Married Filing Separately in Community Property States
Filing taxes in community property states as Married filing Separately (MFS) often has some extra work for you. Certain states have laws about community property defining how they expect couples to share, or allocate, income between the two persons if they are not filing as Married Filing Jointly (MFJ).
Community property states are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
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, refer to IRS Publication 555 Community Property.
Tip: If you're using TurboTax Online, we recommend that you transfer your return to the CD/Desktop software version. You will save money by paying only once for multiple federal returns, and save time by entering less information.
Begin by completing a MFS tax return for both persons, as you'll need the amounts for different income categories, tax amounts, and all tax payments for each person. Remember, if one of you itemizes deductions both of you must itemize, or both must use the standard deduction.
Note: You may not be able to e-file, in which case TurboTax will guide you through the steps to file a paper return.
Entering income adjustments for a community property state
First, use your community property state rules to determine what adjustments you expect to enter in TurboTax. Often one return has an addition to income and withholding, while the other will have a reduction (subtraction) to income and withholding.
In the Federal Tax tab, select Other Tax Situations, then select the Done With Other button.
On the Community Property Income Adjustments screen, enter the adjustment amount in one of the fields:
- Enter any additional income for this return in the Addition Adjustment field
- Enter any income reduction for this return in the Subtraction Adjustment field
A positive number must be entered for either amount. When done, select Continue.
On the Tax withholding Adjustments screen, enter the adjustment amount (if any) in one of the fields:
- Enter any additions for tax withholding or estimated tax payments on this return in the Withholding - Addition Adjustment field
- Enter any reductions for tax withholding or estimated tax payments on this return in the Withholding - Subtraction Adjustment field
Again, enter only positive numbers to make either adjustment. When done with your entries, select Continue.
Complete the community property worksheet
When filing as MFS from a community property state, this worksheet is required and will be included with your federal tax return. The worksheet shows how the income on this tax return compares with the other taxpayer's return.
- You should see the Enter Your Spouse’s Community Income screen.
- Your federal taxes should show in the first (You) column.
- Manually enter the amounts from your spouse/partner’s return in each line of the second (Spouse) column.
- Select the Calculate Totals button. A third column will show the Totals. The totals should equal your combined income amounts.
Use these columns to see how the allocation appears compared to your state tax rules. Allocation calculations between taxpayers are subject not only to state law, but to individual circumstances. The split is not necessarily 50/50. Refer to your state tax department for their rules.
You can make changes to the spouse column, then select Recalculate to show the changes. To adjust the amounts in the You column for this return, select the Back button. At the Other Tax Situations screen, select Done With Other. Then make any adjustments, continue to the worksheet and calculate the new totals.
If you make an addition in one tax return, there should be a matching reduction in the other tax return. The Totals column must show the totals for each line and for your total combined income.
Once you have determined how to split both your combined income and tax withholding between you, continue with your state tax return.
Finish your tax returns
Continue entering or checking all other information necessary for both state returns. Be sure to review your federal and state returns for completeness and accuracy when you are finished.
Note: Depending on how tax withholding payments are allocated between the two MFS returns in a community property state, the IRS may not accept e-filed MFS tax returns at this time.
If your tax return is rejected with error code 0103, print the tax return with the community property worksheet and mail the return to the IRS.
