Do you live in a “Community Property State“? What’s his is hers, and what’s her is his.... no not necessarily so....
Community property laws generally.
Community property laws affect how you figure your income on your federal income tax return if you are married, live in a community property state or country, and file separate returns. If you are married, your tax usually will be less if you file married filing jointly than if you file married filing separately . However, sometimes it can be to your advantage to file separate returns. If you and your spouse file separate returns, you have to determine your community income and your separate income.
Community property laws also affect your basis in property you inherit from a married person who lived in a community property state. See Death of spouse, later.
Note. This publication doesn't address the federal tax treatment of income or property subject to the “community property” election under Alaska state laws.
Married individuals. This publication is for married taxpayers who are domiciled in one of the following community property states:
• Arizona,
• California,
• Idaho,
• Louisiana,
• Nevada,
• New Mexico,
• Texas,
Washington, or
Wisconsin.
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 Form 1040 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 Community property.
• That can't be identified as separate property.
Community income.
Generally, community income is income from:
• Community property.
• Salaries, wages, and other pay received for the services 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.
• Real estate that is treated as community property under 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 inheritance during your marriage (or registered domes- tic partnership).
• Property that you or your spouse (or your registered domestic partner) bought with separate funds, or acquired 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 under state law.
• The part of property bought with separate funds, if part was bought with community funds and part with separate funds.
Separate income.
Generally, income from separate property is the separate income of the spouse (or the registered domestic partner) who owns the property.
In Idaho, Louisiana, Texas, and Wisconsin, income from most separate property is community income.
Publication 555 (January 2019)
For more information click here: https://www.irs.gov/pub/irs-pdf/p555.pdf