How do I figure partial year in a community property state?

[johamill]

We file married separately for student loan reasons.  We lived in a non-community property state for the first 6 months of 2019, and then moved to a community property state (NM) for the remainder of the year, so I'm trying to figure out all of the specifics around this.  How do I account for the income earned separately in our first state (non-community property), and then account for the community property income?  These figures between states are relatively clear on our W-2s, but I don't understand how to account for both in TurboTax.  I'm trying to figure this out on the federal tax level right now, and then have the two states to work on, so I want to be sure I'm doing this legally and correctly.  I've always done my own taxes, but the combination of married separate, with two states, and one being community property has me considering dumping this on a professional.  I'm using TurboTax Deluxe and it's not clear to me how to account for the two time periods in different states.  Thanks!

[KathrynG3]

By breaking down the tax return in steps, it is easier.

1. Start by entering your new address and in the My Info interview, identify the state you moved from.
2. Continue the same way as you have in the past with entering your income, deductions and credits.
3. For the State details:
   1. Start in the state tab by adding the state you lived in at the beginning of the year. 
      1. Click this article to learn more: How do I file a part-year state return?
   2. Only after this, add another state: New Mexico. 
      1. When you are entering the details for New Mexico, then you will need to enter your community property details just for the time period you lived in New Mexico.
      2. Click this article to learn more: Married filing separately in community property states

[johamill]

Thank you for this - I do have a follow up question.  I'm nearly done with my Federal part, but where this all started to get me hung up was when I hit the 'Other Tax Situations' section, specifically the 'Community Property Income Adjustments' where I have to add or subtract a value.  How / When do I figure this out?  Do I go through the whole Federal process for both myself and my wife separately and then come back to this section on both with the appropriate adjustment?  Would this adjustment on the Federal level still only be related to the New Mexico income for both of us to balance it out for community property?

Thanks so much

[MarilynG1]

If you are Married Filing Separately, you will have to go through this allocation on both of your returns.  You will get a worksheet when preparing your Federal return, and may get another for your New Mexico state return. 

You don't need to allocate W-2 income; items like dividends, interest, capital gains, etc. would need to be allocated to each return. 

Click this link for more detailed info on Married Filing Separately in Community Property States.

[johamill]

I'm confused about your comment on not having to allocate W-2 income.  The link you supplied has a link to IRS Publication 555 which states that filing separately requires you to figure out what half of your community property wages are for each return.  Could you clarify what you mean?  Thanks

[MaryK4]

You will want to start with the total income for each category of income (A).  Next, subtract the non-NM income.  The amount left should be the total NM community income- divide this by half.  The adjustment would apply only to the NM portion- the addition or subtraction is the amount to get each to the community income half. 

FOR EXAMPLE---

W2 Dave NM $700

W2 Dave CO $800

W2 Sally NM $300

W2 Sally CO $900

TOTAL $2700 (A) minus $1700(non NM income)= $1000 NM INCOME

NM Community Income $1000 / 2 = $500

ADJUSTMENTS=  

Dave= $500 - $700= ($200)

Sally= $500-$300= $200

@johamill