My husband retired from the military June 1, 2008. His entire career he was a NH resident. For the 3 years we were married prior to hi retirement, we filed married filing separately because I have always been a MA resident.

He switched his residence July 2008 and we are now wondering how to handle his 6 months of income from Jan-Jun 2008. Federal return is Married Filing Jointly - can MA return be Married Filing Separately? Should it be Married Filing Jointly and we not show his 6 months of active duty pay? Or are going to take a hit from MA on that money?

For all the three years you were married, you could have filed joint returns. For NH your husband was resident and will report his income. You were nonresident and did not have any NH income. Similarly, for MA report only your income as resident while your husband did not have any MA income.

For 2008, also you can file joint return. File joint returns for states also. Your husband's income will be reported to NH while your income will be reported on MA tax return.