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08-23-2017 09:18 AM
I live in Texas. My wife lives in North Carolina. We wed mid year, June 30th 2017. We will maintain our separate residences for the remainder of this year. Is it easier to file as we've done in the past (me filing single 1040ez) or should we now file Married filing Separate? What are all of our options?
08-23-2017 03:16 PM
Welcome to the H&R Block community.
Your best option more than likely is going to be to file jointly with your spouse. There are numerous limitations to filing separately, including that if one of you itemizes deductions on Schedule A the other must also do so even if their deductions are equal to $0. When filing separately your tax rate is also higher and income phase-out levels for most tax credits are 50% or more restrictive than they would be if you file jointly.
In addition, Texas is a community property state, which means that 1/2 of all income & property acquired during your marriage must be reported on each tax return if you file separately, so depending on your situation it's possible that one of you may have more income than expected to report if you file separately.
As far as your spouse's North Carolina return goes, you are in luck. Although you can file jointly for North Carolina and correctly indicate your wife's taxable NC income on the return, NC is a state that allows you to file separately at the state level even though you filed jointly at the federal level when only one spouse is a NC resident and the other is a non-resident with no NC income. Note that if you filed jointly and your Texas address is on the federal return you will have to provide NC with a copy of the federal return and a calculation of your separate incomes, exemptions, deductions, etc.
"If you filed a joint federal return and one of you was a nonresident of North Carolina who had no North Carolina taxable income, you may file a joint State return. However, you still have the option of filing your State return as married filing separately." (NC Department of Revenue)
"If you filed a joint federal income tax return but file a separate North Carolina return, you must complete either a separate federal return reporting only your income, exemptions, and deductions, OR a schedule showing the computation of your separate income, deductions, and exemptions and attach it to your North Carolina return.
(NC Department of Revenue)
So with that all said, my recommendation for you is that unless you both have high five-figure or better incomes in which scenario filing separately may yield a better outcome, you should file jointly at the federal level. You should file whichever way is easier for you at the state level. Most people that I've spoken to here in the community and otherwise have said that it's easier for them to file state returns separately when possible in the kind of situation you're in. You will not have a state return for Texas as I'm sure you're already aware there is no state income tax in your own state.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)