Married Filing Separate Allocation - Form 8958
Who Must File
If your resident state is a *community property state, you may have community income. If you file a federal tax return separately from your spouse AND live within a *community property state, you must report half of all community income and all of your separately earned income.
*Community Property States are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
Generally, community income is derived from:
- Community Property
- Salaries, wages, or pay for services you, your spouse, or both performed during you marriage
- Real estate that is treated as community property under the laws of the state where the property is located.
- Dividends, interest and rents from community property
- Gains and losses that are classified as community or separate, depending on how the property is held.
Please follow these steps below to accurately report your Community Income:
- Gather you and your spouse’s W-2’s and any other community income for preparation.
- Add together all Community Income between the taxpayer and spouse. All types of community income are listed above.
- You will be required to claim half of the total income on your return. To do this, please go into the Federal Section >> Income >> Enter Myself >> Wages and Salaries >> Edit your W-2 >> Change the amount in Box 1 to reflect one-half of the total community income for wages.
- If you have any other community income besides your W-2’s, please change those amounts to reflect your new community income.
- Once you have completed the four steps above, please complete the Community Property States Tax Allocation Form 8958. This form will explain to the IRS why you have changed your taxable income listed on the W-2 and various other locations. To complete the form, please go into the Federal Section >> Miscellaneous Forms >> Married Filing Separately Allocation (Form 8958). Enter your spouse’s half of the community income within the applicable fields.
For more information, please view the IRS Instructions for Form 8958 here: Click here
You may also review:
IRS Publication 504 here: Start reviewing where “Community Property” begins.
IRS Publication 555 here - Community Property