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Community Property State Tax Issues
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Community Property States
2 Community Property States Arizona California Idaho Louisiana Nevada New Mexico Texas Washington Wisconsin
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Indefinite or unlimited period of use
Domicile Only 1 domicile Time Spent Permanent Legal Home Intent Indefinite or unlimited period of use
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Domicile Business & Social ties Pay state income taxes
Length of Residence Registered to vote Property owned Citizenship
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Community Property vs Separate Property
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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
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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
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HOW TO Federal Tax Return
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Form 1040 Schedule 1 Adjustment for community income
Line 21 Adjustment: Community Property Adj. +/-
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Form 8958 MFS allocation Used for married spouses in community property states who choose to file MFS tax returns.
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Form 8958 page 2 MFS allocation
Each item produces a community property adjustment on the tax return
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Form 1040 page 2 Tax withheld adjustment
Check with your software provider for how their system handles this adjustment for efile purposes
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RDP Registered Domestic Partners
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Registered domestic partners
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Form 1040 Schedule 1 Adjustment for community income
Line 21 Adjustment: Community Property Adj. +/-
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Form 8958 MFS allocation Used for RDP’s in community property states
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Form 8958 page 2 MFS allocation
Each item produces a community property adjustment on the tax return
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Form 1040 page 2 Tax withheld adjustment
Check with your software provider for how their system handles this adjustment for efile purposes
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SINGLE or Head of Household
Filing Status RDP’s SINGLE or Head of Household
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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
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Military Tax Returns A simple overview
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Servicemember retains their domicile upon entry
Only 1 domicile Permanent Legal Home Servicemember retains their domicile upon entry
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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
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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
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25 Large Photo Slide Q & A
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THANK YOU SUSAN TINEL @April15Taxes Susan Tinel
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