IRS Publication 555 explains how income and deductions must be reported when individuals live in a community property state. If spouses or registered domestic partners (RDPs) file separate federal returns, they may be required to report: - One-half of their combined community income and deductions, and
- All of their own separate income and deductions.
Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
For federal tax purposes:
- Married spouses living in a community property state must follow these rules when filing separately.
- RDPs must follow community property rules if they live in California, Nevada, or Washington.
- Same-sex married couples must follow the same rules as any other married couple if legally married.
TaxAct cannot automatically calculate community income allocations because separate federal returns are not linked. This applies whether a taxpayer files Single, Head of Household, or Married Filing Separately.
Each person must determine their share of community and separate income based on IRS Publication 555 and enter the allocated amounts into their own return.
Important: In some situations, spouses do not split income 50/50, even if they live in a community property state. Exceptions can apply when:
- The spouses lived apart for the entire year,
- One spouse is a nonresident alien (unless electing joint treatment),
- Income comes from separate property, or
- Withholding or estimated tax payments must be allocated differently.
Form W-2
To report community wages in TaxAct, the taxpayer must enter two W-2 forms:
- One W-2 for the taxpayer, showing 50% of the wages from their original Form W-2.
- One W-2 for the spouse/partner’s wages, also showing 50%, but entered under the taxpayer’s name using the spouse/partner’s employer information.
The spouse or partner must follow the same steps when preparing their own tax return.
Use this same allocation method for other types of community income such as:
- Interest
- Dividends
- Business income
- Other income shared under community property law
Form 8958
Form 8958, Allocation of Tax Amounts Between Certain Individuals in Community Property States, is used to report how income, deductions, credits, and withholding are divided between spouses or RDPs filing separate returns. To access Form 8958 in the TaxAct program, follow the steps below.
You do not need Form 8958 if you are filing a joint federal return, even if you file separate state returns.
Form 8958 will only appear if your filing status and state of residence require community property reporting.
Online
Dashboard
- From within your TaxAct return, click Taxes & Miscellaneous.
- On smaller devices, click the menu at the top left corner of your screen, then make your selection.
- Click the Other Tax Forms drop-down.
- Click Add beside Community Property Allocation.
- Complete the rest of the interview process.
Classic
- From within your TaxAct return, click Federal.
- On smaller devices, click the menu at the top left corner of your screen, then make your selection.
- Click the Miscellaneous Topics drop-down, then click Community property allocation record (Form 8958).
- Complete the rest of the interview process.
Desktop
- From within your TaxAct return, click Federal.
- Click the Miscellaneous Topics drop-down, then click Community property allocation record (Form 8958).
- Complete the rest of the interview process.