IP 2003(23)

Connecticut Income Tax Information
for Armed Forces Personnel and Veterans

This publication has been superseded by IP 2004(15)

Purpose: This publication explains how Connecticut income tax laws apply to members of the United States armed forces on active duty. It defines the requirements for Connecticut residency status for members of the armed forces and their families and the taxability of the types of income they receive. It also explains how to file a Connecticut income tax return and special conditions that apply to certain types of service. An explanation of the tax liability for year of death is included in the publication.

Effective Date: Effective for taxable years beginning on or after January 1, 2003.

Servicemembers Civil Relief Act: The federal Servicemembers Civil Relief Act (P.L. 108-189) enacted by Congress on December 19, 2003, updates and expands the Soldiers’ and Sailors’ Civil Relief Act of 1940. One of the new provisions provides that a state cannot include military pay received by a nonresident, or received by a part-year resident during the part-year resident’s nonresidency portion of the taxable year, in determining the rate at which Connecticut income tax is to be imposed on any other income of the nonresident or part-year resident servicemember (or the member’s spouse, if filing a joint Connecticut income tax return).

Definitions

A Combat zone is an area designated by the President of the United States as a combat zone by executive order. A combat zone also includes an area designated by the federal government as a qualified hazardous duty area.

If you served in a combat zone or if you were injured and hospitalized as a result of wounds, disease, or injury incurred while serving in a combat zone, see important instructions for filing a Connecticut income tax return.

Domicile and Permanent Place of Abode: To determine your resident status for Connecticut income tax purposes, you must consider where your domicile was before you entered the armed forces and where you maintained a permanent place of abode during the taxable year.

Your domicile (permanent legal residence) is the place you intend to have as your permanent home. It is the place you intend to return to whenever you are away. You can have only one domicile, although you may have more than one place to live. This also applies if you are working in a foreign country.

Your domicile does not change until you move to a new location and definitely intend to make your permanent home there. If you move to a new location but intend to stay there only for a limited period of time (no matter how long), your domicile does not change. Armed forces assignments do not generally affect your domicile.

A permanent place of abode is a residence (a building or structure where a person can live) that you permanently maintain, whether or not you own it, and generally includes a residence owned by or leased to your spouse. A place of abode is not considered permanent if you maintain it only during a temporary stay for the accomplishment of a particular purpose.

A temporary duty assignment does not change your permanent place of abode.

Barracks, bachelor officer’s quarters, quarters on a ship, or any structure that contains only dormitory-type quarters and not facilities ordinarily found in a dwelling, such as facilities for cooking and bathing, generally do not qualify as a permanent place of abode.

Resident, Nonresident, and Part-Year Resident: You are a resident and you should complete Form CT-1040EZ or Form CT-1040, or Telefile your Connecticut income tax return if:

If you are in the armed forces and stationed in Connecticut, but your domicile is elsewhere, you do not become a resident of Connecticut even though you spend more than 183 days in Connecticut during the taxable year. Armed forces personnel who are domiciled in Connecticut but are stationed elsewhere are subject to Connecticut income tax. If you enlisted in the service as a Connecticut resident and have not established a new domicile (permanent legal residence) elsewhere, you may be required to file a resident income tax return (see Exceptions below).

You are a nonresident and you should complete Form CT-1040NR/PY if:

• Your domicile was in a jurisdiction other than Connecticut for the entire taxable year and you did not maintain a permanent place of abode in Connecticut; or
• Your domicile was in a jurisdiction other than Connecticut during the entire taxable year, and, if you maintained a permanent place of abode in Connecticut, you did not spend a total of more than 183 days in Connecticut during the taxable year.

You are a part-year resident and you should complete Form CT-1040NR/PY if:

• You changed your domicile (permanent legal residence) during the taxable year, so that neither Connecticut nor another jurisdiction was your domicile for the entire taxable year. A part-year resident is subject to tax on all income earned during the residency portion of his or her taxable year and on income from Connecticut sources during the nonresidency portion of his or her taxable year.

Exceptions: Certain individuals are not treated as resident individuals even though they are domiciled in Connecticut. If you meet all three conditions under either the Group A or Group B Exception, you are treated as a nonresident of Connecticut for the taxable year. You do not have to file a resident income tax return. However, if you have any income derived from Connecticut sources, you may have to file a nonresident income tax return. Review the examples to determine if you are required to file Form CT-1040NR/PY.

Group A Exception:

• You did not maintain a permanent place of abode in Connecticut for the entire taxable year;
• You maintained a permanent place of abode outside Connecticut for the entire taxable year; and
• You spent a total of 30 days or less in the aggregate in Connecticut during the taxable year.

If you are domiciled in Connecticut and meet all three conditions in Group A, you are treated as a nonresident and, in order to claim a refund of any Connecticut income tax that was withheld in error, you must file Form CT-1040NR/PY and attach an explanation that contains all of the following:

• A statement that you did not maintain a permanent place of abode in Connecticut during the taxable year;
• The location and a description of the permanent place of abode you maintained outside Connecticut and the beginning and ending dates of your stay there; and
• The exact number of days you spent in Connecticut during the taxable year.

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Group B Exception:

• Within any period of 548 consecutive days (the 48-day period) you are present in a foreign country (or countries) for at least 450 days;
• During the 548-day period, you are not present in Connecticut for more than 90 days and you do not maintain a permanent place of abode in Connecticut at which your spouse (unless the spouse is legally separated) or minor children are present for more than 90 days; and
• During the nonresident portion of the taxable year in which the 548-day period begins and during the nonresident portion of the taxable year in which the 548-day period ends, you are present in Connecticut for a number of days which does not exceed an amount that bears the same ratio to 90 as the number of days contained in the nonresident portion of the taxable year bears to 548. The following calculation illustrates the Group B Exception:

Number of days in the nonresident portion    =  d =     Maximum days allowed in Connecticut
of the taxable year                                     90

If you are domiciled in Connecticut but meet all three conditions in Group B, you are treated as a nonresident and, in order to claim a refund of any Connecticut income tax that was withheld in error, you must file Form CT-1040NR/PY (for each taxable year within the 548-day period) and attach an explanation that contains all of following:

• A statement that within any period of 548 consecutive days, you were present in a foreign country (or countries) for at least 450 days;
• During the 548-consecutive-day period, you were not present in Connecticut for more than 90 days and you did not maintain a permanent place of abode in Connecticut at which your spouse (unless you and your spouse are legally separated) or minor children are present for more than 90 days; and
• During the nonresident portion of the taxable year with which or within which the period of 548 consecutive days begins and during the nonresident portion of the taxable year with which or within which the period of 548 consecutive days ends, you were present in Connecticut for a number of days which does not exceed an amount which bears the same ratio to 90 as the number of days contained in the nonresident portion of the taxable year bears to 548.

For more information on filing returns under the Group B Exception, see Special Notice 2000(17).

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If you are a Connecticut resident in the armed forces (and not treated as a nonresident under either the Group A Exception or Group B Exception) and you meet either of the following conditions for the taxable year, you must file a resident return:

You had Connecticut income tax withheld or made estimated Connecticut income tax payments; or

Your federal gross income (plus any income that is federally exempt, but subject to Connecticut income tax) exceeds:

$12,000 if your filing status is Married Filing Separately$19,000 if your filing status is Head of Household

$24,000 if your filing status is Married Filing Jointly

*For taxable years beginning on or after January 1, 2004, but prior to January 1, 2005, the maximum amount of the single filer personal exemption is $12,625.

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Special Rules on Filing Status for Married Individuals:

If you and your spouse are both Connecticut residents, your Connecticut filing status must match your filing status reported on your federal income tax return for the taxable year.If you and your spouse are both nonresidents of Connecticut and both of you have income derived from Connecticut sources, your Connecticut filing status must match your filing status reported on your federal income tax return for the taxable year. However, if only one spouse has Connecticut source income, the Connecticut filing status of the spouse who is required to file a Connecticut income tax return is married filing separately unless:

• Your filing status reported on your federal income tax return is married filing jointly; and
• You both elect to be treated as if you both had Connecticut source income for the taxable year.

If either you or your spouse is a Connecticut resident and the other spouse is a nonresident, the Connecticut filing status of each spouse who is required to file a Connecticut income tax return is married filing separately unless:

• Your filing status reported on your federal income tax return is married filing jointly; and
• You both elect to be treated as if you both were Connecticut residents for the taxable year.

If you or your spouse is a Connecticut resident or a nonresident and the other spouse is a part-year resident, the Connecticut filing status of each spouse who is required to file a Connecticut income tax return is married filing separately.

If both you and your spouse are part-year residents, and your change of domicile occurs on the same day during the taxable year, your Connecticut filing status must match your filing status reported on your federal income tax return for the taxable year.

If both you and your spouse are part-year residents, and your change of domicile does not occur on the same day during the taxable year, the Connecticut filing status of each spouse who is required to file a Connecticut income tax return is married filing separately.

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Taxability of Armed Forces Pay for Residents: If you are a Connecticut resident, your armed forces pay or your armed forces pension is subject to Connecticut income tax to the same extent that it is taxable for federal income tax purposes.

Disability pensions and any other benefits granted for the relief of injuries or disabled veterans, as well as tuition payments, subsistence allowances, and any other benefits paid to, or on account of, a veteran or beneficiary under the laws relating to veterans, are treated the same for Connecticut income tax purposes as for federal income tax purposes. If these amounts are excludable from gross income for federal income tax purposes, they are not subject to Connecticut income tax.

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Nonresidents Who Are Members of the Armed Forces: If your permanent legal residence (domicile) was outside Connecticut when you entered the armed forces, you do not become a Connecticut resident because you are stationed and live in Connecticut.

If you have no income other than your military pay, you are not subject to Connecticut income tax and are not required to file a Connecticut income tax return because you have no Connecticut source income. If you have other income, however, the rate at which your other income is taxed for Connecticut income tax purposes has been affected by the enactment by Congress of the Servicemembers Civil Relief Act, Pub. L. No. 109-189. To benefit from this enactment, you compute your Connecticut adjusted gross income by subtracting your military pay, to the extent includible in your federal adjusted gross income, from your federal adjusted gross income. This benefit is available only if you are a nonresident of Connecticut or if, under either the Group A or Group B Exception, you are, although domiciled in Connecticut, treated as a nonresident of Connecticut.

However, other income you (or your spouse) receive from Connecticut sources while you are a nonresident, including your (or your spouse’s) nonmilitary income, may be subject to Connecticut income tax. For example, if you are employed in Connecticut during your off-duty hours, your nonmilitary wages are subject to Connecticut income tax. If you have income or gain from property located in Connecticut or from a business, trade, or profession carried on in Connecticut, this income or gain is also subject to Connecticut income tax.

Spouses of armed forces personnel who are stationed in Connecticut may be considered residents of this state even if their domicile is elsewhere. If your spouse has a permanent place of abode in Connecticut and spends more than 183 days in the state in the taxable year, he or she is a resident for Connecticut income tax purposes and must file Form CT-1040EZ or Form CT-1040, or Telefile his or her Connecticut income tax return.

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Part-Year Residents Who Are Members of the Armed Forces: If you have no income other than your military pay, whether you are required to file a Connecticut income tax return will depend on how much of your military pay is received during the residency portion of the taxable year. If you have other income, however, the rate at which your other income is taxed for Connecticut income tax purposes has been affected by the enactment by Congress of the Servicemembers Civil Relief Act, Pub. L. No. 108-189. To benefit from this enactment, you compute your Connecticut adjusted gross income by subtracting your military pay, to the extent includible in your federal adjusted gross income and to the extent received during the nonresidency portion of your taxable year, from your federal adjusted gross income.

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Examples for Group A Exception:

Example 1: Steve was a resident of Connecticut when he joined the Army and has not established a new domicile. He does not maintain a permanent place of abode in Connecticut. He visited his parents’ home in Connecticut for only two weeks during the taxable year. He lives in dormitory-type housing at his permanent duty assignment in Texas.

Steve did not meet all three conditions under the Group A Exception to be treated as a nonresident because dormitory-type housing does not qualify as a permanent place of abode. Therefore, Steve is a resident of Connecticut for income tax purposes and must file Form CT-1040EZ or Form CT-1040, or Telefile his Connecticut income tax return.

Example 2: Moira was a Connecticut resident when she entered the Navy and has not established a new domicile. Her permanent duty assignment is San Diego, California. For all of the taxable year she rented an apartment in San Diego.

She did not visit Connecticut during the taxable year and she does not have a permanent place of abode in Connecticut.

Renting or owning an apartment or house for the entire taxable year at a permanent duty assignment qualifies as maintaining a permanent place of abode outside Connecticut. Additionally, Moira did not maintain a permanent place of abode in Connecticut or spend more than 30 days in Connecticut during the taxable year. Therefore, although Moira is still domiciled in Connecticut, she meets all three conditions under the Group A Exception for being treated as a nonresident for the taxable year.

Example 3: Assume the same facts as in Example 2. In the following year, Moira is temporarily assigned to a naval base in Florida. She gives up her apartment in San Diego and rents a house near the base in Florida.

A place of abode is not permanent if it is maintained only during a limited or temporary period or for a particular purpose. Because Moira does not meet all three conditions under the Group A Exception to be treated as a nonresident, she is a Connecticut resident for that taxable year and must file Form CT-1040EZ or Form CT-1040, or Telefile her Connecticut income tax return.

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Example for Group B Exception:

Example 4: Cindy is domiciled in Connecticut. During the period November 2, 2002, through May 2, 2004 (a period of 548 consecutive days), Cindy was present in a foreign country 480 days.

During the above period, Cindy was present in Connecticut a total of 65 days, nine days during the period November 2, 2002, through December 31, 2002; 41 days during 2003; and 15 days during the period January 1, 2004, through May 2, 2004.

Because Cindy was present in a foreign country 480 days, she meets the first requirement. Cindy also meets the second requirement because she was present in Connecticut a total of 65 days during the 548-day period (which is less than the maximum of 90 days allowed).

For Cindy to decide if she meets the third requirement, she must determine if the number of days present in Connecticut during the period November 2, 2002, through December 31, 2002 (60 days), exceeds the maximum number of days allowed for the nonresident portion of the taxable year within which the 548-day period began.

The maximum number of days Cindy may be present in Connecticut during the period November 2, 2002, through December 31, 2002, is 10, as determined by the following computation:

Because Cindy was present in Connecticut nine days during the period November 1, 2002, through December 31, 2002, she did not exceed the maximum of 10 days allowed for this period.

Cindy must also determine if the number of days she was present in Connecticut during the period January 1, 2004, through May 2, 2004, exceeds the maximum allowed for the nonresident portion of the taxable year within which the 548-day period ended. The maximum number of days she may be present in Connecticut during the period January 1, 2004, through May 2, 2004, is 20, as determined by the following computation:

Because Cindy was present in Connecticut 15 days during the period January 1, 2004, through May 2, 2004, she did not exceed the maximum of 20 days allowed for this period.

Cindy meets all the requirements of the Group B Exception. Therefore, she must file as a part-year resident individual for the 2002 taxable year, as a nonresident individual for the 2003 taxable year, and as a part-year resident individual for the 2004 taxable year.

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Examples for Nonresidents Who Are Members of the Armed Forces:

Example 5: Bob was domiciled in Florida when he entered the Navy. Bob was stationed in Groton, Connecticut for eight months during the 2003 taxable year. Sue, Bob’s wife, is also domiciled in Florida but lived in Groton with Bob in a house they rented during the entire time he was stationed there. For the 2003 taxable year, Bob’s Navy pay includible in his federal adjusted gross income was $38,000.

Bob is not a resident of Connecticut because armed forces personnel are considered to be residents of the state in which they resided when they enlisted. Sue is a resident of Connecticut because she maintained a permanent place of abode in Connecticut and spent more than 183 days in Connecticut during the taxable year. Where one spouse is a resident and the other spouse is a nonresident, they are not permitted to file a joint Connecticut income tax return even if they elected to file a joint federal income tax return unless they both elect to be treated as residents.

They had no other income. Bob is not required to file Form CT-1040NR/PY as a married individual filing separately because he has no Connecticut source income. Sue is not required to file Form CT-1040 as a married individual filing separately because she has no income.

If Bob files Form CT-1040NR/PY, as a married individual filing separately, he will not owe any Connecticut income tax because his Connecticut adjusted gross income is less than or equal to $12,000.

If Sue files Form CT-1040 as a married individual filing separately, she would include only her income on Form CT-1040, Line 1 (her share of the joint income reported on Line 1 of the federal return if they filed a joint return.) Her income includes any income she earned in her own name and her share of any joint income (such as interest income from a joint bank account) received in 2003.

If Bob and Sue file jointly for federal income tax purposes for the 2003 taxable year, and elect to be treated as if both were Connecticut residents, Bob and Sue will file Form CT-1040, and report all their income, whether or not it is from a Connecticut source. Bob’s Navy pay will not be subtracted from federal adjusted gross income and, along with his civilian wages, will be subject to Connecticut income tax.

Charlie was domiciled in Texas when he entered the Navy. Charlie was stationed in Groton, Connecticut during the entire 2003 taxable year. Melissa, Charlie’s wife, is also domiciled in Texas but lived in Groton with Charlie in an apartment they rented during five months of the 2003 taxable year. For the 2003 taxable year, Charlie’s Navy pay includible in his federal adjusted gross income was $42,000. Charlie and Melissa are not required to file a Connecticut income tax return because they have no Connecticut source income.

If Charlie and Melissa file jointly for federal income tax purposes for the 2003 taxable year, and elect to file Form CT-1040NR/PY as married individuals filing jointly (although only Charlie has Connecticut source income), Charlie’s Navy pay includible in his federal adjusted gross income ($42,000) will be subtracted from their federal adjusted gross income ($58,000) in computing their Connecticut adjusted gross income ($16,000). They will not have any Connecticut income tax because their Connecticut adjusted gross income ($16,000) is less than or equal to $24,000.

Because Melissa’s domicile or legal residence is in Texas and she lived in Connecticut for 183 days or less during the taxable year, she is a nonresident. Because Melissa has Connecticut source income and meets the Gross Income Test, she is required to file Form CT-1040NR/PY.

John was domiciled in Connecticut when he entered the Air Force. John was stationed in Houston, Texas for the entire 2003 taxable year and meets all three conditions under the Group A Exception to be treated as a nonresident. For the 2003 taxable year, John’s Air Force pay includible in his federal adjusted gross income was $24,000.

John’s gain from the sale of property in Connecticut is Connecticut source income and is subject to Connecticut income tax. Because John has Connecticut source income and meets the Gross Income Test, he is required to file Form CT-1040NR/PY. John will subtract his Air Force pay includible in his federal adjusted gross income ($24,000) from his federal adjusted gross income ($44,000) in computing his Connecticut adjusted gross income ($20,000). In completing Form CT-1040NR/PY, John will enter his federal adjusted gross income on Line 1 and his Air Force pay on Schedule 1, Modifications to Federal Adjusted Gross Income, Line 48. He will enter "Exempt Military Pay" as the explanation beside Line 48. John will carry his total subtraction modifications on Line 49, to Line 4 on the front of the form. John will owe Connecticut income tax on his Connecticut source income of $20,000. (John will follow the instructions in the booklet to calculate the tax.)

When to File Your Return: If you are a calendar year filer, your Connecticut income tax return is due on or before April 15 of the following year. If you are not a calendar year filer, your return is due on or before the fifteenth day of the fourth month following the close of the taxable year. If the due date falls on a Saturday, Sunday, or legal holiday, the next business day is the due date.

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Extension of Time to File Returns: If you cannot meet the April 15 deadline and need to extend the time for filing your return, you must file Form CT-1040 EXT, Application for Extension of Time to File. The time to file your return will be extended six months. File Form CT-1040 EXT on or before the due date for filing your return. Form CT-1040 EXT must be accompanied by full payment of tax due, because filing Form CT-1040 EXT does not extend the time for payment of tax.

United States Citizens Living Abroad: If you are a United States citizen or resident living outside the United States and Puerto Rico, or in the armed forces of the United States serving outside the United States and Puerto Rico, and are unable to file a timely Connecticut income tax return, you must file Form CT-1040 EXT. You must also pay the amount of tax due on or before the original due date of the return. Include with Form CT-1040 EXT a statement that you are a United States citizen or resident living outside the United States and Puerto Rico, or in the armed forces of the United States serving outside the United States and Puerto Rico, and that you qualify for a federal automatic two-month extension. If your application is approved, the due date will be extended for six months. If you are still unable to file your return, and you were granted an additional extension of time to file for federal purposes, you may file your Connecticut return using the federal extension due date. A copy of the federal Form 2350 approval notice must be attached to the front of your Connecticut return.

Group B Exception: If you believe that you will ultimately meet all three requirements of the Group B Exception and you need additional time to file your return, you may apply for a further extension of time to file by attaching a letter to a subsequently filed Form CT-1040 EXT explaining why additional time to file is being requested. This request must be made before the expiration of the original extension.

Interest and Penalties: In general, interest and penalty apply to any portion of the tax not paid on or before the original due date of the return.

If you do not pay the tax when due, you will owe interest at the rate of 1% (.01) per month or fraction of a month until the tax is paid in full.

If you did not pay enough tax through withholding or estimated payments, or both, by any installment due date, you may be charged interest. This is true even if you are due a refund when you file your tax return.

Interest on underpayments or late payments of tax cannot be waived.

The penalty for late payment or underpayment of income is 10% (.10) of the tax due. If a request for an extension of time has been granted, you can avoid a penalty for failure to pay the full amount due by the original due date if you:

• Pay at least 90% (.90) of the income tax shown to be due on the return on or before the original due date of the return; and
• Pay the balance due with the return on or before the extended due date.

If no tax is due, DRS may impose a $50 penalty for the late filing of any return or report that is required by law to be filed.

If you do not file your return and DRS files a return for you, the penalty for failure to file is 10% (.10) of the balance due or $50, whichever is greater.

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Effect on This Document: An Informational Publication addresses frequently asked questions about a current position, policy, or practice, usually in a less technical question and answer format.

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For Further Information: Call DRS during business hours, Monday through Friday:

• 1-800-382-9463 (in-state), or
• 860-297-5962 (from anywhere)

TTY, TDD, and Text Telephone users only may transmit inquiries anytime by calling 860-297-4911.

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Forms and Publications: Forms and publications are available anytime by:

• Internet: Preview and download forms and publications from the DRS Website
• Telephone: Call 860-297-4753 (from anywhere), or 1-800-382-9463 (in-state) and select Option 2 from a touch-tone phone.

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IP 2003(23)
Income Tax
Military Personnel
Issued: 3/18/2004