FIling State Taxes Jointly or Separately

[Hawkeye004]

I am trying to figure out if I should file jointly or separately for state returns. My wife and I live and work in adjoining states that have reciprocity. I had to go through and file separately for the state filings last year (tax year 2020) since we got married that tax year and the state filings looked like a mess (one state was basically even and the other said we owed more than our federal refund). This year, it looks like something changed as both showed a refund when left as married filing jointly for 2021, and seem to fall apart when I start to make a mock MFS federal return.

Is there a rule or law from either state that prevents me from just transmitting everything filing jointly since I have not found a requirement that I must file separately from either state. (The language in the tax rules for both says "may")

[ErnieS0]

It depends on what states you are speaking about. Every state has their own rules and the rules of one state do not have to be consistent with a neighboring state.

In general, if you are your wife are residents of different states, you can file together or separate. If you file together, a state generally taxes your total joint income and allows a credit for tax paid to the other state.

[Hawkeye004]

The states are MD and VA, looking at the state rules the language is "May file separately" for both. I know they have full reciprocity (we should each only pay in our respective states), but I want to make sure I am not making a mistake.

Given that it goes from a refund to basically nothing if I do the mock separate filing, I am wondering if I should just go ahead and file jointly at the states this year (both seem to have provisions for situations like this and give the option of separate). Last year (tax year 2020) showed that we ended up owing in both if filing jointly, this year shows a refund, so I am just a little confused.

[DMarkM1]

If I understand correctly.  One of you lives and works in MD and the other lives and works in Va.  If that is the case VA says you do not file jointly in VA.  You can only file a joint VA return if both are VA residents.  You must file a separate return for the VA resident.  Here is the VA reference.  

For MD you may file a joint MD return, but attach the form 505 and 505NR to allocate the non-MD income.  According to MD Administrative release 3, the MD joint return in this situation cannot be electronically filed.  Which basically means you would complete both a joint resident return and a non-resident separate return and attach them and mail them.  

My recommendation is to file separate state returns.