How do I file a DC tax return to exclude my wife's non-resident income?

[tommyrandom]

In 2017, I lived / worked in DC the entire year. My wife worked while she completed her education in NY, where she lived and worked the entire year. We visited each other at times and were not / are not legally separated. 

I am having trouble handling the NY income on our state tax returns. Wife owes NY tax for NY earnings. I cannot find a way to remove the NY earnings from the DC return (or possibly on my DC return to claim a credit for the NY tax paid).

[DanielV01 · Accepted solution]

You may choose to file as married filing separate in DC.  DC will allow you to choose this filing status, particularly since only you are taxed in DC.  Please note this excerpt from 2017 Package X Individual (click on link and go to page 11):

Married filing separately or registered domestic partner filing separately on separate returns (D-40)

If you are married or have a registered domestic partner and both spouses/partners had income, you can use this filing status. Include your spouse/registered domestic partner's name and social security number in the Personal Information section. (Italics added).

You will each report only your own income, exemptions, deductions, and credits. You will each report one-half of the income from any securities, bank accounts, real estate, etc., that are registered or titled in both names.

DC will allow you this status even though you file a joint return Federal.  This is the only way to separate your spouse's income from your income for DC tax calculation.  You do not have to file separate, but you may do so, even though you are not legally separated.  (Otherwise, her income is included for DC, and she will have to claim a credit for tax paid to NY on her NY income.  By claiming as Married Filing Separate in DC, only your income is taxed in DC and no credit calculation is required.)

To file a joint federal return but separate state (DC, while not a state, is treated as a state return because DC's method of taxation is identical to state taxation), please see this following FAQ:  https://ttlc.intuit.com/replies/3301995