Multiple State Tax Situation - How to file?

[kurt166]

I live and work in New York state all the year and my spouse moved to Colorado in mid June 2020 for work. My spouse was a student in New York without any income when my spouse was in NY with me. I will be filing jointly in my federal (MFJ). But for my state taxes, Colorado requires us to use the same tax filing status (MFJ) as my federal and NY allows us to file Married Filing Separate status (MFS) since I am NY Resident and my wife may be a CO resident. My question is whether I can do the following:

1. File Federal Income Tax - Married Filing Jointly
2. File NY State Tax - Married Filing Separately 
3. File CO State Tax - Married Filing Jointly 

Is this correct? or Are these filings not allowed as per the NY and CO tax rules?   Thanks

[ErnieS0]

That is correct. 

1. File Federal Income Tax - Married Filing Jointly
2. File NY State Tax - Married Filing Separately 
3. File CO State Tax - Married Filing Jointly

The Colorado MFJ return will pull in your total federal taxable income so you can claim a credit for your double-taxed income from NY on the CO return.

You may actually save money by filing everything married filing separately, depending on both your incomes and what types of deductions and credits you claim on your federal return.

[kurt166]

Thanks @ErnieS0  for the clarification and the quick reply.  I checked the MFS, filing separately would significantly increase our federal tax (will put me in the higher tax bracket) so we will have go with MFJ.

Just to clarify for the state taxes: 

1) I will prepare the Federal Income Tax with Married Filing Jointly

2) I will prepare the Colorado State Tax with the same status (MFJ) as federal.

               - Do I mark me as Colorado non-resident and my spouse as part-year Colorado resident for the Colorado state taxes?

3) I will prepare a mock Federal Income Tax with separate return MFS and use it for filing my NY State tax as full-year NY resident.

               - My spouse had some dividends, interests and some stocks/bond sale in NY before she moved to Colorado in June. Do I have to file NY State taxes for my spouse too (as MFS)? If so, should I mark my spouse as Non-resident? 

[ErnieS0 · Accepted solution]

Hi @kurt166. Yes. Prepare joint federal and Colorado returns and mark yourself as nonresident and your wife as part-year for CO.

If your spouse had New York income, you can either prepare two married filing separate returns or you can file a joint resident return. If you file two separate married filing separate returns, you will be a resident and she will be a part-year resident.

I reviewed CO again. The return only picks up your wife's income so there would be no tax credit for NY tax paid on the CO return.