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Uhart Tax & Financial

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Married Filing Joint vs Separate

Do you have questions like these:

"Is married filing separate better for you and your spouse?"

"What are the rules related to a community property state like California?"

Here is some helpful information from Uhart Tax & Financial and the Internal Revenue Service Publication 555.

California is a community property state!

Essentially, if you live together all year and comingle funds, you need to file jointly.

Otherwise, if you still want to file separately you would be splitting your incomes,

withholding and deductions ½ (which is really total income split by two on each of your returns)

but you are taxed at a higher rate as well as lose out on certain deductions.

Preparing a married filing joint vs married filing separate tax analysis is a time-consuming task

and we do charge for this comparison since we must prepare 3 tax returns.

We charge an additional $150 for the analysis on top of the final tax return charges.

Below is some important information regarding community property income taxes,

which can be found in the IRS publication 555.

As always, it is best to consult with a tax professional for your specific situation.

PER IRS PUBLICATION 555 -

Community or Separate Property and Income:

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 registered domestic partner must report half of all community income and all of his or her separate income on his or her federal tax return. You each must attach your Form 8958 to your return showing how you figured the amount you are reporting on your 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 in-come for federal tax purposes. The following is a summary of the general rules. These rules are also shown in Table 1.

Community property.

Generally, community property is property:

That you, your spouse (or your registered domestic partner), or both acquire during your marriage (or registered domestic partnership) while you and your spouse (or your registered domestic partner) are domiciled in a community property state;
That you and your spouse (or your registered domes-tic partner) agreed to convert from separate to com-munity property; and
That can't be identified as separate property.

Community income.

Generally, community income is in-come from:

Community property;
Salaries, wages, and other pay received for the serv-ices performed by you, your spouse (or your registered domestic partner), or both during your marriage (or registered domestic partnership) while domiciled in a community property state; and
Real estate that is treated as community property un-der the laws of the state where the property is located.

Separate property.

Generally, separate property is:

Property that you or your spouse (or your registered domestic partner) owned separately before your marriage (or registered domestic partnership);
Money earned while domiciled in a noncommunity property state;
Property that you or your spouse (or your registered domestic partner) received separately as a gift or in-heritance during your marriage (or registered domes-tic partnership);
Property that you or your spouse (or your registered domestic partner) bought with separate funds, or ac-quired in exchange for separate property, during your marriage (or registered domestic partnership);
Property that you and your spouse (or your registered domestic partner) converted from community property to separate property through an agreement valid un-der state law; and
The part of property bought with separate funds, if part was bought with community funds and part with separate funds.