Table of Contents
Whether you have community property and community income depends on the state where you are domiciled. If you and your spouse (or RDP/California same-sex spouse) have different domiciles, check the laws of each to see whether you have community property or community income.
You have only one domicile even if you have more than one home. Your domicile is a permanent legal home that you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. The question of your domicile is mainly a matter of your intention as indicated by your actions. You must be able to show with facts that you intend a given place or state to be your permanent home. If you move into or out of a community property state during the year, you may or may not have community income.
Factors considered in determining domicile include:
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Where you pay state income tax,
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Where you vote,
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Location of property you own,
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Your citizenship,
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Length of residence, and
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Business and social ties to the community.
If you file a federal tax return separately from your spouse, you must report half of all community income and all of your separate income. Likewise, a RDP (and an individual in California who is married to an individual of the same sex) must report half of all community income and all of his or her separate income on his or her federal tax return. Generally, the laws of the state in which you are domiciled govern whether you have community property and community income or separate property and separate income for federal tax purposes. The following is a summary of the general rules. These rules are also shown in Table 1.
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That you, your spouse (or RDP/California same-sex spouse), or both acquire during your marriage (or registered domestic partnership/same-sex marriage in California) while you and your spouse (or RDP/California same-sex spouse) are domiciled in a community property state.
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That you and your spouse (or RDP/California same-sex spouse) agreed to convert from separate to community property.
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That cannot be identified as separate property.
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Community property.
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Salaries, wages, and other pay received for the services performed by you, your spouse (or RDP/California same-sex spouse), or both during your marriage (or registered domestic partnership/same-sex marriage in California).
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Real estate that is treated as community property under the laws of the state where the property is located.
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Property that you or your spouse (or RDP/California same-sex spouse) owned separately before your marriage (or registered domestic partnership/same-sex marriage in California).
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Money earned while domiciled in a noncommunity property state.
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Property that you or your spouse (or RDP/California same-sex spouse) received separately as a gift or inheritance during your marriage (or registered domestic partnership/same-sex marriage in California).
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Property that you or your spouse (or RDP/California same-sex spouse) bought with separate funds, or acquired in exchange for separate property, during your marriage (or registered domestic partnership/same-sex marriage in California).
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Property that you and your spouse (or RDP/California same-sex spouse) converted from community property to separate property through an agreement valid under state law.
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The part of property bought with separate funds, if part was bought with community funds and part with separate funds.
Community property is property:
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Separate property is:
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Community income 1,2,3
is income from:
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Separate income 1,2
is income from: • Separate property. Separate income belongs to the spouse (or RDP/California same-sex spouse) who owns the property. |
1 Caution: In Idaho, Louisiana, Texas, and Wisconsin, income from most separate property is community income. |
2 Caution: Check your state law if you are separated but do not meet the conditions discussed in Spouses living apart all year. In some states, the income you earn after you are separated and before a divorce decree is issued continues to be community income. In other states, it is separate income. |
3 Caution: Under special rules, income that can otherwise be characterized as community income may not be treated as community income for federal income tax purposes in certain situations. See Community Property Laws Disregarded , later. |
If you file separate returns, you and your spouse (or RDP/California same-sex spouse) must be able to identify your community and separate income, deductions, credits, and other return amounts according to the laws of your state.
The following is a discussion of the general effect of community property laws on the federal income tax treatment of certain items of income.
Example.
Henry Wright retired this year after 30 years of civil service. He and his wife were domiciled in a community property state during the past 15 years.
Since half the service was performed while the Wrights were married and domiciled in a community property state, half the civil service retirement pay is considered to be community income. If Mr. Wright receives $1,000 a month in retirement pay, $500 is considered community income—half ($250) is his income and half ($250) is his wife's.
When you file separate returns, you must claim your own exemption amount for that year. (See your tax return instructions.)
You cannot divide the amount allowed as an exemption for a dependent between you and your spouse (or RDP/California same-sex spouse). When community funds provide support for more than one person, each of whom otherwise qualifies as a dependent, you and your spouse (or RDP/California same-sex spouse) may divide the number of dependency exemptions as explained in the following example.
Example.
Ron and Diane White have three dependent children and live in Nevada. If Ron and Diane file separately, only Ron can claim his own exemption, and only Diane can claim her own exemption. Ron and Diane can agree that one of them will claim the exemption for one, two, or all of their children and the other will claim any remaining exemptions. They cannot each claim half of the total exemption amount for their three children.
If you file separate returns, your deductions generally depend on whether the expenses involve community or separate income.
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Community business or investment income are generally divided equally between you and your spouse (or RDP/California same-sex spouse). Each of you is entitled to deduct one-half of the expenses on your separate returns.
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Separate business or investment income are deductible by the spouse (RDP/California same-sex spouse) who earns the income.
Example.
You live in a community property state. You are separated but the special rules explained later under Spouses living apart all year do not apply. Under a written agreement, you pay your spouse $12,000 of your $20,000 total yearly community income. Your spouse receives no other community income. Under your state law, earnings of a spouse living separately and apart from the other spouse continue as community property.
On your separate returns, each of you must report $10,000 of the total community income. In addition, your spouse must report $2,000 as alimony received. You can deduct $2,000 as alimony paid.
The following is a discussion of the general effect of community property laws on the treatment of certain credits, taxes, and payments on your separate return.
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Half the community income and deductions,
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All of your separate income and deductions, and
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Your own exemption and any exemptions for dependents that you may claim.
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If, under the laws of your state, community property is subject to premarital or other separate debts of either spouse, the full joint overpayment may be used to offset the obligation.
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If, under the laws of your state, community property is not subject to premarital or other separate debts of either spouse, only the portion of the joint overpayment allocated to the spouse liable for the obligation can be used to offset that liability. The portion allocated to the other spouse can be refunded.
The following discussions are situations where special rules apply to community property and community income for spouses. These rules do not apply to RDPs (or California same-sex spouses).
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You treat the item as if only you are entitled to the income, and
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You do not notify your spouse of the nature and amount of the income by the due date for filing the return (including extensions).
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You did not file a joint return for the tax year.
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You did not include an item of community income in gross income.
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The item of community income you did not include is one of the following:
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Wages, salaries, and other compensation your spouse (or former spouse) received for services he or she performed as an employee.
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Income your spouse (or former spouse) derived from a trade or business he or she operated as a sole proprietor.
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Your spouse's (or former spouse's) distributive share of partnership income.
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Income from your spouse's (or former spouse's) separate property (other than income described in (a), (b), or (c)). Use the appropriate community property law to determine what is separate property.
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Any other income that belongs to your spouse (or former spouse) under community property law.
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You establish that you did not know of, and had no reason to know of, that community income.
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Under all facts and circumstances, it would not be fair to include the item of community income in your gross income.
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You and your spouse lived apart all year.
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You and your spouse did not file a joint return for a tax year beginning or ending in the calendar year.
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You and/or your spouse had earned income for the calendar year that is community income.
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You and your spouse have not transferred, directly or indirectly, any of the earned income in condition (3) above between yourselves before the end of the year. Do not take into account transfers satisfying child support obligations or transfers of very small amounts or value.
Example.
George and Sharon were married throughout the year but did not live together at any time during the year. Both domiciles were in a community property state. They did not file a joint return or transfer any of their earned income between themselves. During the year their incomes were as follows:
George | Sharon | |||
Wages | $20,000 | $22,000 | ||
Consulting business | 5,000 | |||
Partnership | 10,000 | |||
Dividends from separate property | 1,000 | 2,000 | ||
Interest from community property | 500 | 500 | ||
Total | $26,500 | $34,500 |
Under the community property law of their state, all the income is considered community income. (Some states treat income from separate property as separate income—check your state law.) Sharon did not take part in George's consulting business.
Ordinarily, on their separate returns they would each report $30,500, half the total community income of $61,000 ($26,500 + $34,500). But because they meet the four conditions listed earlier under Spouses living apart all year , they must disregard community property law in reporting all their income (except the interest income) from community property. They each report on their returns only their own earnings and other income, and their share of the interest income from community property. George reports $26,500 and Sharon reports $34,500.
The marital community may end in several ways. When the marital community ends, the community assets (money and property) are divided between the spouses. Similarly, a same-sex couple's community may end in several ways and the community assets must be divided between the RDPs or California same-sex spouses.
The following discussion does not apply to spouses who meet the conditions under Spouses living apart all year , discussed earlier. Those spouses must report their community income as explained in that discussion.
Ordinarily, filing a joint return will give you a greater tax advantage than filing a separate return. But in some cases, your combined income tax on separate returns may be less than it would be on a joint return.
The following rules apply if your filing status is married filing separately.
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You should itemize deductions if your spouse itemizes deductions, because you cannot claim the standard deduction,
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You cannot take the credit for child and dependent care expenses in most instances,
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You cannot take the earned income credit,
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You cannot exclude any interest income from qualified U.S. savings bonds that you used for higher education expenses,
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You cannot take the credit for the elderly or the disabled unless you lived apart from your spouse all year,
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You may have to include in income more of any social security benefits (including any equivalent railroad retirement benefits) you received during the year than you would on a joint return,
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You cannot deduct interest paid on a qualified student loan,
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You cannot take the education credits,
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You may have a smaller child tax credit than you would on a joint return, and
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You cannot take the exclusion or credit for adoption expenses in most instances.
Figure your tax both on a joint return and on separate returns under the community property laws of your state. You can then compare the tax figured under both methods and use the one that results in less tax.
If you file separate returns, you and your spouse must each report half of your combined community income and deductions in addition to your separate income and deductions. List only your share of the income and deductions on the appropriate lines of your separate tax returns (wages, interest, dividends, etc.). The same reporting rule applies to RDPs and individuals in California who are married to an individual of the same sex. For a discussion of the effect of community property laws on certain items of income, deductions, credits, and other return amounts, see Identifying Income, Deductions, and Credits , earlier.
Attach a worksheet to your separate returns showing how you figured the income, deductions, and federal income tax withheld that each of you reported. The Allocation Worksheet (Table 2) shown later can be used for this purpose. If you are a RDP or an individual in California married to an individual of the same sex, you may want to write the social security number of your partner or same-sex spouse in the “Notes” section of the worksheet to avoid delays in the processing of your return. If you do not attach a worksheet, you and your spouse (or RDP/California same-sex spouse) should each attach a photocopy of the other spouse's (or RDP's/California same-sex spouse's) Form W-2, Wage and Tax Statement, or 1099-R, Distributions From Pensions, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Make a notation on the form showing the division of income and tax withheld.
Table 2. Allocation Worksheet
1 Total Income (Community/Separate) |
2 Allocated to Spouse, RDP, or California Same-Sex Spouse #1 |
3 Allocated to Spouse, RDP, or California Same-Sex Spouse #2 |
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1. | Wages (each employer) | ||||
2. | Interest Income (each payer) | ||||
3. | Dividends (each payer) | ||||
4. | State Income Tax Refund | ||||
5. | Capital Gains and Losses | ||||
6. | Pension Income | ||||
7. | Rents, Royalties, Partnerships, Estates, Trusts | ||||
8. | Taxes Withheld | ||||
9. | Other items such as: Social Security Benefits, Business and Farm Income or Loss, Unemployment Compensation, Mortgage Interest Deduction, etc. | ||||
Walter and Mary Smith are married and domiciled in a community property state. Their two children (18-year-old twins) and Mary's mother live with them and qualify as their dependents. Amounts paid for their support were paid out of community funds.
Walter received a salary of $65,424. Income tax withheld from his salary was $6,356. Walter received $132 in taxable interest from his savings account. He also received $217 in dividends from stock that he owned. His interest and dividend income are his separate income under the laws of his community property state.
Mary received $200 in dividends from stock that she owned. This is her separate income. In addition, she received $13,400 as a part-time dental technician. Income tax withheld from her salary was $1,352.
The Smiths paid a total of $7,775 in medical expenses. Medical insurance of $2,050 was paid out of community funds. Walter paid $5,725 out of his separate funds for an operation he had.
The Smiths had $10,264 in other itemized deductions, none of which were miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit. The amounts spent for these deductions were paid out of community funds.
To see if it is to the Smiths' advantage to file a joint return or separate returns, a worksheet (Table 3, shown next) is prepared to figure their federal income tax both ways. Walter and Mary must claim their own exemptions on their separate returns.
The summary at the bottom of the worksheet compares the tax figured on the Smiths' joint return to the total tax figured by adding the tax amounts on their separate returns. By filing separately under the community property laws of their state, the Smiths save $289 in income tax.
If the Smiths were domiciled in Idaho, Louisiana, Texas, or Wisconsin, the result would be slightly different because in those states income from separate property generally is treated as community income. If they lived in one of those states, the interest from Walter's savings account and the dividends from stock owned by each of them would be divided equally on their separate returns.
In figuring your tax, use the amounts from your current tax forms instruction booklet for items such as the standard deduction, exemption allowance, and Tax Table tax. The amounts used in this example apply for 2011 only. The example shows how filing separate returns under community property tax laws can result in lower tax than filing jointly; you must figure your own tax both ways to know which works better for you.
Table 3. Worksheet — Walter and Mary Smith
Joint Return | Separate Returns | ||||||||||
Walter's | Mary's | ||||||||||
Income (Walter's): | |||||||||||
Salary | $ 65,424 | $ 32,712 | $ 32,712 | ||||||||
Interest and dividends ($217 dividends + $132 interest) | 349 | 349 | –0– | ||||||||
Total | $ 65,773 | $ 33,061 | $ 32,712 | ||||||||
Income (Mary's): | |||||||||||
Salary | $ 13,400 | $6,700 | $6,700 | ||||||||
Dividends | 200 | –0– | 200 | ||||||||
Total | 13,600 | 6,700 | 6,900 | ||||||||
Adjusted gross income (AGI) | $ 79,373 | $ 39,761 | $ 39,612 | ||||||||
Deductions: | |||||||||||
Community: (Not subject to the 2% AGI limit) | $ 10,264 | $ 5,132 | $ 5,132 | ||||||||
Medical: | |||||||||||
Premiums | $ 2,050 | $ 1,025 | $ 1,025 | ||||||||
Medical expenses (Walter's) | 5,725 | 5,725 | –0– | ||||||||
Total | $ 7,775 | $ 6,750 | $ 1,025 | ||||||||
(Minus) 7.5% of AGI | (5,953) | (2,982) | (2,971) | ||||||||
Medical expense deduction | $ 1,822 | $ 3,768 | $ –0– | ||||||||
Total deductions | $ 12,086 | $ 8,900 | $ 5,132 | ||||||||
Subtract total deductions from AGI1,2 | $ 67,287 | $ 30,861 | $ 34,480 | ||||||||
Exemptions1,3 (Subtract to find taxable income) | $(18,500) | $ (7,400) | $ (11,100) | ||||||||
Taxable Income | $ 48,787 | $ 23,461 | $ 23,380 | ||||||||
Tax1,4 | $ 6,466 | $ 3,096 | $ 3,081 | ||||||||
Federal income tax withheld | $ 7,708 | $ 3,854 | $ 3,854 | ||||||||
Overpayment (Subtract from Federal tax withheld) | $1,242 | $ 758 | $ 773 |
1Caution: In figuring your tax, use the amounts from your current tax forms instruction booklet for such items as the standard deduction, exemption allowance, and Tax Table tax. | |
2 The itemized deductions are greater than the standard deduction (shown here as $11,600 for married filing jointly and $5,800 for married filing separately). Note: If one spouse itemizes, the other must itemize, even if one spouse's deductions are less than the standard deduction. | |
3 An allowance of $3,700 for each exemption claimed is subtracted — 5 on the joint return, 2 on Walter's separate return, and 3 on Mary's separate return. | |
4 The tax on the joint return is from the column of the 2011 Tax Table for married filing jointly. The tax on Walter's and Mary's separate returns is from the column of the 2011 Tax Table for married filing separately. |
Table 3. Summary
Tax on joint return | $ 6,466 | ||||
Tax on Walter's separate return | $ 3,096 | ||||
Tax on Mary's separate return | 3,081 | ||||
Total tax filing separate returns | $6,177 | ||||
Total savings by filing separate returns | $289 |
You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.
Internet. You can access the IRS website at IRS.gov 24 hours a day, 7 days a week to:
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Check the status of your 2011 refund. Go to IRS.gov and click on Where's My Refund. Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Have your 2011 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund.
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E-file your return. Find out about commercial tax preparation and e-file services available free to eligible taxpayers.
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Download forms, including talking tax forms, instructions, and publications.
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Order IRS products online.
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Research your tax questions online.
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Search publications online by topic or keyword.
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Use the online Internal Revenue Code, regulations, or other official guidance.
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View Internal Revenue Bulletins (IRBs) published in the last few years.
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Figure your withholding allowances using the withholding calculator online at www.irs.gov/individuals.
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Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant available online at www.irs.gov/individuals
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Sign up to receive local and national tax news by email.
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Get information on starting and operating a small business.
Phone. Many services are available by phone.
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Ordering forms, instructions, and publications. Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. You should receive your order within 10 days.
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Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.
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Solving problems. You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local Taxpayer Assistance Center for an appointment. To find the number, go to www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.
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TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications.
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TeleTax topics. Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics.
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Refund information. To check the status of your 2011 refund, call 1-800-829-1954 or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Have your 2011 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back.
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Other refund information. To check the status of a prior-year refund or amended return refund, call 1-800-829-1040.
Evaluating the quality of our telephone services. To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to listen in on or record random telephone calls. Another is to ask some callers to complete a short survey at the end of the call.
Walk-in. Many products and services are available on a walk-in basis.
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Products. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.
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Services. You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. No appointment is necessary—just walk in. If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. All other issues will be handled without an appointment. To find the number of your local office, go to www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.
Mail. You can send your order for forms, instructions, and publications to the address below. You should receive a response within 10 days after your request is received.
Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613
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Your problem is causing financial difficulties for you, your family, or your business.
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You face (or your business is facing) an immediate threat of adverse action.
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You have tried repeatedly to contact the IRS but no one has responded, or the IRS has not responded to you by the date promised.
DVD for tax products. You can order Publication 1796, IRS Tax Products DVD, and obtain:
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Current-year forms, instructions, and publications.
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Prior-year forms, instructions, and publications.
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Tax Map: an electronic research tool and finding aid.
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Tax law frequently asked questions.
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Tax Topics from the IRS telephone response system.
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Internal Revenue Code—Title 26 of the U.S. Code.
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Links to other Internet based Tax Research materials.
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Fill-in, print, and save features for most tax forms.
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Internal Revenue Bulletins.
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Toll-free and email technical support.
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Two releases during the year.
– The first release will ship the beginning of January 2012.
– The final release will ship the beginning of March 2012.
Purchase the DVD from National Technical Information Service (NTIS) at www.irs.gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee).
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