1. Community Property
State Tax Issues

2. Community Property States2
Community Property States
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin

3. Indefinite or unlimited period of use
Domicile
Only 1 domicile
Time Spent
Permanent Legal Home
Intent
Indefinite or unlimited period of use

4. Domicile Business & Social ties Pay state income taxes
Length of Residence
Registered to vote
Property owned
Citizenship

5. Community Property vs Separate Property

6. Separate property Community property
Property owned before marriage
Money earned while domiciled in a non-community property state
Gift or inherited separately during marriage
Property bought with separate funds, or the part of property (if property bought with both community and separate funds)
Property acquired in exchange for separate property
Property agreed to convert by agreement under valid state law
Community property
Property acquired through marriage while domiciled in a community property state
Have agreed to convert
Can’t be identified as separate property

7. Community income Separate income
Income from community property
Active Income during marriage while domiciled in community property state
Income from community property real estate
Income from separate property is income to whom owns the property
Idaho, Louisiana, Texas, and Wisconsin: income from separate property is community property

8. HOW TO
Federal Tax Return

9. Form 1040 Schedule 1 Adjustment for community income
Line 21 Adjustment: Community Property Adj. +/-

10. Form 8958
MFS allocation
Used for married spouses in community property states who choose to file MFS tax returns.

11. Form 8958 page 2 MFS allocation
Each item produces a community property adjustment on the tax return

12. Form 1040 page 2 Tax withheld adjustment
Check with your software provider for how their system handles this adjustment for efile purposes

13. RDP
Registered Domestic Partners

14. Registered domestic partners

15. Form 1040 Schedule 1 Adjustment for community income
Line 21 Adjustment: Community Property Adj. +/-

16. Form 8958
MFS allocation
Used for RDP’s in community property states

17. Form 8958 page 2 MFS allocation
Each item produces a community property adjustment on the tax return

18. Form 1040 page 2 Tax withheld adjustment
Check with your software provider for how their system handles this adjustment for efile purposes

19. SINGLE or Head of Household
Filing Status RDP’s
SINGLE or
Head of Household

20. Important to Note for RDP’s
All the tax adjustments, credits, and deductions NOT allowed on an MFS tax return…
…are allowed on a federal RDP tax return

21. Military Tax Returns
A simple overview

22. Servicemember retains their domicile upon entry
Only 1 domicile
Permanent Legal Home
Servicemember retains their domicile upon entry

23. Domicile NEW! Veterans Benefits and Transition Act of 2018 (VBTA)
Spouse no longer have to establish residency in state of servicemember's domicile
(MSRRA)
Election
Dec 31, 2018
Check state website for latest procedures

24. Examples: M Separate/S Community – Stationed (resided) in Community property state all year, domiciled elsewhere
Military Servicemember
$10K Military wages
Spouse
$10K resident wages
$4K from K-1 (1041)
100% stationed state sourced Separate Income (M) $0
100% Separate Income (S)
$4000
50% stationed state sourced CPI
$5000
Military income excluded
Does not take 50% of military income
NR tax return for stationed state -
Resident return for stationed state

25. 25
Large Photo Slide
Q & A

26. THANK YOU
SUSAN TINEL
@April15Taxes
Susan Tinel