Long distance marriage filing status - Husband in Michigan and Wife in Massachusetts

[littlepeanut]

My husband lives and works in Michigan and I live and work in Massachusetts. We are unsure if we should file our taxes as married filing jointly or married filing separately. I am a student working towards my bachelor's degree for the first time. I know that I am unable to claim my education expenses if we file separately. If we file jointly, we are also unsure of how to state our residency status. Would it be better if we file separately?

[KathrynG3]

Yes, you are correct, there are many advantages to filing married filing jointly. TurboTax will help you capture these details in the state interview. 

When starting the state interview, here are the steps to follow:

• Identify yourselves as non-resident and resident with this protocol: 
  • Identify the spouse identified as Taxpayer first--so, if you are listed first in the return, you are the taxpayer. 
     
    • Whoever is the taxpayer: Enter the nonresident state first
      • When asked about state residency, select Nonresident for taxpayer and Resident entire year for spouse.
      • Complete the interview for this state.
      • Be sure to report only the resident income as belonging to this state. 
         
    • Enter the state the taxpayer lived in as of December 31, 2020. 
      • When asked about state residency, select Resident entire year for taxpayer and Nonresident for spouse.
      • Complete the interview for the second state.
      • Be sure to report only the resident income as belonging to this state.
• For the state returns, remember that there is a renter's credit and a commuter's credit for Massachusetts residents.

Regarding your education credits, you may qualify for the American Opportunity Tax Credit. If not, the Lifetime Learning Credit will allow for up to a $2,000 credit for qualified students. 

For more details, see: Is it better for a married couple to file jointly or separately?

2020 Massachusetts Form Instructions Resources (See page 22 of Form 1 instructions for Commuter deduction.)

2020 Michigan Form MI-1040 and Schedule NR Instructions Resources

[littlepeanut]

I understand. But when I go to start our Massachusetts state taxes, there is no option for us to say that one was a nonresident and one was a resident. In that case, what do we do?

[JohnB5677]

This has happened before.  If you get the desktop version you can file your Federal return as Married Filing Jointly.  You can then create  two other returns and file the states as Married Filing Separate.

You will be able to Efile your federal return, but you will have to mail the state returns.

[littlepeanut]

The issue that we are facing is that Michigan doesn't allow us to file separately if we file jointly for federal. But Massachusetts makes us file separately if we are not residents at the same time. Are we allowed to file jointly for one state and file separately for another?

[JeffreyR77]

Yes, in order to file compliant tax returns in Michigan and Massachusetts that's exactly what you will have to do.

As @JohnB5677 said. to do it in TurboTax, you will need to use the Desktop version of TurboTax that will allow you to create and efile your Federal Married Filing Joint return and your Michigan Married Filing Joint return. 

You can then prepare a Massachusetts return Married Filing Separate and claim a credit for Taxes Paid to Another State on Schedule OJC on your income that was taxed on the Michigan return to avoid being double taxed on income.  

TurboTax will only allow you to efile one of the state returns, so you will need to mail in the Massachusetts return with a copy of the Federal return and a copy of the Michigan return to show the income taxed by Michigan.