When Does Community Property Income Start?

Forum|Forum|4 years ago
July 7, 2021
1 reply
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I am a current CA resident and moving to WA permanently this month. I'm planning to marry a CA resident in December 2021. My understanding is that since CA and WA are both community property states, half of my income after marriage will be taxed by CA. Can anyone clarify if the community income, 50% of which is taxed by CA, will only start accruing after the date of marriage in December? Or is it retroactively applied to the entire calendar year?

Thanks in advance.

macuser_22

Alumni - Champ

Community income is any income earned in a community property while married.

However, you only allocate community income when filing separately which is the worse way to file. If you file jointly, as you should, then community income is irrelevant - all income from both spouses goes on the same tax return.

You misunderstand community property.

When filing seperartely in a community property state then 1/2 of each spouses community income is claimed on the other spouses income. Therefore 1/2 of your community income goes on your tax return and 1/2 on your spouses tax return and visa-versa so all the income is taxed only once, but half on each spouses tax return.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

thanksforyourhelpAuthor

Level 2

Let's say that my spouse and I file separately for the year and we get married on 12/1/21. Up to 12/1/21 I make $110K and she makes $0. From 12/1/21 - 12/31/21, I make $10K and she makes $0K.

So if I'm a WA resident and she's a CA resident, she would only report half of $10K ($5K) on her separate tax filing, correct? Since community income only starts after the date of marriage?

macuser_22

Alumni - Champ

Yep your advice makes a lot of sense. I guess I'm just having trouble figuring how the MFJ filings would work in our case.

So for Federal, we'll file MFJ and I'll report all my income for the year (7 months from CA, 5 months from WA).

Then for CA, we'll file a 540NR (MFJ) with the following calculation:

Assuming I made $10K per month and moved from CA to WA on August 1st and got married on December 1st, I would have a total AGI of $120K, and a CA AGI of $75K (7 months of $10K while in CA, and $5K from the 1 month of community income). And then I would only pay CA state taxes on $75K of income, and 0 state taxes (WA) on the remaining $45K of income.

Am I approaching this correctly?

Correct. You only pay CA tax on the income earned in CA. That is the same reguardless of what your filing status is.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**