The short answer is – if you file joint state returns, regard of which or how many states – your combined income will be taxed on those returns, and you will get credit for taxes paid to the other states.
You can pick and chose what states you want to file joint and what states you want to file separate.
Under your proposal:
Joint part-year California return. Claim a credit for tax paid to IL and MD on the separate returns. These will have to be entered manually since they are coming from mock returns. You would only get credit for IL tax paid for the part-year CA residency period, so you will have to do a proration.
You don’t have to worry about community property since you are filing joint federal and California.
Part-year separate Maryland tax return for your wife.
Full year separate Illinois tax return for you. Claim a credit for your portion of CA tax.
You will need to add back the tax treaty exempt amounts if you are filing a joint CA return. CA bases your tax rate on your total income and then taxes you on the CA ratio of that total tax.
Since you are using Download/CD, the easiest way to enter the addition is to use Forms mode.
- Tap Forms in the top right
- Find Schedule CA Adj
- Go to line 16a and enter your adjustment as an addition
- Tap Step-by-Step in the top right to get back to the interview mode
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