Married couple living in CA and VA

[Totoro88]

My husband moves to VA since mid-Jan 23, while I stay in CA.  We plan to file the Federal MFJ, but not sure about the states. 
1) Husband - W2s from CA (last pay from previous employer), W2s from VA, and Joint rental incomes in CA.  He is the resident in VA.
2) Wife - 1099 (self-employed) from CA and Joint rental incomes in CA. 
How should we file the CA and VA state return?  Could we file MFS? 
Also, about dependents (2 son), how do we claim dependents on the state return when file MFS? 

[Vanessa A · Accepted solution]

Yes, you can file as MFS for the states and jointly for federal.  Both VA and CA allow you to do this. 

You will file a CA full year resident return. 

Your husband will file a Part Year/Non-Resident CA return and a Part Year VA return. Since the rental income is earned in CA, it is CA source income, so even while he is a resident of VA, he will need to pay taxes to CA on the rental income.  VA gives a credit for taxes paid to other states, so he will need to complete his CA return first, then his VA return. Since he is receiving the rental income as a resident of VA, that is also taxable by VA. He will not need to include VA earned income on his CA return.  But, the rental income will need to be included on BOTH returns.

The joint rental income will simply need to be split and reported on both of your CA returns

For your 2 sons, whoever they live with would claim them on their returns.  So, if they live with you for the entire year, then you would claim them as a dependent on your CA return and your husband would not claim them at all.

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[Totoro88]

Thanks.  Would we be allowed to file MFJ in CA?  Or we must only choose MFS in CA? 

[RobertB4444]

You can file married filing jointly in California but if you do then all of the income reported on your federal return is subject to California tax.  California residents are taxed on 100% of the income they earn even if it is from out of state sources.

@Totoro88