Married living in separate states

[Rbostwick]

My wife lived and worked in Oregon last year while I lived and worked in Washington.   She moved to Washington in July but didn't get back to work until after the new year.  We bought a house and had a baby. Should we file jointly or separate?

[AmyC]

Most couple find it better to file MFJ particularly when a child is involved. You can read more about MFJ vs MFS here.

In your case, the child is worth $2,200 for the child tax credit plus you have more range in tax brackets.

Oregon will require a part year resident return with the same filing status. Only income earned in OR will be taxed.

Congratulations and best wishes!

[torobert222]

You should generally file jointly for federal taxes to maximize deductions (house, baby) and lower your combined tax bracket. However, for Oregon, you will likely file as part-year residents/nonresidents, with your wife splitting her income by the date she moved to Washington (July) to avoid paying Oregon tax on her 5-month unemployment/WA residence

Key Tax Considerations

• Federal Filing (Joint vs. Separate): Filing jointly (MFJ) is typically better, especially with a new house (mortgage interest deduction) and child (Child Tax Credit).
• Oregon State Taxes (Part-Year/Nonresident): Because your wife worked in Oregon but moved to WA, she will likely file an Oregon part-year resident return (Form OR-40-P). She only pays Oregon tax on income earned while living/working in Oregon, not for the months she was unemployed in Washington.
• Washington State Taxes: Washington has no state income tax, so no return is required there.
• New Baby & Home: You can claim the child tax credit (up to \(\$2,000\)). For the house, you can deduct mortgage interest if you itemize

Recommended Filing Strategy

1. Use Tax Software: Use a program like TurboTax, H&R Block, or a CPA, as they can handle complex part-year, multi-state scenarios.
2. Federal: File jointly.
3. Oregon: File as a part-year resident. Be meticulous in splitting income to only include the income earned while she was an Oregon resident or working in Oregon.
4. Save Paystubs: Use paystubs around the move date (July) to verify when Oregon withholding stopped.