The state of domicile is generally the state where a taxpayer lived when first entering military service.
Service members domiciled outside of California may exclude military compensation from gross income when computing the tax rate on nonmilitary income.
Service members 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 considered California source income when a service member is permanently stationed outside of California.
A military service member’s nonmilitary spouse is considered a nonresident for tax purposes if the service member and spouse have the same domicile outside of California, and the spouse is in California solely to be with the service member who is serving in compliance with permanent change of station orders.
Special Note: California may require nonmilitary spouses of military service members to provide proof that they meet the criteria for the California personal income tax exemption. Services performed in California by a nonmilitary spouse are not considered to be from California sources if the spouse is not a California resident because the spouse is in California solely to be with the service member serving in compliance with military orders and both have the same out of-state domicile. However, all other income of nonresident spouses from California sources is subject to California tax.
