I am a resident of California and my only income are from California sources. In 2017 October, my wife moved to Illinois for work and started living there and has income from both California and Illinois sources. For filing the state tax returns, should I and my wife file married filing separately for California, and does she only file married filing separately for Illinois? Or can we file married filing jointly in California and she files married filing separately for Illinois?
P.S. We would file jointly file for the Federal return. Thanks.
If you and your spouse are filing a joint federal return but you work in or are residents of different states, you may need to file separate state returns. Sometimes this is required by state tax law; other times it is to your best interest to not include your non-resident spouses income on your state return. Otherwise both states may try to tax the same income.
The calculations you need to do can be done in TurboTax online, but it is easier to do them with the desktop software. And you can file up to 5 returns using the desktop software. It will be tedious, but it is the best way to accurately minimize your taxes.
Please follow these instructions from TurboTax on this
- You'll prepare one married filing jointly (MFJ) return to file with the IRS.
- Prepare a "mock" married filing separate (MFS) tax return for each taxpayer. This is for your records only, and will be used to generate separate state returns for each person. The mock MFS returns are not filed.
- Then for the first taxpayer, label and use the first "mock" married filing separate (MFS) federal return to prepare their state MFS return, using only their income and their half of the deductions from the MFJ federal return. This ensures that TurboTax only transfers the first taxpayer's income to their married filing separate state return. File this MFS state return, but not the mock federal return that it pulls the information from.
- For the second
label and use the second "mock" MFS federal return to prepare
their state MFS return, again using only their income and their half of
the deductions from the MFJ federal return.
Again, file the second MFS state return, but not the second mock federal return that it pulls the information from.
Be sure to name each TurboTax federal return so you know the MFJ federal return to file, and which mock MFS federal and state return is for which person.
Note: State returns prepared using the "Mock" federal returns will require you to print and file your state return by mail.