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bhector16
New Member

Community property adjustments

I live in texas, my husband and I are filing separately. He made XXXX and I made XXX this year before taxes. How do I calculate thewhat needs to go in the "community property addition Adjustment" and "Community property subtraction adjusment" box? 

16 Replies
RobertG
Expert Alumni

Community property adjustments

 

When you are doing the Community Property allocation you will take the TOTAL for the community property for each category then divide it in half.  For the amount attributed to each spouse, you add or subtract to make up the difference of the half.  For example:

 

If Bob made $800 and Mary made $200 the total wages are $1000.  One half is income to each spouse- which is $500.

 

Because Bob made more, he would have a subtraction to get his $800 to $500.  Mary would have an addition of $300 to get her to $500.

 

This question was previously answered by  MaryK1101 Employee Tax Expert at: https://ttlc.intuit.com/community/tax-credits-deductions/discussion/what-does-community-property-add...

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MarriedCommProp
New Member

Community property adjustments

Thanks for the clear and simple explanation, RobertG. Now I get the concept!   I  followed the links and did a bunch of reading and remain mystified how I type this info into the Form 8958. I did the math, added the income for my spouse and myself. Divided in half, and figured out which amount gets added or subtracted so we each report 50% of our total income.   When I entered the allocation in column B, however, turbo tax decided to change the amount previously auto-filled in Column A.  It would be so helpful to simple see an example of how it is done. I am not finding the TT software helps with this calculation.  It didn't offer the step-by-step on mine either. 

wtangalos
Level 1

Community property adjustments

Turbo Tax needs to rework how it guides one through the Community Property Income and deductions a lot better. It isnt clear to me if I need to re enter the actual Income and Deductions at 50% of the combined for my spouse and I on each of our returns in the Income and Deductions entries, OR, simple include showing the 50% for each income and expense on form 8958.

 

I don't see where the Deductions section is on form 8958 either. I must say in buying the Turbo Tax Home and Business software, I'm very disappointed this isn't easy to solve.

KarenJ2
Expert Alumni

Community property adjustments

 

The deductions section on form 8958 is listed on line 12.

 

Five Tax Tips for Community Property States

Married filing separately in community property states

IRS Publication Community Property

What is Form 8958?

 

 

Community property states usually require that your income be split 50-50.  Having said that, each state has nuances in their own laws that can make the calculations complicated.  

If you have a situation where all of our income is under community property law, then each of you will be claiming approximately 94,000 of income (1/2 of 188,000, which is your total income).  Your tax withholdings would also be split 50/50 between the two of you.

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totallyfrozen
New Member

Community property adjustments

Each year I find my self needing to come back to this community forum to understand how to do this. The clear, logical answers found here never seem to jive with the vague and convoluted explanation in TurboTax. If my wife makes more than I do, do I just need to put what she makes in my adjustment ADDITION? Or to I ALSO need to subtract MY OWN earnings via the Subtraction Adjustment?

The basic idea seems simple enough. Why can't it be explained in a straight forward manner? It's much like asking a simple Yes/No question to a politician and getting 3 minute, mind-numbing non-answer.

Critter-3
Level 15

Community property adjustments

The answer earlier in the thread put it plainly ...

 

 

If Bob made $800 and Mary made $200 the total wages are $1000.  One half is income to each spouse- which is $500.

 

Because Bob made more, he would have a subtraction to get his $800 to $500.  Mary would have an addition of $300 to get her to $500.

 

 

And IMHO filing separately in a community property state is usually a waste of time and effort. 

xmasbaby0
Level 15

Community property adjustments

Married filing separately is usually the worst way to file--why do you want to file that way?  (Especially in a community property state)

 

If you were legally married at the end of 2019 your filing choices are married filing jointly or married filing separately.

Married Filing Jointly is usually better, even if one spouse had little or no income. When you file a joint return, you and your spouse will get the married filing jointly standard deduction of $24,400 (+$1300 for each spouse 65 or older)  You are eligible for more credits including education credits, earned income credit, child and dependent care credit, and a larger income limit to receive the child tax credit.

 

If you choose to file married filing separately, both spouses have to file the same way—either you both itemize or you both use standard deduction. Your tax rate will be higher than on a joint return. Some of the special rules for filing separately include: you cannot get earned income credit, education credits, adoption credits, or deductions for student loan interest. A higher percent of your Social Security benefits may be taxable. Your limit for SALT (state and local taxes and sales tax) will be only $5000 per spouse. In many cases you will not be able to take the child and dependent care credit. The amount you can contribute to a retirement account will be affected. If you live in a community property state, you will be required to provide additional information regarding your spouse’s income. ( Community property states:  AZ, CA, ID, LA, NV, NM, TX, WA, WI)

If  you are using online TurboTax to prepare your returns, you will need to prepare two separate returns and pay twice.

 

https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately

https://ttlc.intuit.com/questions/1901162-married-filing-separately-in-community-property-states

https://ttlc.intuit.com/questions/1894449-is-it-better-for-a-married-couple-to-file-jointly-or-separ...

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
Nigel J
Returning Member

Community property adjustments

Where is the community property adjustment for a sale of a business (rental) property that generates a community property gain (partly a profit, mostly depreciation recapture) ? I see where I can enter the information for IRS information but I don't see where to enter it so it changes the amount of tax due or refund. Any help greatly appreciated please. Thanks.

ThomasM125
Expert Alumni

Community property adjustments

In TurboTax, you are allowed to make an entry to either increase or decrease your total income to adjust it to your correct community property income. The income or loss on the sale of the property would be added to your other community property income adjustment and then be entered as one amount in TurboTax as follows:

 

When you do this, the adjustment will end up being taxed at ordinary income tax rates, which may differ from the capital gains rates that may apply to the property sale. To account for this, you can enter just your share of the property sale transactions when you make the original entries in TurboTax, in which case you would not enter the community property adjustment for that part of your income in TurboTax. 

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Nigel J
Returning Member

Community property adjustments

Thanks for taking the time to reply, much appreciated. That's actually what I planned to do, but it's a shame that Turbotax requires this less than ideal work around when it could easily ask if there are any CP adjustments to a gain on sale, the same as it does for income, etc.

Julie H
Level 2

Community property adjustments

I really need help with MFS. I live in CA and my husband lives in FL so we are MFS. He did hundreds (maybe more) of stock trades in 2020. I couldn't find the place to adjust the 1099 B short-term capital gains. When I uploaded the data from my brokerage firm to TT, it calculated the whole amount in Schedule D. How can I split 50-50 in my tax return? Do I have to manually adjust each trade one by one in form 8949? Is there any way automatic adjust 50% in total amount?

I really appreciate your help.

Thanks.

MaryM428
Level 10

Community property adjustments

You can enter a summary of each type of transaction.  Long term, short term, etc.  and claim 50% of that amount.

You will be able to use the summary date from the brokerage accounts.
 

When you sell a capital asset, the difference between its cost basis and the selling price results in a capital gain or loss.

  • A capital gain is when your asset's sales price exceeds its cost basis (in other words, you made money). Capital gains must be reported on your tax return.
  • A capital loss is when you sell the asset for less than its cost basis. Capital losses from investments can be deducted, but not those from personal-use assets, such as your home or personal vehicle.

Your total capital gains for the year minus your total capital losses results in either a net capital gain or a net capital loss.

  • Short term capital gains (gains on assets held one year or less) are taxed as ordinary income.
  • Long term capital gains (gains on assets held more than one year) are taxed at a more favorable rate than ordinary income.
  • Net losses are deductible, but only up to a maximum of $3,000 ($1,500 if married filing separately). Any capital losses you couldn't deduct this year can be carried forward and deducted on future tax returns. This is called a capital loss carryover.




@ julieh

Julie H
Level 2

Community property adjustments

I see. I can input summary data in schedule D instead of upload file, and use excel to calculate 50% of each trade gain/loss for form 8949.

But I still want to give comments to TT. You really need to work on this automation. I am using the Premier version and am very disappointed on two points: first, I need to prepare two tax returns for me and my husband (everything is the same but need to input twice); second, I need to manually adjust 50% for all investment income, including dividends, interest, capital gain/loss, and other incomes. I did lots of research to learn how to adjust it. I don't mind paying extra fees for the better product.

Thank you, Mary. Your help is really great. I will keep working on my return and share the problems if I find them.

 

Julie H
Level 2

Community property adjustments

Hi Mary,

SOS! It's me again. I couldn't find the "community property income adjustment" worksheet in TT to add portion of my husband's income . I did search "community property" and click enter, then use "jump to community property" link. However, it went to "We are ready to review your federal return". Could you please tell me where I can find the correct place to adjust my income? Currently, my filing status is MFS. 

Thanks a million!

 

 

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