When you are testing the scenario of filing MFS for New York, make sure that you have started a new tax file and that your income isn't entered anywhere in that file at all. If your income is entered but just listed as "not earned in NY," it won't calculate correctly.
If you've already done that and the result is still better filing jointly, I am surprised, but that happens a lot with taxes!
- Your DC return sounds like it's perfect the way it is. No matter what you decide to do with NY, sticking with the Married Filing Separately on the same return is the best choice for DC.
- If your wife spent more than 184 days in New York in 2019, she should file as a resident. If she is a resident and you file a joint state return, you must also elect to be treated as a resident, even though you are not. You will be able to allocate your income to income not earned in NY, but it will be combined with hers to determine the tax rate that applies to the NY-source income.
- Since you are not a New York state resident but are electing to be treated as one for tax purposes, it is possible to be a nonresident in NYC for tax purposes while filing as a state resident for tax purposes. (Defies all logic, doesn't it?)
- You should file the returns using the status(es) that get you the best result, but the residency determination should be made based on the facts and circumstances.
- Since your wife was back and forth, you'll need to determine if she was in NY more than the 184 days or otherwise meets the NY definition of a resident. If you would like to see more about how NY determines residency, click on this link: New York State Income tax definitions.
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