Nebraska Military Service Pay is subject to income tax only by the state where the servicemember is a legal resident. The place of legal residence at the time of entry into the service is presumed to be the state of legal residence. It remains so until legal residence in another state is established. The Nebraska income tax is imposed on all the federal adjusted gross income of a resident who is a member of the armed forces, regardless of where the income is received.
Military pay received by a nonresident servicemember stationed in Nebraska is not subject to Nebraska income tax. Other income derived from Nebraska sources by a servicemember, such as income earned from a separate job not connected with the member's military service, is subject to Nebraska income tax.
A servicemember's spouse living in Nebraska more than six months is a resident. Nonresident military families who file married joint federal returns may elect to file a Nebraska married joint return and can deduct any nonresident military service compensation included in the servicemember's federal adjusted gross income. More information is contained in the Nebraska Department of Revenue's information guide titled, "Nebraska Income Tax for Military Servicemembers".
Be sure to check the box for active military on Forms 1040N or 1040NS, if you or your spouse are in the active military.