Married living and working in different state

[unablezhy]

I am living and working in CA and my wife is living and working in AZ.

We got married last year and looking for filing options. Because I earned much more than my wife hence filing federal jointly would yield in tax benefit. I do have couple of questions below:

1. Can we file federal together and state separately?

2. I am reading this article from turbotax and seems to be straightforward. However I see both CA and AZ are common property state, how does the common income apply to our situation?

[unablezhy]

The link I refer to, somehow it is not working from the post directly

https://ttlc.intuit.com/turbotax-support/en-us/help-article/small-business-processes/prepare-joint-f... (restored)

[DavidD66]

Yes, you can file a joint federal return and file separate returns in both Arizona and California, provided the the non-resident spouse did not have any source income from the non-resident state.  

Arizona and California are both community property states.  What this means is that if your file separately, because in both cases the non-resident spouse lives in a community property state you will each have to claim 100% of the income you earned plus 50% of your spouses income.  Because of the differences in tax rates and tax brackets, I doubt you would receive any benefit from filing separately.  That said, the only way to be sure would be to prepare tax returns both ways and compare the total tax liability for each method.

[unablezhy]

@DavidD66 Thx for replying. 

I was not aware that we could file jointly for state in our situation given I don't have income in AZ and my wife does not have income in CA. 

That being said, if we file state jointly, we still need to file state individually AND need to report both of our income in each state filing and get taxed twice? 

Much appreciated for your response!

Best

[MarilynG1]

No, you would only need to file one return for each state, either jointly or separately.  Since they're both Community Property states, where you report all your income and half of your spouse's on separate returns, it could be a wash using either method, though you may lose some deductions that are limited when MFS. 

You can use your joint federal return and test filing separately for each state, and test filing jointly for each state.

Here's detailed info on Filing Separate States.

@unablezhy 

[unablezhy]

@MarilynG1 How do we apply half of each income in the state return using turbotax?

[DavidD66]

Marilyn G1 is correct.  If you file joint state returns you do not need to and should NOT file separate state returns.  For each state, you either file a single joint return, or you each file a separate state return.

TurboTax has allocation screens and a worksheet to assist you in entering any adjustments your community property state may require when filing separately.  For more information on filing separately in a Community Property State click on the following link to a TurboTax Help Article on the subject:  

Married Filing Separately in community property states