2010 tax changes affect residents of KY, MN, NM and OK

Military members claiming legal residency in Kentucky, Minnesota, New Mexico and Oklahoma may have all or part of their 2010 qualifying military pay exempt from state income taxes. The legislation covering the exemptions was effective for all of calendar year 2010 for Kentucky, Minnesota and New Mexico; the legislation for Oklahoma was effective July 1, 2010.

When DFAS receives changes to state tax laws affecting our customers, our pay systems are updated to ensure payments reflect the necessary withholding based on these changes. There are cases when these changes occur after some members have had some of their now-exempt military pay withheld. These members can file a 2010 state income tax return to receive withholdings of exempt pay.

More information on these changes is available at:

Exceptions:

Certain pay received by military members are not exempt from state income tax withholding. These include:

  • Cadets and midshipmen - Kentucky/Minnesota/New Mexico/Oklahoma
  • Academy preparatory students (including prior enlisted prep students) - Kentucky/Minnesota/New Mexico/Oklahoma
  • ROTC, including the ROTC pay of dual status members - Kentucky/Minnesota/New Mexico/Oklahoma
  • College First - Kentucky/Minnesota/New Mexico/Oklahoma
  • Medical stipends, including Nurse Candidate Continuation bonuses - Kentucky/Minnesota/New Mexico/Oklahoma
  • Active Guard Reserves (AGRs) - Minnesota
  • Drill pay - New Mexico

Prior enlisted preparatory students must submit estimated state payments for all four states as their state income tax withholding is not currently processed by DFAS.

Page Updated: March 16, 2011