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.
Per Expert MaryK4:
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.
And yes, your adjustments should include all income and deductions, regardless of source or type.
Also, if you need to find the community property worksheet online, see this link: Married filing separately in Community Property states. You may find it easier to switch to the desktop software. The link does provide guidance on this option.
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.
The answer used the example of wages for each spouse. Is it only wages that is considered or is the final value the net of all income and deductions for each spouse?
Community income is income from:
Please see the broad outline on page 4 of this IRS publication.
Where is the information from form 8958 entered on your Federal 1040?
Form 8958 is a allocation form that separates your income and deductions and your spouse's or domestic partner's share of their income and deductions. This form is required in all community property states. Whatever the amount of your income and deductions you allocate on the 8958 will be the amounts reported on your 1040. Your partner/spouse is also required to fill out a 8958.
Please view this Turbo Tax link that explains the details of form 8958.
My husband and I have just completed form 8958. How do I import results from form 8958 into my 1040?
Yes, I understand that, thank you. What I am asking is how do I get turbotax to automatically download and complete our respective 1040s with the correct incomes, deductions, etc., from the 8598 we completed. I cannot find that feature.
Unfortunately, TurboTax cannot do this. You will have to enter the information on each return then add the information on the Form 8598 pt the return.
Hello,
I read the responses on here (and searched endlessly online for a better explanation) and appreciate the info shared. However, could we please provide better ("real world") examples please, using more ideal figures?
For example, if Jack received 24,500 in Social Security benefits, and his husband, Tom, received 84,000 in regular wages. What would Jack list in the "Community Property Addition Adjustment" field, and what would he list in the "Subtraction" field?
Tyvm!
You would have to add the taxable portion of each spouse's social security benefit to the total of both wage incomes and then divide the total by two. From that amount, you would subtract the income of Jack (his taxable social security plus his wages) to arrive at his addition adjustment. There would be no subtraction adjustment, since Jack has less income than Tom.
The taxable amount of social security would be best taken from each tax return, after preparing them separately before the community property adjustment. It would appear on line 6(b) of form 1040.
You can see form 1040 while working in the online TurboTax program by using the following menu tabs:
Gosh I'm questioning this as well. Hard to wrap ones head around particularly when I have read that Social Security is not considered community property. I don't know why I struggle so with trying to determine if on the 8959 I am adding or subtracting the fed and state tax and whether to use the - sign or not. The income was easy to figure doing the split on. Since my partner paid more tax and had more income than I, I am assuming I will add the Fed and State tax to mine but use the subtract with the -sign on my partners? Is that correct?
No that is incorrect. if you live in a community property state where you have to allocate income, you would report your income and then your partners income. Enter both as positive numbers. Upon completion of your entries, Turbo Tax will determine the 50/50 split. Social Security income is also included in the reporting.
I appreciate that. My confusion lies in what I found is according to the IRS whether or not Social Security benefits are community property IS in fact determined under State law. However the state law in California seems to say that SS in NOT community property. This case was huge and the reason for my confusion. 1/11/16
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR B259322
(Los Angeles County
Super. Ct. No. BD520273 )
In this case the court held that because the husband’s Social Security benefits are separate property and the wife’s county retirement benefits are community property, the Social Security benefits may not be considered and the county benefits must be divided equally between the parties. Its possible there has been a ruling since this 2016 case that I have not seen. What I have read over and over though is that California law defers to federal law when it comes to SS benefits. I am not convinced that although California IS a community property state, Social Security benefits Are Not considered community. See the link here for some interesting reading on that topic. https://law.scu.edu/same-sex-tax/are-current-social-security-receipts-taxed-as-community-income/
Thanks for the tip on entering the numbers as positive!!! Appreciated!
Yes, this is interesting. According to this IRS link, In some states, income from separate property is separate income. These states include Arizona, California, Nevada, New Mexico, and Washington.
Looking into this link, Social Security considers payments to its program as property of the contributor and not community property, even though California considers income accrued during marriage as community property. Property of the contributor means separate property. Since it is not considered community property, it does not need to be reported or allocated in your federal return.
I hope this helps.
That's really great stuff! Now back to pluses and minuses. Adding and subtracting. This does complicate matters. Spreadsheets help. Gracias!
What if you are going through a divorce and you don't know how much your spouse made in 2020?
I recommend at least reporting your income in the tax return and doing your best to obtain the information for your spouse.
You will need to file as Married Filing Separately (or Head of Household if you qualify) to ensure your return is prepared to the best of your ability.
Head of Household Qualifications
Please see the links below for additional information to guide you as you prepare your tax return.
Filing separately in a community property tax help
Tips for taxes when getting divorced
Publication 504 - Divorced or separated individuals
My wife and I were married for 3 months of the year. How do I calculate partial community property?
Community Property Rules only apply if you are filing Married Filing Separately.
If this is your situation, you would only split the applicable income earned AFTER marriage.
Anything earned before marriage would go to the spouse who earned it at that time.
On the 'Community property income adjustments' screen in Turbotax desktop, when I'm putting in the addition/subtraction for both partners, should I be just allocating the sum of our incomes, incl relevant dividends and interest? Or should I be netting out deductions like capital losses, self-employment qualified business loss, HSA contributions etc?
Thank you,
Per Expert MaryK4:
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.
And yes, your adjustments should include all income and deductions, regardless of source or type.
Also, if you need to find the community property worksheet online, see this link: Married filing separately in Community Property states. You may find it easier to switch to the desktop software. The link does provide guidance on this option.