CA Resident and Nonresident Spouse

[sabo1323]

I recently moved to CA for work.  I was formerly an NV resident. (I would still like to be but I think CA will require me to be a CA resident) .  My spouse is an NV resident and will visit CA no more than a few days this year--I will visit NV almost every weekend.  My income is earned entirely in CA and her income is earned entirely in NV.  We file a joint federal return.  I have CA state income taxes withheld from my paycheck.

Even though her income is earned entirely in NV, will CA tax it?  Either as income or as community property?

[TomD8]

The issue in your situation is community property.  Since NV is a community property state, 1/2 of her NV income is attributable to you, and therefore taxable to you as a CA resident.  (CA taxes its residents on all income, regardless of source.)

If you're not sure about your CA residency, see this reference on CA's rules for determining residency status:  https://www.ftb.ca.gov/forms/2018/18_1031.pdf

[sabo1323]

Thanks. So, as a hypothetical, if I earned $100,000 in CA-source income as a resident of CA and my wife earned $50,000 of NV-source income and is not a resident of CA, we would file a joint return in California and I would be taxed on $125,000? 

[TomD8]

Correct.

[sabo1323]

Hmmm. That is less than ideal.

Does CA allow pre-tax 401k contributions?  I.e., gross income was 100,000 but contributed 10,000 to 401k pre-tax, my taxable income is 90,000? And pre-tax commuter parking expenses?

[TomD8]

California taxes are based on the information on your W-2 and your federal return.  Your 401K contributions are normally reported in Box 12 of your W-2, with code D, and are pre-tax.   The employee 401K contribution limit for 2019 is $19,000, which includes all elective employee salary referrals.  Most plans do not permit employee contributions outside of payroll.

Employers can offer a pre-tax commuter parking benefit.  See this IRS reference: https://www.irs.gov/government-entities/federal-state-local-governments/qualified-parking-fringe-ben...