Right, I created two separate returns - each including only the income/expenses etc for one of us.
As per the response to my question in another discussion thread, I was advised to:
- create two separate returns (as I'm already doing)
- enter ALL (both spouses) income and expenses in BOTH returns, but split the amounts in half (50:50 since CA is a community property state)
- leave any SS or Medicare amounts (W2 forms) alone, those are NOT supposed to be split
- fill form 8958 to show how I've allocated the income across both returns
That way I can attest that TT is doing the right tax calculations. I was worried that the various amounts in the returns won't match the 1099 amounts, but this seems to be the only possible way to arrive at correct tax calculations while also splitting income, expenses etc 50:50 to satisfy CA tax code.
One more question: I have a rental property which generated income. I'll be splitting that income and the related expenses 50:50 to both returns and that follows the above logic, no problem. The only aberration concerns handling the depreciation of that unit. Since I've acquired it before marriage, my understanding is that the depreciation "follows the property and affects its basis when sold", therefore the depreciation must NOT be split between both reports (so, it is 100% applied to my report). If somebody could confirm this approach, I'd appreciate that very much. Thanks!
