2018 Tax Planning - one spouse with one state income, other spouse with multi states income

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dkg2707
Posts: 14
Joined: Wed Jun 04, 2014 6:21 pm

2018 Tax Planning - one spouse with one state income, other spouse with multi states income

Post by dkg2707 » Sat Oct 06, 2018 10:04 am

Our situation for tax year 2018:
  • We are a couple residing together in MA (full year resident living in MA for last several years)
  • I work in two states. MA (80% time) and VA (20% time). This is my first year when I have income from two states. Previously I had income only from one state (MA).
  • My spouse works only in MA (100% time)
  • We have capital gains, interest, and dividend incomes to report this year.
  • I don't have any other income from VA other than the wage income (for 20% of my time)
  • Both of us are W2 employees
Based on research I have done so far, my understanding is:
  • For 2018, we will file federal as Married Filing Jointly (as we have done for all the past years)
  • We will file MA state filing as Married Filing Jointly (as we have done for all the past years). All our income will be reported to MA (including my MA wage income, my VA wage income, my spouse's MA wage income, all our capital gains, interests and dividend incomes). We will get a tax credit in MA filing for the state income tax I pay to VA.
  • Only I will file VA non-resident state tax return as Married Filing Separately reporting only my VA sourced income. My spouse's income will not be included to VA filing. Also, our capital gains, interest, and dividend incomes will not be reported to VA as we are not VA residents; these incomes are taxed only in the resident state (i.e. MA for us).
Any comment confirming or correcting the above understanding will be very helpful.

Questions I have
  • Will we be able to E-file for all the three: Federal (MFJ), MA State (MFJ) and VA State (MFS for me alone)? Or Will I have to do paper filing for the VA state? Based on some source, it seems I will have to do paper filing for at least VA state.
  • Are there good source for further education, step by step process on how to file all the returns for the above situation especially using TaxAct or TurboTax?
  • Any tips, things to watch for will be helpful
Many thanks in advance.

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FiveK
Posts: 5738
Joined: Sun Mar 16, 2014 2:43 pm

Re: 2018 Tax Planning - one spouse with MA income, other spouse with MA and VA income

Post by FiveK » Sat Oct 06, 2018 11:45 am

The federal and MA returns should be straightforward as you describe.

The VA state return will depend on VA state law, so you'll need to understand that (can't help you there). E.g., does VA not allow MFJ filing when only one person has VA income - even if it is a one income household? Usually MFJ is better for you than MFS, but again it depends on the state law.

SRenaeP
Posts: 760
Joined: Tue Jan 19, 2010 9:05 pm

Re: 2018 Tax Planning - one spouse with one state income, other spouse with multi states income

Post by SRenaeP » Mon Oct 08, 2018 8:28 am

dkg2707 wrote:
Sat Oct 06, 2018 10:04 am
Our situation for tax year 2018:
  • We are a couple residing together in MA (full year resident living in MA for last several years)
  • I work in two states. MA (80% time) and VA (20% time). This is my first year when I have income from two states. Previously I had income only from one state (MA).
  • My spouse works only in MA (100% time)
  • We have capital gains, interest, and dividend incomes to report this year.
  • I don't have any other income from VA other than the wage income (for 20% of my time)
  • Both of us are W2 employees
Based on research I have done so far, my understanding is:
  • For 2018, we will file federal as Married Filing Jointly (as we have done for all the past years)
  • We will file MA state filing as Married Filing Jointly (as we have done for all the past years). All our income will be reported to MA (including my MA wage income, my VA wage income, my spouse's MA wage income, all our capital gains, interests and dividend incomes). We will get a tax credit in MA filing for the state income tax I pay to VA.
  • Only I will file VA non-resident state tax return as Married Filing Separately reporting only my VA sourced income. My spouse's income will not be included to VA filing. Also, our capital gains, interest, and dividend incomes will not be reported to VA as we are not VA residents; these incomes are taxed only in the resident state (i.e. MA for us).
Any comment confirming or correcting the above understanding will be very helpful.

Questions I have
  • Will we be able to E-file for all the three: Federal (MFJ), MA State (MFJ) and VA State (MFS for me alone)? Or Will I have to do paper filing for the VA state? Based on some source, it seems I will have to do paper filing for at least VA state.
  • Are there good source for further education, step by step process on how to file all the returns for the above situation especially using TaxAct or TurboTax?
  • Any tips, things to watch for will be helpful
Many thanks in advance.
Regarding e-filing, you will need to check with each state. DH and I were in a similar situation last year. We e-filed MFJ for federal. Then we had to paper file his MFS non-resident return along with a copy of a mockup MFS federal. We had to paper file our MFJ resident return along with a copy of his MFS non-resident return in order to get the credit for the tax paid to the non-resident state.

Also be sure to research how your state credits tax paid to other states. I assumed (shame on me) that we would receive a credit for the full amount of the tax paid. However, we only received a credit for the amount we would have been taxed in our resident state. To illustrate, let's say he had $10,000 of taxable income in the other state and their tax rate was 10% so we paid $1000. Our home state had a 4% tax rate and therefore credited us for $400, not the $1000 we actually paid.

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grabiner
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Re: 2018 Tax Planning - one spouse with one state income, other spouse with multi states income

Post by grabiner » Mon Oct 08, 2018 8:25 pm

SRenaeP wrote:
Mon Oct 08, 2018 8:28 am
Also be sure to research how your state credits tax paid to other states. I assumed (shame on me) that we would receive a credit for the full amount of the tax paid. However, we only received a credit for the amount we would have been taxed in our resident state. To illustrate, let's say he had $10,000 of taxable income in the other state and their tax rate was 10% so we paid $1000. Our home state had a 4% tax rate and therefore credited us for $400, not the $1000 we actually paid.
This is how the other state tax credit works in every state I know of. The net effect is that the tax you pay on the other-state income at the higher of the other state's tax rate and your home state's tax rate. (There are some pairs of states that reverse the credit, so that you claim a credit on the other state's tax for tax paid to your home state, using the same formula.)
Wiki David Grabiner

dkg2707
Posts: 14
Joined: Wed Jun 04, 2014 6:21 pm

Re: 2018 Tax Planning - one spouse with one state income, other spouse with multi states income

Post by dkg2707 » Mon Oct 08, 2018 8:30 pm

SRenaeP wrote:
Mon Oct 08, 2018 8:28 am
dkg2707 wrote:
Sat Oct 06, 2018 10:04 am
Our situation for tax year 2018:
  • We are a couple residing together in MA (full year resident living in MA for last several years)
  • I work in two states. MA (80% time) and VA (20% time). This is my first year when I have income from two states. Previously I had income only from one state (MA).
  • My spouse works only in MA (100% time)
  • We have capital gains, interest, and dividend incomes to report this year.
  • I don't have any other income from VA other than the wage income (for 20% of my time)
  • Both of us are W2 employees
Based on research I have done so far, my understanding is:
  • For 2018, we will file federal as Married Filing Jointly (as we have done for all the past years)
  • We will file MA state filing as Married Filing Jointly (as we have done for all the past years). All our income will be reported to MA (including my MA wage income, my VA wage income, my spouse's MA wage income, all our capital gains, interests and dividend incomes). We will get a tax credit in MA filing for the state income tax I pay to VA.
  • Only I will file VA non-resident state tax return as Married Filing Separately reporting only my VA sourced income. My spouse's income will not be included to VA filing. Also, our capital gains, interest, and dividend incomes will not be reported to VA as we are not VA residents; these incomes are taxed only in the resident state (i.e. MA for us).
Any comment confirming or correcting the above understanding will be very helpful.

Questions I have
  • Will we be able to E-file for all the three: Federal (MFJ), MA State (MFJ) and VA State (MFS for me alone)? Or Will I have to do paper filing for the VA state? Based on some source, it seems I will have to do paper filing for at least VA state.
  • Are there good source for further education, step by step process on how to file all the returns for the above situation especially using TaxAct or TurboTax?
  • Any tips, things to watch for will be helpful
Many thanks in advance.
Regarding e-filing, you will need to check with each state. DH and I were in a similar situation last year. We e-filed MFJ for federal. Then we had to paper file his MFS non-resident return along with a copy of a mockup MFS federal. We had to paper file our MFJ resident return along with a copy of his MFS non-resident return in order to get the credit for the tax paid to the non-resident state.

Also be sure to research how your state credits tax paid to other states. I assumed (shame on me) that we would receive a credit for the full amount of the tax paid. However, we only received a credit for the amount we would have been taxed in our resident state. To illustrate, let's say he had $10,000 of taxable income in the other state and their tax rate was 10% so we paid $1000. Our home state had a 4% tax rate and therefore credited us for $400, not the $1000 we actually paid.
Thanks much. This seems to be consistent with what I am reading elsewhere, for example:
Can I e-file my state return before my federal?
Also, if you e-filed your federal return as Married Filing Jointly but want to file your state returns as Married Filing Separately, only one state return can be e-filed. The other will have to be paper-filed.

So curious, if you wanted, could you e-file the resident state return (along with federal e-file) instead of paper filing both the nonresident and resident state returns?

SRenaeP
Posts: 760
Joined: Tue Jan 19, 2010 9:05 pm

Re: 2018 Tax Planning - one spouse with one state income, other spouse with multi states income

Post by SRenaeP » Tue Oct 09, 2018 8:17 am

dkg2707 wrote:
Mon Oct 08, 2018 8:30 pm
SRenaeP wrote:
Mon Oct 08, 2018 8:28 am
dkg2707 wrote:
Sat Oct 06, 2018 10:04 am
Our situation for tax year 2018:
  • We are a couple residing together in MA (full year resident living in MA for last several years)
  • I work in two states. MA (80% time) and VA (20% time). This is my first year when I have income from two states. Previously I had income only from one state (MA).
  • My spouse works only in MA (100% time)
  • We have capital gains, interest, and dividend incomes to report this year.
  • I don't have any other income from VA other than the wage income (for 20% of my time)
  • Both of us are W2 employees
Based on research I have done so far, my understanding is:
  • For 2018, we will file federal as Married Filing Jointly (as we have done for all the past years)
  • We will file MA state filing as Married Filing Jointly (as we have done for all the past years). All our income will be reported to MA (including my MA wage income, my VA wage income, my spouse's MA wage income, all our capital gains, interests and dividend incomes). We will get a tax credit in MA filing for the state income tax I pay to VA.
  • Only I will file VA non-resident state tax return as Married Filing Separately reporting only my VA sourced income. My spouse's income will not be included to VA filing. Also, our capital gains, interest, and dividend incomes will not be reported to VA as we are not VA residents; these incomes are taxed only in the resident state (i.e. MA for us).
Any comment confirming or correcting the above understanding will be very helpful.

Questions I have
  • Will we be able to E-file for all the three: Federal (MFJ), MA State (MFJ) and VA State (MFS for me alone)? Or Will I have to do paper filing for the VA state? Based on some source, it seems I will have to do paper filing for at least VA state.
  • Are there good source for further education, step by step process on how to file all the returns for the above situation especially using TaxAct or TurboTax?
  • Any tips, things to watch for will be helpful
Many thanks in advance.
Regarding e-filing, you will need to check with each state. DH and I were in a similar situation last year. We e-filed MFJ for federal. Then we had to paper file his MFS non-resident return along with a copy of a mockup MFS federal. We had to paper file our MFJ resident return along with a copy of his MFS non-resident return in order to get the credit for the tax paid to the non-resident state.

Also be sure to research how your state credits tax paid to other states. I assumed (shame on me) that we would receive a credit for the full amount of the tax paid. However, we only received a credit for the amount we would have been taxed in our resident state. To illustrate, let's say he had $10,000 of taxable income in the other state and their tax rate was 10% so we paid $1000. Our home state had a 4% tax rate and therefore credited us for $400, not the $1000 we actually paid.
Thanks much. This seems to be consistent with what I am reading elsewhere, for example:
Can I e-file my state return before my federal?
Also, if you e-filed your federal return as Married Filing Jointly but want to file your state returns as Married Filing Separately, only one state return can be e-filed. The other will have to be paper-filed.

So curious, if you wanted, could you e-file the resident state return (along with federal e-file) instead of paper filing both the nonresident and resident state returns?
Not in our state. We were required to paper file the resident state return because we had to include a copy of the non-resident state return in order to receive credit for taxes paid to them.

2cents2
Posts: 330
Joined: Sun Mar 02, 2014 11:31 am

Re: 2018 Tax Planning - one spouse with one state income, other spouse with multi states income

Post by 2cents2 » Tue Oct 09, 2018 9:34 am

Here is a link to the 2017 Virginia Form 763 Nonresident Individual Income Tax Instructions:
https://tax.virginia.gov/sites/default/ ... ctions.pdf

Here is a link to the 2017 Virginia Form 763 2017 Virginia Nonresident Income Tax Return:
https://tax.virginia.gov/sites/default/ ... 3-2017.pdf

Here is a link to the VA tax forms:
https://tax.virginia.gov/forms/search?c ... =1&year=57

MarkNYC
Posts: 1382
Joined: Mon May 05, 2008 7:58 pm

Re: 2018 Tax Planning - one spouse with one state income, other spouse with multi states income

Post by MarkNYC » Tue Oct 09, 2018 11:41 am

Most states require that you use the same filing status you used on the federal tax return, unless one spouse is a resident and the other is a nonresident. I believe VA follows that rule, so you may be required to file a joint VA nonresident return. Even though filing jointly, as a VA nonresident only your wages earned in VA will be taxed to VA.

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