Yes, you need to include Form 8958 when filing as "Married Filing Separately" because you earned income in a community property state (Washington) during part of the tax year. Here's why:
- Community Property Rules Apply to Income Earned in Washington: Even though you moved to Tennessee (a non-community property state) in August 2024, the income earned while you were in Washington is subject to community property rules. This means that income earned by either spouse during that time is considered community income and must be split equally between both spouses for federal tax purposes.
- Form 8958 is needed to share income, deductions, and credits between spouses in states where community property is owned by both spouses. Since part of your income was earned in Washington, you need to use this form to properly allocate the community income and deductions for the months you lived there.
- After moving to Tennessee, the money you and your spouse made is no longer part of community property rules. However, the IRS requires you to account for the portion of the year you lived in a community property state.
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