VA State, filing jointly w/ spouse. TT allocates ALL joint Div/Int/CapGain income to me. There used to be an advantage to an even allocation. Is this NOT true?

[spartan1961]

For VIRGINIA state income tax, Turbo Tax Automatically allocates 100% of our joint income to me.  Virginia allows allocation between me and my spouse.  At one time an even allocation resulted in lower taxes.  But TT won't let me adjust the allocation to test whether it results in a lower tax or not.

[Karca · Accepted solution]

Perhaps in the past, you were a part-year resident of Virginia?  You are allowed to use the filing status, "Married, Filing Separately on a Combined Return", in Virginia only if you are filing as a part-year resident. Full year residents do not have this option.

[spartan1961]

Thank you!  If that is the case for this year, that is good to know.  However, no, I did not file as a part year resident, and it used to be (a long time ago) that you were allowed to allocate between spouse and yourself.  TurboTax (back then) even allowed you to do "what if" scenarios to get the right balance -- at least that is what I recall.  I have not done such an allocation in recent years, but this year it looked like it would have been worthwhile for me.  Thank you again for your answer.

[jojo52319]

When you enter interest/dividends/capital gains into TurboTax, you should be prompted concerning whether they belong to you, your spouse, or both of you (50/50).  Make sure you check the right box.  This is what drives the allocation in the Virginia State Taxpayer/Spouse Allocation Worksheet.

[costaemt]

I thought the point of the "adjustment" was to let you find the optimal allocation of cap gains and dividends.  Thus 100/0, 0/100, 50/50, etc for self/spouse. 

[ErnieS0]

TurboTax Online allows you to allocate capital gains to the spouse and you can allocate interest and dividends in CD/Download, or you can tag individual items as belonging either to the Taxpayer, Spouse or both.

[jojo52319]

According to the Virginia tax website, the point of allocating income and computing the spousal adjustment is to prevent spouses from having to file separate individual returns to lower their overall tax bill.  It addresses the "marriage penalty", and lowers the total tax bill for joint filers to what it would be if they filed individually.  TurboTax allocates income based on the entries for each type.  W2's and 1099s generally have an SSN or tax ID associated with them.  For interest and dividends hand-entered without an SSN, TurboTax asks which individual the income belongs to, or if the income belongs to both (for joint accounts).  TurboTax then uses this information to fill in the Virginia Spousal Allocation worksheet which computes the adjustment and lowers the tax due. 

[costaemt]

I wish VA tax authority would give a much clearer description with multiple examples.

[costaemt]

Could a 1099-DIV addressed two names could be allocated 100% to the spouse (lower earner) in Virginia for the benefit of Spouse Tax Adjustment?  The spouse (lower earner) has the SSN assigned to the 1099-DIVs. 

[PattiF]

Yes, you can allocate 100% of the dividends to one spouse. The instructions for this are found on Page 12 of the Virginia Income Tax Booklet.