Married filing separately - Community property states?

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My spouse and I are considering filing separately. I live in Minnesota and my spouse lives in Wisconsin. We both work in Minnesota.  Given that Wisconsin is a community property state, how do we correctly file state taxes?

 

1. Do I claim my income on the Minnesota state return and my spouse claims our combined incomes on the Wisconsin state return? 

 

2. Does my spouse fill out a M1RCR on their return that takes into account our combined income taxes paid to Wisconsin?

 

Thank you!

Best Answer

  • KeriC
    KeriC FreeTaxUSA Agent
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    @sammypaige I'll do my best to answer your question below. I see that @LaurenW and @CoryF have both commented on your earlier discussion that relates to this.

    1. Minnesota requires that your federal filing status match your state filing status." Since both you and your spouse have MN income, you likely can still file joint federal and MN state returns if you wish.

      Source: Pages 7-8 at: https://www.revenue.state.mn.us/sites/default/files/2023-12/m1-inst-23.pdf

      Form M1RCR is a Minnesota form. In your case, you likely won't need to fill out the credit for taxes paid to another state on your MN return, so this form won't be necessary. I'll provide some additional details below on claiming this credit for WI.
    2. Wisconsin does not require that your federal filing status match your state filing status. Since you are a full-year resident of MN and a nonresident of WI, you meet an exception to reporting income under the marital property law for Wisconsin tax purposes. This means your wife is able to file a married filing separate return in Wisconsin and does not need to report any of your income.

      "For Wisconsin income tax purposes, the marital property law applies only while both you and your
      spouse are domiciled in Wisconsin. During any period that you and your spouse aren't both domiciled in Wisconsin, you must report your income based on title and ownership under the common law property system."

      Source: See pages 13-15 at: https://www.revenue.wi.gov/DOR%20Publications/pb109.pdf

      Since your wife's income will be taxable by both states, she will want to claim a credit for taxes paid to another state on her resident state return (Wisconsin). If you do file joint federal and MN returns, she will likely need to make calculations to determine what the MN tax on her income is to properly calculate the credit. This credit will be reported on WI Schedule OS. If using our tax software, this form will be filled out.

      If you do have additional questions regarding your particular situation, I encourage you to contact support from within your account (or your wife's) for additional assistance.