5, 2023, and made amendments to the federal
Servicemembers Civil Relief Act (SCRA). California
conforms to the following VAEIA provisions:
•	 A spouse of a servicemember shall neither lose nor
acquire a residence or domicile for purposes of taxation
with respect to the person, personal property, or income
of the spouse by reason of being absent or present in any
tax jurisdiction of the United States solely to be with the
servicemember in compliance with the servicemember’s
military orders.
•	 For any taxable year of the marriage, a servicemember
and the spouse of such servicemember may elect to
use for purposes of taxation, regardless of the date on
which the marriage of the servicemember and the spouse
occurred, any of the following:
•	 The residence or domicile of the servicemember.
•	 The residence or domicile of the spouse.
•	 The permanent duty station of the servicemember.
Note: If the servicemember or the spouse of such
servicemember makes an election, write “MSRRA/VAEIA” at
the top of the tax return in BLUE INK, or include it according
to the software’s instructions.
3514 Booklet – A new FTB 3514, California Earned Income
Tax Credit Booklet, has been created. The new FTB 3514
booklet contains form FTB 3514, instructions, and the EITC
tables. To get FTB 3514 booklet and other FTB forms and
publications, see “P Where to Get California Tax Forms and
Publications” or go to ftb.ca.gov/forms.

A	 General Information
Servicemembers domiciled outside of C
­ alifornia, and
their spouses, exclude the servicemember’s military
compensation from gross income when computing the
tax rate on nonmilitary income. Requirements for military
servicemembers domiciled in California remain unchanged.
Military servicemembers domiciled in California must include
their military pay in total income. In addition, they must include
their military pay in California source income when stationed
in ­California. However, military pay is not California source
income when a servicemember is permanently stationed
outside of California.
If you mistakenly included military income on a previously
filed California tax return, see the discussion of “Amended
Tax Returns” in this publication.
Young Child Tax Credit Expansion – For taxable years
beginning on or after January 1, 2022, California expanded
the Young Child Tax Credit (YCTC) eligibility to include an
eligible individual with a qualifying child who would otherwise
have been allowed the California Earned Income Tax Credit
(EITC) but the individual has earned income of zero dollars
or less, does not have net losses in excess of $33,497 in
the current taxable year, and does not have wages, salaries,
tips, and other employee compensation in excess of $33,497
in the current taxable year. For more information, get form
FTB 3514, California Earned Income Tax Credit, or go to
ftb.ca.gov and search for yctc.
Foster Youth Tax Credit – For taxable years beginning
on or after January 1, 2022, the refundable Foster Youth
Tax Credit (FYTC) is available to an individual and/or
spouse/registered domestic partner (RDP) age 18 to 25,
who is allowed the California EITC for the taxable year, was

in foster care while 13 years of age or older and placed
through the California foster care system. For the current
taxable year, the maximum amount of credit allowable for
each eligible taxpayer is $1,117 and the credit amount
phases out as earned income exceeds the threshold amount
of $25,775, and completely phases out at $30,932. For more
information, get form FTB 3514, see California Revenue and
Taxation Code (R&TC) Section 17052.2, or go to ftb.ca.gov
and search for fytc.
Special rule for separated spouses/RDPs – The federal
American Rescue Plan Act of 2021 allows married taxpayers
who file married filing separately for federal purposes and
who meet certain requirements to qualify for the federal
Earned Income Tax Credit. California law conforms to these
changes for purposes of eligibility for California EITC. For
more information, get form FTB 3514.
Taxpayers with Individual Taxpayer Identification
Number – For taxable years beginning on or after
January 1, 2022, taxpayers who claim the EITC, YCTC, and
FYTC using an Individual Taxpayer Identification Number
(ITIN) may, at the request of the Franchise Tax Board (FTB),
use identifying documents acceptable for purposes of
obtaining a California identification card as authorized by the
California Vehicle Code and related regulations for purposes
of establishing documents acceptable to prove identity, in
addition to other documents already listed under Specific
Instructions for line 7, “Valid ITIN” section, in the form
FTB 3514. For more information, get form FTB 3514.
Dependent Exemption Credit with No ID – For taxable
years beginning on or after January 1, 2018, taxpayers
claiming a dependent exemption credit for a dependent
who is ineligible for a Social Security Number (SSN) and
a federal ITIN may provide alternative information to the
FTB to identify the dependent. For more information, get
form FTB 3568, Alternative Identifying Information for the
Dependent Exemption Credit.
Taxpayers may amend their tax returns beginning with
taxable year 2018 to claim the dependent exemption credit.
If claiming a refund, taxpayers must amend their returns
within the statute of limitations. For more information on how
to amend your tax returns, get 540 or 540 2EZ, Personal
Income Tax Booklet, or 540NR, Nonresident or Part-Year
Resident Booklet, and Schedule X, California Explanation of
Amended Return Changes.
Minimum Essential Coverage Individual Mandate –
For taxable years beginning on or after January 1, 2020,
California law requires residents and their dependents to
obtain and maintain minimum essential coverage, also referred
to as qualifying health care coverage. Individuals who fail
to maintain qualifying health care coverage for any month
during the taxable year will be subject to a penalty unless
they qualify for an exemption. For more information, get the
following health care forms, instructions, and publications:
•	 Form FTB 3853, Health Coverage Exemptions and
Individual Shared Responsibility Penalty
•	 Form FTB 3895, California Health Insurance Marketplace
Statement
•	 Pub. 3895B, California Instructions for Filing Federal
Forms 1094-B and 1095-B
•	 Pub. 3895C, California Instructions for Filing Federal
Forms 1094-C and 1095-C
Combat Zone Extended to Egypt’s Sinai Peninsula – The
federal Tax Cuts and Jobs Act grants an exclusion from gross
income of military pay received while serving in the Sinai
Peninsula of Egypt. California does not conform. Additional
FTB Pub. 1032  2023  Page 3

information can be found in the instructions for California
Schedule CA (540), California Adjustment – Residents
and Schedule CA (540NR), California Adjustments –
Nonresidents and Part-Year Residents.
Residence of Spouse of Servicemember – The federal
Veterans Benefits and Transition Act of 2018 allows the
spouse of a servicemember to make the election to
use the same residence for purposes of taxation as the
servicemember regardless of the date on which the marriage
of the spouse and the servicemember occurred. This change
also applies to California.
The VAEIA, which was enacted on January 5, 2023,
amended the SCRA and made changes to the tax residency
and domicile laws for servicemembers and the spouse of
a servicemember. For more information, see “What’s New”
section.
Military Spouses Residency Relief Act (MSRRA) –
The federal MSRRA amended the SCRA. The VAEIA, which
was enacted on January 5, 2023, amended the SCRA and
made changes to the tax residency and domicile laws for
servicemembers and the spouse of a servicemember. A
nonmilitary spouse of a military servicemember shall neither
lose nor acquire a residence or domicile for tax purposes
by being absent from or present in California to be with the
servicemember serving in compliance with military orders if
the servicemember and the spouse is domiciled outside of
California.
Income of a military servicemember’s nonmilitary spouse
for services performed in California is not California source
income subject to state tax if the spouse is in California to be
with the servicemember serving in compliance with military
orders, and the spouse is domiciled outside of California.
For more information regarding the servicemembers’
spouses to whom the MSRRA applies, see Section N,
Military Spouses Residency Relief Act (MSRRA) or for the
VAEIA, see “What’s New” section.
Heroes Earnings Assistance and Relief Tax (HEART)
Act – California conforms to the federal HEART Act of 2008
that permits the rollover of a federal military death gratuity
payment or Servicemembers’ Group Life Insurance proceeds
into a Roth Individual Retirement Arrangement (IRA) or
Coverdell education savings account (ESA), without regard
to otherwise applicable contribution limits.
Differential wage payments made on or after
January 1, 2009, to members of the uniformed services
on active duty for more than 30 days will be treated as
compensation for purposes of a retirement plan and IRA
contributions. Differential wages are all or part of the wages
paid by an employer as if the member were performing
service for the employer rather than being on active duty.
Individual Retirement Plan Contributions – California
conforms to the federal Heroes Earned Retirement
Opportunities Act that allows members of the Armed Forces
serving in a combat zone to make contributions to their
individual retirement plans even if the compensation on which
such contribution is based is excluded from gross income.
Early Distributions Not Subject to Additional Tax –
California conforms to the exceptions from the additional
tax on early withdrawals from retirement plans for qualified
distributions made after September 11, 2001, to reservists
while serving on active duty for at least 180 days. If you
received one of these distributions and were assessed
an additional tax, you may amend your tax return to claim
a refund within the applicable statute of limitations. See
“Amended Tax Returns” in this publication.

Page 4  FTB Pub. 1032  2023

Registered Domestic Partners (RDPs) – For purposes of
California income tax, references to a spouse, husband, or wife
also refer to a California RDP, unless otherwise specified. When
we use the initials RDP, they refer to both a California registered
domestic “partner” and a California registered domestic
“partnership,” as applicable. For more information on RDPs, get
FTB Pub. 737, Tax Information for Registered Domestic Partners.
California conforms to the federal Military Family Tax
Relief Act to allow the following:
•	 Deduction for Overnight Travel Expenses of National
Guard and Reserve Members – Reservists who stay
overnight more than 100 miles away from home while
in service (e.g., for a drill or meeting) may deduct
unreimbursed travel expenses (transportation, meals,
and lodging).
•	 Exclusion of Gain on Sale of a Principal Residence –
A taxpayer on qualified official extended duty in the U.S.
Armed, Uniformed, or Foreign Services may suspend, for
up to 10 years of such duty time, the running of the 5-year
ownership‑and‑use period before the sale of a residence.
This applies when the duty station is at least 50 miles
from the residence - or while the person is residing under
orders in government housing - for a period of more than
90 days or for an indefinite period.
•	 Exclusion from Gross Income of Certain Federal
Death Gratuity Payments – A federal death gratuity
payment to a survivor of a member of the Armed Forces
is excludable from gross income.
•	 Combat Zone Extensions Expanded to Contingency
Operations – The various extensions granted to combat
zone participants to file tax returns or pay taxes apply to
those serving in Contingency Operations, as designated
by the Secretary of Defense.
Amended Tax Returns – If you are domiciled outside of
California and included your military pay in income from all
sources on a previously filed California tax return, you may
file an amended tax return to claim a refund for taxable years
not closed by the general statute of limitations. In addition,
servicemembers who are American Indian tribal members
treated as living on an Indian reservation who, on a previously
filed California tax return, included military pay in income from
all sources, can amend ­previously filed tax returns to claim a
refund for taxable years not closed by the statute of ­limitations.
Generally, the statute of limitations is the later of:
•	 Four years from the original due date of the tax return.
•	 Four years from the date a timely tax return is filed.
•	 One year from the date of overpayment.
However, the general statute of limitations may be extended
by service in a combat zone, a disaster loss, or assignment
outside the United States.
To amend your tax return:
•	 File an amended Form 540NR, California Nonresident
or Part-Year Resident Income Tax Return, and check the
“AMENDED return” box at the top of Side 1.
•	 Attach Schedule X to the amended tax return and check
box k, Military HR 100, on Part II, line 1 of the Schedule X.
•	 Attach Schedule CA (540NR) and any other affected
forms or schedules.
•	 Attach a copy of the military W-2, Wage and Tax
Statement, to the amended tax return.
If you are filing an amended tax return for a taxable year in
which the general statute of limitations has closed, attach
a statement explaining how you determined the extended
statute of limitations. If the statute is extended because of
military service in a combat zone or outside of the United
States, attach copies of any documents that show when you
served in a combat zone or overseas.

B	 Filing Requirements
Residents – File a California tax return if either your gross income (which consists of all income you received from all sources in the form
of money, goods, property, and services, that is not exempt from tax) or your adjusted gross income (AGI) (which consists of your federal
AGI from all sources, reduced or increased by all California income adjustments) is more than the amounts shown on the chart below.
Nonresidents and Part-Year Residents – File a California tax return if you have any income from California sources and your gross
income (which consists of all income you received from all sources in the form of money, goods, property, and services, that is not
exempt from tax) from all sources or your AGI (which consists of your federal AGI from all sources, reduced or increased by all California
income adjustments) is more than the amounts shown on the chart below.
Exception: Married/RDP taxpayers who choose the married/RDP filing separately filing status may have a tax liability in some cases
even where combined income is under these amounts.
Even if you do not meet the basic filing requirements, you must file a tax return in order to get a refund if California income tax
was withheld from your pay, you have withholding from Form(s) 592-B, Resident and Nonresident Withholding Tax Statement,
or 593, Real Estate Withholding Statement, or if you made estimated tax payments.
On 12/31/23,
my filing status was:

and on 12/31/23,
my age was:

(If your 65th birthday is on
January 1, 2024, you are considered to
be age 65 on December 31, 2023)

California Gross Income
Dependents

Single or Head of Household

Under 65
65 or older

0
21,561
28,761

Married/RDP filing jointly
Married/RDP filing separately

Under 65 (both spouses/RDPs)
65 or older (one spouse/RDP)
65 or older (both spouses/RDPs)

43,127
50,327
57,527

Qualifying surviving spouse/RDP

Under 65
65 or older

Dependent of another person –
Any filing status

Any age

(Get FTB Pub.1540, Tax Information for Head
of Household Filing Status.)

(The income of both spouses/RDPs must
be combined; both spouses/RDPs may be
required to file a tax return even if only one
spouse/RDP had income over the amounts
listed.)

C	 Are You a Resident?
Active Duty Military – Generally, for tax purposes, you are
considered a resident of the state from which you entered
the military. The SCRA provides that:
•	 A person shall not be deemed to have lost a residence or
domicile in any state solely by reason of being absent in
compliance with military orders.
•	 A person shall not be deemed to have acquired a
­residence or domicile in any other state solely by r­eason
of being there in compliance with military orders.
•	 Compensation for military service is not considered to
be from sources within the state where a member is
stationed if that state is not the member’s domicile.
Domicile is defined as the one place:
•	 Where you maintain a true, fixed and permanent home.
•	 To which you intend to return whenever you are absent.
For tax purposes, a military servicemember is not
considered a resident of ­California unless he or she is
domiciled in California.
An individual domiciled in ­California when entering the
military is considered to be a:
•	 Resident while stationed in C
­ alifornia.
•	 Resident while stationed in California on permanent
change of station (PCS) orders and temporary duty
(TDY) assignments outside ­California, regardless of
the duration.
•	 Nonresident while stationed outside C
­ alifornia on
PCS orders.
Military servicemembers domiciled outside of ­California are
considered nonresidents for tax purposes when stationed in
­California on PCS orders.

1
36,428
39,911

2
or more
47,578
48,831

57,994
61,477
68,677

69,144
70,397
77,597

36,428
39,911

47,578
48,831

California Adjusted Gross Income
Dependents
2
0
1
or more
17,249
32,116
43,266
24,449
35,599
44,519
34,503
41,703
48,903

49,370
52,853
60,053

60,520
61,773
68,973

32,116
35,599

43,266
44,519

More than your standard deduction (Use the California Standard Deduction Worksheet
for Dependents in the instructions for your tax return to figure your standard deduction.)

Spouses Not Covered Under the MSRRA and Retired
Military – For purposes of determining residency, civilian
spouses of military servicemembers not meeting the
MSRRA requirements and retired military servicemembers
are not covered by the SCRA, as amended by the MSRRA.
For tax purposes, their residency is determined under state
laws. R&TC Section 17014 defines a resident as:
1.	 Every individual who is in this state for other than a
temporary or transitory purpose.
2. 	Every individual domiciled in this state who is outside the
state for a temporary or transitory purpose.
For more information, get FTB Pub. 1031, Guidelines for
Determining Resident Status.

D	 Examples of Resident Status
Military Personnel With a California Domicile
•	 Stationed in C
­ alifornia – Military servicemembers
whose domicile is ­California are residents of California
and are subject to tax on all income, regardless of source,
while stationed in ­California on permanent military orders.
•	 Stationed Outside California – California military
servicemembers who leave ­California under PCS
orders become nonresidents of ­California for income
tax purposes. All income received or earned prior to
departure is subject to tax by ­California. After departure,
only income from ­California sources is subject to tax
by ­California. Nonresidents are generally not taxed by
­California on income from intangibles, such as dividends
from stocks or interest from bonds or bank accounts.
•	 California military servicemembers who leave ­California
under a TDY assignment continue to be ­California
residents even though absent from the state.
•	 California military servicemembers on a ship whose home
port is in ­California remain ­California residents while on
sea duty, regardless of the ship’s location.
FTB Pub. 1032  2023  Page 5

Nonmilitary Spouse – If the spouse of the military
servicemember remains in C
­ alifornia, the nonmilitary spouse
is considered a ­California resident. As a ­California resident,
the spouse is subject to tax on all of his or her separate
income, regardless of where it is earned. If the military
servicemember retains a C
­ alifornia domicile, the spouse is
also subject to tax on his or her one‑half community property
share of all income, including the military servicemember’s
military pay.
The nonmilitary spouse of a military servicemember who
is domiciled in ­California, but leaves the state with the
military spouse on PCS orders outside ­California, becomes
a nonresident upon leaving ­California. The MSRRA does
not alter this result. All income received or earned while a
­California resident is subject to tax. While a nonresident, only
income from C
­ alifornia sources is subject to tax.
Military Personnel Domiciled Outside of California –
Military servicemembers who are domiciled outside C
­ alifornia
remain nonresidents, even though stationed in C
­ alifornia,
unless they establish a ­California domicile.
Military Couples – Each servicemember follows the
above rules applicable to each of them as an individual
military servicemember.

E	 Joint or Separate Tax Returns
Active duty military servicemembers and their spouses who
file joint federal tax returns may file joint or separate tax
returns for C
­ alifornia.
When filing separate tax returns, a full-year resident
spouse must file Form 540, California Resident Income Tax
Return. A nonresident or part-year resident spouse must
file Form 540NR. When filing a joint tax return and one
spouse is a nonresident or part‑year resident, you must file
Form 540NR. You should figure your tax both jointly and
separately to determine which filing status will result in the
lower amount of tax.
A married couple who file a joint tax return may amend that
tax return, within the general statute of limitations, after the
original due date to change their filing status from married
filing jointly to married filing separately if either spouse was
one of the following:
•	 An active servicemember of the armed forces or any
auxiliary branch, or
•	 A nonresident for the entire taxable year who had no
income from a California source.

F	 Income Subject to California Tax
In general, ­California taxes all of the income you ­receive while
you are a resident of ­California and all of the income you
receive from C
­ alifornia sources while you are a nonresident.
Under the SCRA, military servicemembers who are not
domiciled in California are not taxed by California on pay
received for military services performed in California, even though
they were stationed in California for the entire year. However,
all other income of nonresident military servicemembers from
California sources is subject to California tax.
California Source Income – California source income
includes income from all of the following:
•	 Nonmilitary services performed in ­California such
as salaries or wages from a second job held by a
nonresident military member.
•	 A trade or business for which the benefit of the services
received are in ­California.
•	 Real or tangible personal property located in C
­ alifornia.

Page 6  FTB Pub. 1032  2023

Intangible Income – Income from intangible property
(such as dividends from stocks or interest from bonds or
bank accounts), regardless of the location of the payor, is
sourced in the state of residence of the recipient. Therefore,
intangible income is not taxable by ­California if received by
a nonresident.
Military Pay – Military pay is not included in ­California
source income unless the military servicemember is
domiciled in ­California and stationed in ­California. However,
American Indian tribal servicemembers treated as living on
an Indian reservation are not taxed on their military pay. For
information on how American Indians treat other types of
income, go to ftb.ca.gov and search for native americans.
Military Retirement Pay – Military retirement pay is taxable
by California if it is received by a California resident. This
applies to all military pension income received while the
retiree is a California resident regardless of where the retiree
was stationed or domiciled while on active duty.
Example: John Douglas was a nonresident of California
stationed outside California all of his active duty military
career. He retires and moves to California. His military
pension income received after he moves to California is
taxable by California.
Nonresidents of California are not taxed on military retirement
pay or other qualified retirement income. For more information,
get FTB Pub. 1005, Pension and Annuity Guidelines.
Division of Income, When Separate Tax Returns Are Filed –
For tax purposes, income is allocated between spouses based
upon whether the person receiving the income is domiciled in a
community or separate property state.
Community property states are: Arizona, ­California, Idaho,
Louisiana, Nevada, New Mexico, Texas, Washington,
and Wisconsin.
Puerto Rico, Guam, and Northern Mariana Islands are
community property territories. All other states and U.S.
territories are separate property states or territories.
The domicile of the spouse earning the income determines
the division of income between the spouses when separate
tax returns are filed. See Section C, Are You a Resident?, for
the definition of domicile. Each spouse must follow the laws
of his or her state of domicile to determine if the income is
separate or community property. If the state of domicile is a
community property state, when filing separate tax returns,
each spouse must report half of the community property
plus each spouse’s separate income on each tax return.
Income from joint accounts is assumed to belong equally to
each party. Therefore, if you and your spouse file separate
tax returns, each must report one-half of any taxable income
from a joint account.
Example: Lt. Tucker is domiciled in New York, a separate
property state, and Mrs. Tucker is domiciled in ­California, a
community property state. Wages earned by Lt. Tucker are
his separate income for tax purposes. Wages earned by
Mrs. Tucker are community property for tax purposes and
each spouse must report his or her community half if they
are filing separate tax returns.
Nonresident Military Personnel With California
­Domicile – When you compute your total AGI from all
sources under ­California law on Schedule CA (540NR),
column A should include all income you reported on your
federal tax return. Do not enter your military income or
non-California source income in column B. Use column B
and column C to make only the adjustments described in
the instructions for Schedule CA (540NR). Be sure to read
the instructions for Schedule CA (540NR), Part II, Section A,
line 1a through line 1i and line 1z.

To compute your part-year or nonresident C
­ alifornia AGI,
do not enter your military income or other non-California
source income in Schedule CA (540NR), column E.
Resident Nonmilitary Spouse – Resident nonmilitary
spouses are taxed on their entire share of taxable income.
If a military servicemember is domiciled in ­California, the
resident nonmilitary spouse’s community half of military pay
is included in total California AGI regardless of the military
servicemember’s residency status.
Military Pay Adjustment (MPA) – Military pay of a
servicemember domiciled outside of California cannot be
used to determine the amount of California tax you (or your
spouse) must pay. Since the California tax return starts with
federal AGI, which includes your military pay, you must make
an adjustment on your California tax return. This is called the
“military pay adjustment” or “MPA”.
If you file Form 540NR, enter your military pay on
Schedule CA (540NR), Part II, Section A, line 1a, column B.
Write “MPA” to the left of column A or include it according to
your software’s instructions. Do not include your military pay
in column E.
Example: Lt. Pope is a nonresident domiciled outside of
California. Mrs. Pope is a resident of California. They should
enter Lt. Pope’s military pay on Schedule CA (540NR),
Part II, Section A, line 1a, column B. See the examples on
page 10 for the division of pay between spouses.
Modified Federal Adjusted Gross Income – Some
deductions and credits are limited by federal AGI. Military
pay of a servicemember domiciled outside of California
cannot be used to reduce the amount of these deductions
and credits. You must modify your federal AGI used to
compute these limitations by subtracting your military pay
from federal AGI. The deductions and credits subject to a
federal AGI limitation are:
•	 Exemption Credit – if using modified federal AGI to
compute the exemption credit phase out, write “MPA” to
the left of the exemption credit amount on Form 540NR,
line 39, or for the resident spouse filing a separate tax
return, Form 540, line 32, or include it according to your
software’s instructions.
•	 Medical and Dental Expenses – limited to amounts in
excess of 7.5% of federal AGI on federal Schedule A,
Itemized Deductions.
•	 Gifts to Charity – subject to a 20%, 30%, and 50% federal
AGI limitation.
•	 Casualty and Theft Losses – total amount of all losses
limited to amount in excess of 10% of federal AGI on
federal Schedule A.
•	 Job Expenses and Most Other Miscellaneous E
­ xpenses –
limited to amounts in excess of 2% of federal AGI.
•	 Investment expenses included as a Miscellaneous
Itemized Deduction – subject to the 2% of federal AGI
limitation and reported on form FTB 3526, Investment
Interest Expense Deduction.
•	 Passive Activity Losses – modified federal AGI limitation.
•	 Student Loan Interest Deduction – figured on the Student
Loan Interest Deduction Worksheet included in the
instructions for Schedule CA (540 or 540NR).
•	 Child and Dependent Care Expenses Credit – see
Section I, Nonrefundable Child and Dependant Care
Expenses Credit.
•	 Alternative Minimum Tax (AMT).
•	 Underpayment of Estimated Tax.

G	 Tax Computation for Part-Year
Residents or Nonresidents
The California tax on part-year residents or nonresidents
is the California taxable income multiplied by a
California tax rate. Nonresidents use Form 540NR and
Schedule CA (540NR) to compute their tax.
California taxable income is the income subject to
­California tax as explained in Section F, Income Subject to
California Tax, of this publication less certain deductions,
such as a prorated portion of the standard deduction or
itemized deductions.
The California tax rate is figured as follows:
Step 1: Generally, nonresidents or part-year residents
determine their total taxable income as if they were
California residents for the entire year and taxable on
all their income. However, military servicemembers
domiciled outside of California, whether residing
inside or outside of California, exclude their military
compensation from this total taxable income amount.
See Section F. Nonresident servicemembers
must refigure any federal AGI limitations by first
subtracting military compensation from federal AGI.
See Section F.
Step 2: Compute the tax on the total taxable income from
Step 1.
Step 3: Divide the tax from Step 2 by the total taxable
income from Step 1. This is the California tax rate.
Multiply California taxable income by the California
tax rate to determine your part-year or nonresident
California tax.
California	
taxable	
x
income	

Tax on total taxable income
Prorated
   Total taxable income
=
tax

H	 Nonrefundable Renter’s Credit
California residents or part-year residents who paid rent for
at least six months on their principal residence located in
­California and meet certain income requirements may claim a
nonrefundable renter’s credit against tax.

I	

Nonrefundable Child and
Dependent Care Expenses Credit

Taxpayers may claim a nonrefundable child and dependent
care expenses credit against tax. You may be eligible to
claim this credit if you paid someone to care for your child
or other qualifying person so you (and your spouse, if
married) could work or look for work. If you are a nonresident
of California, your earned income must be from California
sources. For purposes of this credit, income for services
performed in California by a servicemember’s spouse that is
not subject to state tax under the MSRRA is not considered
earned income from California sources. Active duty pay
is considered earned income from California sources,
regardless of whether the servicemember is domiciled in
California. Generally, if you are married, you must file a joint
tax return. To qualify for the credit, both spouses must have
California earned income. A full-time student or disabled
person is deemed to have earned income. Your federal AGI
must be $100,000 or less. For more information, get form
FTB 3506, Child and Dependent Care Expenses Credit.

FTB Pub. 1032  2023  Page 7

Military Personnel Domiciled In California
Example: Sgt. Miller is domiciled in California, but stationed
all year in Virginia. Sgt. Miller’s only source of earned
income is his military pay. His wife, Ann, and their child
remained in California. Ann worked in California and they
incurred childcare expenses for care provided in California.
Because Sgt. Miller’s military pay, while serving in Virginia,
is considered ­California earned income for purposes of
computing the credit, they qualify for the credit, if they meet
all other qualifications.
Military Personnel Domiciled Outside of California
This is additional information you need to complete
form FTB 3506.
•	 Military pay is considered California earned income
for purposes of computing the credit – Under
California law, your military pay for service in California
is considered California earned income for purposes of
computing the credit.
•	 Income for services performed in California by a
servicemember’s spouse that is not subject to state tax
under the MSRRA is not considered California earned
income for purposes of computing the credit.
•	 Modified federal adjusted gross income – Use the
federal AGI less your military pay to determine:
•	 If your federal AGI is $100,000 or less.
•	 The decimal amount to use on form FTB 3506, line 7
and line 9.
If using modified federal AGI to compute the Child and
Dependent Care Expenses Credit, write “MPA” to the left
of the credit amount on form FTB 3506, line 12 or include it
according to your software’s instructions.

J	 Refundable California Earned
Income Tax Credit
Taxpayers who earned wage income subject to California
withholding and/or have net earnings from self-employment
may claim a refundable California EITC. If you are a
nonresident of California, your earned income must be
from California sources. For purposes of this credit, income
for services performed in California by a servicemember’s
spouse that is not subject to state tax under the MSRRA
is not considered earned income from California sources.
If you are married, you must file a joint tax return to claim
the credit, unless you meet the requirements under the
Special rule for separated spouses/RDPs, provided in the
Specific Instructions in the form FTB 3514. A servicemember
may elect to include his or her nontaxable military combat
pay in earned income for purposes of the EITC. Each
servicemember must include all of his or her combat pay, not
just a portion of it. You do not need a child to qualify for the
credit, but must file a California tax return to claim the credit
and attach a completed form FTB 3514 to your California tax
return. For more information, get form FTB 3514.
Military Personnel Domiciled In California
Example: Sgt. Miller is domiciled in California, but stationed
all year in Virginia. Sgt. Miller’s only source of earned income
is his military pay. His wife, Ann, remained in California.
Because Sgt. Miller’s military pay, earned while serving
in Virginia, is considered California earned income for
purposes of computing the credit, they qualify for the credit,
if they meet all other qualifications.

Page 8  FTB Pub. 1032  2023

Military Personnel Domiciled Outside of California
This is additional information you need to complete form
FTB 3514.
•	 Military pay is not considered California earned
income for purposes of computing the credit – Under
California law, your military pay for service in California is
not considered California earned income for purposes of
computing the credit.
•	 Income for services performed in California by a
servicemember’s spouse that is not subject to state tax
under the MSRRA is not considered California earned
income for purposes of computing the credit.
•	 A servicemember’s income from a second job in
California that is subject to California withholding and/or
net earnings from self-employment qualifies as earned
income for computing this credit.
•	 Modified federal adjusted gross income – Use the
federal AGI less your military pay to determine if your
modified federal AGI is $30,000 or less.

K	 Alternative Minimum Tax (AMT)
If you claim certain types of deductions and income
exclusions, you may be subject to ­California’s AMT.
Generally, if you filed federal Form 6251, Alternative
Minimum Tax – Individuals, you must also file ­California’s
Schedule P (540), Alternative Minimum Tax and
Credit Limitations — Residents, with Form 540; or
Schedule P (540NR), Alternative Minimum Tax and Credit
Limitations — Nonresidents or Part-Year ­Residents, with
Form 540NR.
The MPA as described in Section F, if applicable, is used
to reduce the federal AGI when computing several lines of
Schedule P and when determining other limitations.

L	 Extensions – Combat Zone,
Military Overseas, or Contingency
Operations
Military servicemembers are allowed a filing extension of up
to 180 days to file their California income tax returns and pay
their tax, without interest or penalties, under the following
conditions:
•	 If you were in a designated combat zone, contingency
operation or in a qualified hazardous duty area
(QHDA) anytime during the taxable year or filing period
(January 1 to April 15), you are entitled to an extension to
file and pay, without interest and penalties, of up to 180
days after leaving the combat zone or QHDA. In addition
to the 180 day extension, you are entitled to an extension
for the number of days you were in a combat zone or
QHDA during the filing period.
•	 If you served outside the United States, but not in a
designated combat zone, contingency operation or
QHDA, you are entitled to an extension of time to file and
pay without interest and penalties, of up to 180 days after
returning from overseas.
IMPORTANT:
How do I indicate that I qualify for the extension to file
and pay?
•	 If you were serving in the military overseas, write
“MILITARY OVERSEAS” at the top of your tax return in
BLUE INK.
•	 If you served in a designated combat zone or QHDA,
write “COMBAT ZONE” and the area you served in at
the top of your tax return in BLUE INK.

•	 You must also write the date you were deployed
overseas or entered a designated combat zone or
QHDA and the date you returned from overseas or from a
designated combat zone or QHDA.
•	 If both you and your spouse were in the military, write
the information for both of you and indicate which is your
information and which is your spouse’s information.
The extensions apply to the servicemember and spouse
regardless of whether a joint tax return or separate tax
returns are filed.

M	 Examples of Income Reporting
Requirements
The chart on the next page includes examples that illustrate
California’s income reporting requirements. To use the
chart, read down the first column to find your status: Military
servicemember (M) or Spouse (S), then read across to find
the type of tax return to file and the type of income to report.
These examples assume you were either a nonresident for
the entire year or a resident for the entire year. Part-year
residents should get FTB Pub. 1031 for more information.
(continued on next page)

FTB Pub. 1032  2023  Page 9

Status	

Examples of Income Reporting Requirements

M = Military servicemember   S = Spouse

California Domiciled Military
SINGLE TAXPAYERS

1.	

M –	 Domiciled in California.
		
Stationed in California
		
all year.

File Form 540 2EZ, California Resident Income Tax Return, and report all income, including military
income; or file Form 540 and report all income, including military income, on Schedule CA (540),
column A. Do not enter military income in column B or column C.

2.	 M –	 Domiciled in California.

If you have California source income, file Form 540NR and report all income, including military
income, on Schedule CA (540NR), column A. Do not enter military income on Schedule CA (540NR),
column B or column C. Exclude your military compensation and other non-California source income
from Schedule CA (540NR), column E. If you have no California source income, you are not required
to file a California tax return.

		
		

Stationed outside
California all year.

MARRIED TAXPAYERS

3.	 M –	 Domiciled in California.

If filing a joint tax return, file Form 540 2EZ and report all income, including military income, or file
Form 540 and report all income, including military income, on Schedule CA (540), column A. Do not
enter military income in column B or column C.
If filing separate tax returns, each spouse must file Form 540 and report his or her one-half share
of all community income, including military income, and his or her separate income, if any, on
Schedule CA (540), column A. Do not enter military income in column B or column C.

4.	 M –	 Domiciled in California.

If filing a joint tax return, file Form 540NR. Report all income, including military income, on
Schedule CA (540NR), column A. Do not enter military income on Schedule CA (540NR), column B
or column C. Report all California source income, all S’s separate income, and S’s community
one-half share of all non-California source income on Schedule CA (540NR), column E. This includes
S’s community one-half share of military pay and intangible income.
If filing separate tax returns, M must file Form 540NR. Report all separate income and one‑half share
of all community income, including military income, on Schedule CA (540NR), column A. Do not
enter military income on Schedule CA (540NR), column B or column C. Report all separate California
source income and one-half share of community California source income on Schedule CA (540NR),
column E. Do not enter military income, intangible income, or other non-California source income on
Schedule CA (540NR), column E.
If filing separate tax returns, S must file Form 540 and report all separate income and his or her
one‑half share of all community income, including military income, on Schedule CA (540), column A.
Do not enter military income in column B or column C.

5.	 M –	 Domiciled in California.

If filing a joint tax return, file Form 540NR. Report all income, including military income, on
Schedule CA (540NR), column A. Do not enter military income on Schedule CA (540NR), column B
or column C. Report on Schedule CA (540NR), column E, all California source income, including all
military income, and M’s community one-half share of S’s non-California source income, and M’s
one‑half share of intangible income.

		
		
	
S –	
		
		
		
		
	
S –	
		
		

		
		
	
S –	
		
		

Stationed in California
all year.
Domiciled in California.
Resided in California
all year.
Stationed outside
California all year.
Domiciled in California.
Resided in California
all year.

Stationed in California
all year.
Domiciled in California.
Resided outside California
all year.

If filing separate tax returns, M must file Form 540, and report his or her one-half share
of all community income, including military pay, and his or her separate income, if any, on
Schedule CA (540), column A. Do not enter military income in column B or column C.
If filing separate tax returns, S must file Form 540NR. Report on Schedule CA (540NR),
column A, one-half of all community income, including military income, and his or her separate
income, if any. Do not enter military income in column B or column C. Report your one-half share of
California source community income, including military income, and any separate California source
income in column E.

6.	 M –	 Domiciled in California.
		
		
	
S –	
		
		

Stationed outside California
all year.
Domiciled in California.
Resided outside California
all year.

Page 10  FTB Pub. 1032  2023

If filing jointly or filing separately, file Form 540NR. Report all income, including military income, on
Schedule CA (540NR), column A. Do not enter military income on Schedule CA (540NR), column B
or column C. Report on Schedule CA (540NR), column E, all California source income. Do not include
in column E, military, intangible, or other non-California source income (including the spouse’s income
for services performed outside of California). If there is no California source income, M and S do not
have to file a California tax return.

Status	

Examples of Income Reporting Requirements (continued)

M = Military servicemember   S = Spouse   MPA = Military pay adjustment

Non-California Domiciled Military
SINGLE TAXPAYERS

7.	

M –	 Domiciled outside
		California.
		
Stationed in or out of
		
California all year.

If you have California source income, file Form 540NR. Report all income, including military income,
on Schedule CA (540NR), column A. Enter all military income on Schedule CA (540NR), column B.
Report on Schedule CA (540NR), column E, California source income. Do not enter military income
on Schedule CA (540NR), column E. If M has no California source income, M is not required to file a
California tax return.

MARRIED TAXPAYERS

8.	 M –	 Domiciled in a community

If filing a joint tax return, file Form 540NR. Report all income, including military income, on
Schedule CA (540NR), column A. Report all military income in column B. Report all California source
income, plus S’s share of intangible income, and S’s other non-California source income in column E.
Do not include M’s military income, M’s share of intangible income, or M’s other non-California source
income in column E.
If filing separate tax returns, M must file Form 540NR. Report on Schedule CA (540NR), column A,
all separate income and your one-half share of all community income, including M’s one-half share
of military income. Enter your one-half share of military income on Schedule CA (540NR), column B.
Report all separate California source income and one-half of California source community income in
column E. Do not enter military or intangible income in column E.
If filing separate tax returns, S must file Form 540. Report all separate income and your one-half share of
all community income, including S’s community one-half share of military income on Schedule CA (540),
column A. Enter S’s community one-half share of military income on Schedule CA (540), column B.
See page 12 for an illustration of how to complete Schedule CA when filing jointly or filing separately.

9.	 M –	 Domiciled in a separate

If filing a joint tax return, file Form 540NR. Report all income, including military income, on
Schedule CA (540NR), column A. Enter all military income in column B. Report all California source
income, plus S’s intangible income, and S’s other non-California source income in column E. Do not
enter military income in column E.
If filing separate tax returns, M must file Form 540NR. Report on Schedule CA (540NR), ­column A,
all separate income, including all military income, M’s intangible income, California source income
and ­non‑California source income. Enter in column B all M’s military pay. Report in column E all
M’s California source income. Do not report military or intangible income in column E. If M has no
California source income, M does not have to file a California tax return.
If filing separate tax returns, S must file Form 540 and report all separate income of S from all sources.

10.	 M –	

Domiciled in a separate
		
property state.
		
Stationed in or out of
		
California all year.
	
S –	 Domiciled in a
		
community property
		state.
		
Resided in California
		
all year.

If filing a joint tax return, file Form 540NR. Report all income, including military income,
on Schedule CA (540NR), column A. Enter all military income in column B. Report on
Schedule CA (540NR), column E, all California source income plus S’s intangible income, and S’s
other non‑California source income. Do not include military income.
If filing separate tax returns, M must file Form 540NR. Report on Schedule CA (540NR), column A, all
separate income including military income and one-half of S’s community income. Enter in column B
all M’s military income. Report on Schedule CA (540NR), column E, all separate California source
income and your one-half share of California source community income. Do not include M’s military or
intangible income.
If filing separate tax returns, S must file Form 540. Report all separate income and your one-half
share of all ­community income on Schedule CA (540), column A.

11.	

If filing a joint tax return, file Form 540NR. Report all income, including military income, on
Schedule CA (540NR), column A. Enter all military income in column B. Report all California source
income, plus S’s share of intangible income, and S’s other non-California source income in column E.
Do not include M’s military income, M’s share of intangible income, or M’s other non-California source
income in column E.
If filing separate tax returns, M must file Form 540NR. Report on Schedule CA (540NR), column A,
all separate income and M’s one-half share of all community income, including military income.
Enter in column B one-half of M’s military income. Report all separate California source income and
M’s one-half share of California source community income in column E. Do not include military or
intangible income in column E.
If filing separate tax returns, S must file Form 540. Report all separate income and your one-half share
of all community income, including S’s community one-half of military income on Schedule CA (540),
column A. Enter S’s community one-half of military income on Schedule CA (540), column B.

		
property state (other
		than California).
		
Stationed in or out of
		
California all year.
	
S –	 Domiciled in a community
		property state.
		
Resided in California
		all year.

		property state.
		
Stationed in or out of
		
California all year.
	
S –	 Domiciled in a separate
		property state.
		
Resided in California
		all year.

M –	 Domiciled in a
		
community property
		
state (other than
		California).
		
Stationed in or out of
		
California all year.
	
S –	 Domiciled in a separate
		
property state.
		
Resided in California
		
all year.

FTB Pub. 1032  2023  Page 11

Illustration for example 8:

The following provides partial views of Schedule CA (540) and Schedule CA (540NR).
Lt. Pope is domiciled in Texas, a community property state, and Mrs. Pope is domiciled in California, a community property state.
Lt. Pope was stationed in California for all of 2023 and received $32,500 in military wages reported on federal Form W-2 and
Mrs. Pope, who also lived in California, received $29,000 in wages reported on federal Form W-2. Lt. and Mrs. Pope also have a
joint savings account from which they received $200 in interest income. Following are illustrations of how their income would be
reported on Schedule CA (540 or 540NR) of their California tax return(s) (refer to example 8 on page 11):
Filing a Joint Tax Return (Form 540NR)
They would make the following entries on Schedule CA (540NR):
Part II	
Income Adjustment Schedule	
A	
B	
C	
D	
E
		
Federal Amounts	
Subtractions	
Additions	
Total Amounts	
CA Amounts
Section A – Income from federal Form 1040 or 1040-SR				
Using CA Law
 1a	 Total amount from federal Form(s) W-2, box 1.
See instructions  . . . . . . . . . . . . . . . . . . . . . . .   1a	
$61,500	$32,500****		 $29,000	$29,000*
 2	 Taxable interest . . . . . . . . . . . . . . . . . . . . . . . .   2b	

200			 200	100

Filing Separate Tax Returns
Lt. Pope would file Form 540NR and would make the following entries on Schedule CA (540NR):
Part II	
Income Adjustment Schedule	
A	
B	
C	
D	
E
		
Federal Amounts	
Subtractions	
Additions	
Total Amounts	
CA Amounts
Section A – Income from federal Form 1040 or 1040-SR				
Using CA Law
 1a	 Total amount from federal Form(s) W-2, box 1.
See instructions  . . . . . . . . . . . . . . . . . . . . . . .   1a	
$30,750**	
$16,250****		 $14,500	$14,500***
 2	 Taxable interest . . . . . . . . . . . . . . . . . . . . . . . .   2b	

100  			

100

Mrs. Pope would file Form 540 and would make the following entries on Schedule CA (540):
Part I	
Income Adjustment Schedule			
A	
B	
C
				
Federal Amounts	
Subtractions	
Additions	
Section A – Income from federal Form 1040 or 1040-SR				
 
 1a	 Total amount from federal Form(s) W-2, box 1. See instructions . . . . . . . . . . . . . . . . . . . . . .   1a	
$30,750**	$16,250****	
 2	 Taxable interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2b	

*Mrs. Pope’s $29,000 in wages.      
	**One-half of Lt. Pope’s military pay, $16,250 plus one-half of Mrs. Pope’s wages, $14,500.
	***One-half of Mrs. Pope’s wages.
	****R&TC Section 17140.5 military pay adjustment.

Page 12  FTB Pub. 1032  2023

100  

N	 Military Spouses Residency Relief
Act (MSRRA)
Are You a Resident?
Generally, for tax purposes you are considered to maintain
your existing residence or domicile. The MSRRA provides:
•	 A spouse shall not be deemed to have lost a residence
or domicile in any state solely by reason of being absent
to be with the servicemember serving in compliance with
military orders.
•	 A spouse shall not be deemed to have acquired a
residence or domicile in any other state solely by reason
of being there to be with the servicemember serving in
compliance with military orders.
Domicile is defined as the one place:
•	 Where you maintain a true, fixed and permanent home.
•	 To which you intend to return whenever you are absent.
A military servicemember’s nonmilitary spouse is considered
a nonresident for tax purposes if the spouse is domiciled
outside of California and the spouse is in California solely
to be with the servicemember who is serving in compliance
with PCS orders. (Note: California may require nonmilitary
spouses of military servicemembers to provide proof that
they meet the criteria for California personal income tax
exemption as set forth in the MSRRA.)

Status	

Income Subject to California Tax
In general, California taxes all of the income you receive while
you are a resident of California and all of the income you
receive from California sources while you are a nonresident.
Under the MSRRA, the income of a nonmilitary spouse of a
military servicemember for services performed in California
is not considered to be from sources within this state if the
spouse is not a California resident because the spouse is
in California solely to be with the servicemember serving in
compliance with military orders.
However, all other income of nonresident spouses from
California sources is subject to California tax.
California Source Income – For the Military
Servicemember’s Nonmilitary Spouse Who Meets the
MSRRA Requirements
California source income includes income from all of
the following:
•	 Real or tangible personal property located in California.
•	 A trade or business located in California except to the
extent it receives income for services performed by the
MSRRA-qualifying servicemember’s spouse.
Tax Computation for Part-Year Residents or Nonresidents
To determine the amounts of “California taxable income”
and “total taxable income” described in Section G, Tax
Computation for Part-Year Residents or Nonresidents,
the income for services performed in California by a
military servicemember’s nonmilitary spouse meeting the
MSRRA requirements is not included in California income,
Schedule CA (540NR), column E. However, this income is
included in total income, Schedule CA (540NR), column D,
to arrive at the applicable California tax rate.

Examples of Income Reporting Requirements

M = Military servicemember   S = Spouse

Military Servicemembers and Nonmilitary Spouses Who Meet the MSRRA Requirements
MARRIED TAXPAYERS

1.	

M –	 Domiciled in a community

		 property state (other than
		 California).

		
Stationed in California
		
all year.
	
S –	 Domiciled in a community
		
property state other than
		 California.
		 Resided in California
		
all year.

2.	 M –	 Domiciled in a separate
		
		
		
	
S –	

property state.
Stationed in California
all year.
Domiciled in a separate
		 property state other than
		 California.
		
Resided in California
		
all year.

If filing a joint tax return, file Form 540NR. Report all income, including military income, on
Schedule CA (540NR), column A. Report all military income in column B. Report all California source
income, in column E. Do not include intangible or non-California source income in column E.
If filing separate tax returns, M and S must file Form 540NR. Report on Schedule CA (540NR),
column A, all separate income and your one-half share of all community income, including M’s one‑half
share of military income. Enter your one-half share of military income on Schedule CA (540NR),
column B. Report all separate California source income and one-half of California source community
income in column E. Do not enter military or intangible income in column E.
See page 14 for an illustration of how to complete Schedule CA when filing jointly or separately.
If filing a joint tax return, file Form 540NR. Report all income, including military income, on
Schedule CA (540NR), column A. Enter all military income in column B. Report all California source
income in column E. Do not enter military or intangible income in column E.
If filing separate tax returns, M must file Form 540NR. Report on Schedule CA (540NR), column A,
all separate income, including all military income, M’s intangible income, California source income
and non-California source income. Enter in column B all of M’s military pay. Report in column E all
of M’s California source income. Do not report military or intangible income in column E. If M has no
California source income, M does not have to file a California tax return.
If filing separate tax returns, S must file Form 540NR. Report on Schedule CA (540NR), column A, all
separate income, including S’s intangible income, California source income and non‑California source
income. Report in column E all of S’s California source income. Do not report intangible income in
column E. If S has no California source income, S does not have to file a California tax return.

FTB Pub. 1032  2023  Page 13

Illustration for example 1:

The following provides partial views of Schedule CA (540NR).
Lt. and Mrs. Johnson are domiciled in Texas, a community property state. Lt. Johnson was stationed in California for all of 2023
and received $32,500 in military wages reported on federal Form W-2 and Mrs. Johnson, who also lived in California, received
$29,000 in wages reported on federal Form W-2. Lt. and Mrs. Johnson also have a joint savings account from which they
received $200 in interest income. They also sold California rental property for a net gain of $50,000. Following are illustrations of
how their income would be reported on Schedule CA (540NR) of their California tax return(s) (refer to example 1 on page 13):
Filing a Joint Tax Return (Form 540NR)
They would make the following entries on Schedule CA (540NR):
Part II	
Income Adjustment Schedule	
A	
B	
C	
D	
		
Federal Amounts	
Subtractions	
Additions	
Total Amounts	
Section A –