[California] - spouse lives in another country, what to do with state residency

[SpiroCA]

Hello,

I am a US citizen and California resident but my spouse lived in Europe in 2021, while waiting for her green card application. For federal tax purposes we file MFJ (we 've been given an ITIN). Additionally my spouse doesn't have any US income.

What do I do for California taxes? In the personal info page can I put "Resident State" = "California" for my spouse?

Here is the problem I am facing in turbotax.

a. In the personal info page for my spouse under "Resident state" if I put "Foreign or U.S. Possession" I get questions for residency / domicile not only for my wife but also for me. Which doesn't make sense because I already have "Resident State" = "California" for myself. 

b. If I choose "Resident State" = "California" for my spouse, it doesn't seem right either as later on when it comes to health insurance I say that my wife didn't require insurance since she didn't live in California. Then I am asked some further questions about her residency and at the end of test since she didn't live in CA the penalty is waived.

Thanks!

[Vanessa A]

In the personal info section, since your spouse did not live in the US, you should select Foreign or US Possession for the state she lived in.  This will have your wife as a non-resident from the start and waive the insurance penalty.

Which questions are you seeing for yourself that do not seem right?

[SpiroCA]

Hi Vanessa,

By doing so, selecting Foreign or US Possession for my spouse under the state she lived in and for "My spouse lived in another state in 2021" selecting NO, I am asked the following questions for both myself and my spouse

Residency Information During 2021:

Did you become a California resident during 2021?   Yes/no

Did you become a California nonresident during 2021? Yes/no

Were you a California nonresident during all 2021?  Yes/no

Then I am asked (for myself) when did I move to California during 2021, where were you domiciled etc, which doesn't make sense, since I am a California resident for too many years and in the general info I already have CA resident.

Ps. Selecting Resident for my spouse (although she was not), the insurance penalty is waived, because I select the months that she was out of California and the total days give her an exemption. But it doesn't feel it is the right way. 

Thanks!

[ErnieS0]

Filing jointly pulls all your spouse’s income into California. 

It will probably be more beneficial to file separately for yourself for California. Your spouse is not a resident of any state so she would not have to file any state return.

How do I prepare a joint federal return and separate state returns?

If one of you is part-year or nonresident, California will ask residency questions of both of you.