unemployment income - community income? exclusion

[Ledillon1]

My husband and I file separately in Texas, a community property state.

1. I his unemployment income considered community income and should be included in the calculation for the community property adjustment?

2.  He qualifies for the 10,200 exclusion.  Should that be subtracted from income before or after our incomes are averaged?  The Turbotax CD I'm using subtracts the whole amount from just his adjustment, but if appropriate, we would like it to be subtracted from the combined income before it's averaged.  If we can, how can we change how the CD program enters in the forms?  Thanks!

[ThomasM125]

The unemployment would normally be included in community income, but you would have to check the Texas laws on that to be absolutely sure. 

When you prepare your tax return as married-separate, you will enter all income reported to you. When you are finished entering your income and deductions, that is when you will make an adjustment to increase or reduce your income to the correct amount for community property purposes.

As far as the unemployment is concerned, when preparing your tax return, you will add half of his unemployment to your income, net of half the $10,200 exclusion. For instance, if his unemployment income is $15,000, you would add $2,400 to your income ($15,000-$10,200/2.)

[Ledillon1]

Thank you for the reply.  My concern is that Turbotax and the forms take the exclusion automatically after the community income is split, instead of me doing it manually where I can take it out of his income before we split it.  Do I add $5100 to the community adjustment so it evens out (adding it to his, subtracting from mine), even though they then take the whole 10,200 from his?  Would the IRS reject the return if the income numbers don't add up?

[DanielV01]

The following comes directly from this IRS website:  2020 Unemployment Compensation Exclusion FAQs — Topic A: Eligibility

Q4. I'm married and don't file a joint return with my spouse. We live in a community property state. Are we eligible for the exclusion? (added April 29, 2021)

A4. Yes. Because you live in a community property state, you report half of your unemployment compensation and half of your spouse's unemployment compensation on your tax return and your spouse reports the other half of your unemployment compensation and half of his or her unemployment compensation on his or her tax return. You should exclude up to $10,200 on your tax return if your modified AGI is less than $150,000. Your spouse should exclude up to another $10,200 on his or her tax return if your spouse's modified AGI is less than $150,000. Neither of you should exclude more than the amount of unemployment compensation you report on your Schedule 1, Line 7.

[Ledillon1]

Thank you for the reply. That example has both spouses with unemployment income. What do we do if only 1 spouse has unemployment but split between 2 returns?

[DanielV01]

It's the same principle.  You split your unemployment 50-50.  Because of how the law is written, each of you gets up to a 10,200 deduction.