MFJ federal, MFS (CA & MA)

[billwang]

Here is our situation:

Me: CA resident, MA non-resident, only earns income in CA

Wife: MA resident, CA non-resident, only earns income in MA

Can we do MFJ at the federal level, and MFS at CA and MA respectively for the tax year of 2024? Are there any laws that prevent us from doing that?

Also, can turbo tax handle that? If yes, at what level of service?

[MonikaK1]

In the situation you described, it appears that you would need to file a joint California state return if you file a joint Federal return.

Yes, TurboTax can handle joint Federal and separate State returns. It's best done using a Desktop version. See this help article for step-by-step instructions.

Each state has its own rules regarding this topic. For example, Arizona allows couples to file separately even if they filed a joint federal return, whereas Colorado does not. California doesn't allow it either, with the exception of active-duty military and certain nonresidents - see below. Before proceeding further, make sure this is allowed by your state's tax laws.

The California Franchise Tax Board's Form 540 Instructions state the following on this topic:

Use the same filing status for California that you used for your federal income tax return, unless you are an RDP (Registered Domestic Partnership). If you are an RDP and file single for federal, you must file married/RDP filing jointly or married/RDP filing separately for California. If you are an RDP and file head of household for federal purposes, you may file head of household for California purposes only if you meet the requirements to be considered unmarried or considered not in a domestic partnership.

Exception: If you file a joint tax return for federal purposes, you may file separately for California if either spouse was either of the following:

• An active member of the United States armed forces or any auxiliary military branch during 2024.
• A nonresident for the entire year and had no income from California sources during 2024.

Community Property States: If the spouse earning the California source income is domiciled in a community property state, community income will be split equally between the spouses. Both spouses will have California source income and they will not qualify for the nonresident spouse exception.

Since you live in California and have California source income, you don't qualify for the exception to the general rule to file jointly, because you'd be required to split your income with your spouse, who would then also have California income.

The Massachusetts tax agency states that, for tax years beginning on or after January 1, 2024, married couples must file a joint Massachusetts return if they filed a joint federal income tax return, unless one of the spouses wasn't required to file a Massachusetts return because their Massachusetts gross income was $8,000 or less. If one of the spouses does not have a filing requirement because their Massachusetts gross income does not exceed $8,000, an exemption applies where they may choose Married Filing Separately for Massachusetts.

 [Edited 02/17/25| 12:31pm PST] @billwang:  (edited) 

[billwang]

Thanks a lot for the very detailed reply. Following your response, I also did pretty detailed research, and it aligns well with your conclusion.

Could you also advice which Turbotax product is best suited for our purpose? As far as I know, joint filing in both states requires tax credits to avoid double taxation. Is that supported in Turbotax software?

[MonikaK1]

You're welcome! Yes, TurboTax will calculate the credit for tax paid to another state. For this to work correctly, you generally need to prepare the nonresident state return first in order to get the tax liability for that state which you then enter into the interview for the resident state for purposes of calculating the credit. There are some exceptions; for example, Arizona doesn't tax certain Arizona income of California residents. See here for more information from California FTB. 

You can use either Desktop or Online products. Desktop allows you to prepare up to five Federal tax returns for one price and you get one state included, though there is a charge to e-file the state return. You can also use TurboTax Online to test different scenarios without completing and paying for the return and then finish the return in Desktop. Click here for more information from TurboTax on how to decide which filing status to choose.

Click here for tax tips for community property states.