IRS Publication 555 Community Property addresses income and deduction reporting for individuals and their spouse/partner living in a community property state. It outlines when an individual filing separately from their spouse/partner must report half of their combined community income and deductions in addition to their separate income and deductions.
Community Property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. For individuals considered married for federal tax purposes, the spouses must each follow these instructions if they live in any of the community property states listed.
Individuals considered Registered Domestic Partners (RDPs) must follow these instructions if they live in Nevada, Washington, or California.
Per IRS Publication 555, page 2:
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.
Registered domestic partners. This publication is also for registered domestic partners who are domiciled in Nevada, Washington, or California. Registered domestic partners in Nevada, Washington, or California must generally follow state community property laws and report half the combined community income of the individual and his or her registered domestic partner.
Registered domestic partners aren't married for federal tax purposes. They can use the single filing status or, if they qualify, the head of household filing status.
TIP: You can find answers to frequently asked questions by going to IRS.gov/Pub555 and clicking on Answers to Frequently Asked Questions for Registered Domestic Partners and Individuals in Civil Unions under Other Items You May Find Useful.
The TaxAct® program cannot automatically calculate the allocation between each spouse's or partner's return because the two returns are not linked in any way. This is true whether the filing status is Single, Head of Household, or Married Filing Separately. Each taxpayer must determine the applicable split of income and deductions and then enter the appropriate amount in the federal program for their own return.
Create two W-2s for the taxpayer on the return
One should contain the taxpayer's Form W-2 Wage and Tax Statement entries divided by two (50%), and one should contain the spouse's/partner's W-2 entries divided by two (50%). This second W-2 will be entered using the taxpayer's name with the spouse's/partner's employer information. Follow the same method to enter the income on the spouse's/partner's return.
List only your allocated share of the income and deductions on the appropriate lines of your separate tax returns (interest, dividends, etc.). Refer to IRS Publication 555 for information regarding which income and expenses are considered community property, and which are considered separate property. Form 8958 Allocation of Tax Amounts Between Certain Individuals in Community Property States allocates income between spouses/partners when filing a separate return. This allocation worksheet does not need to be completed if you are only filing the state returns separately and filing a joint federal return.
To access Form 8958 in the TaxAct program (the form won't be accessible if your address and filing status don't meet the requirements):
- From within your TaxAct return (Online or Desktop), click Federal (on smaller devices, click in the top left corner of your screen, then click Federal).
- Click the Miscellaneous Topics dropdown, then click Community property allocation record (Form 8958).
- Click Yes to complete or modify the Community Property Allocation Record.
Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.
