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My fiancee and I are thinking about getting married this year. Currently, we live together in California.

My fiancee is going to attend law school in August of this year, in Washington DC. I will stay in California.

She is likely going to have a very low income while she's a student. I expect my income to be between $180K - $200K/yr.

I wanted to better understand what the tax implications would be if we got married. I know that there will likely be federal tax savings from filing jointly. However, I'm concerned about my income being taxed twice: once in California, and once in whatever state my fiancee resides in (ex: Washington DC).

Is there a possibility that I'll be paying taxes twice on the same income?

How would we even file our returns? Would the federal return be MFJ, while we each file separate returns in California and DC as MFS?

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You will generally never have to pay state income taxes twice on the same income. You might be taxed by two states for some portion of your income, but in that case, you would be able to claim a tax credit on one state's income tax return for the tax paid to the other state on that piece of income (up to the amount of tax you paid for it in the first state), so the net effect is you pay whichever is the higher rate of tax between the two states on doubly-taxed income.

Generally, residents of a state are taxed by that state on their worldwide income, while nonresidents of a state are taxed by that state on only their income from that state. You are a resident of CA, and a nonresident of DC, while your future spouse wife will be a nonresident of CA, and a resident of DC (or at least she will be after her move; for 2020, she will be a part-year resident of CA (resident before her move) and part-year resident of DC (resident after her move); she will have to split the tax treatment accordingly). So CA would tax your worldwide income and your wife's CA income, and DC would tax your DC income and your wife's worldwide income.

However, another complication is the fact that California is a community-property state. That means, since you are domiciled in California, your income after marriage is considered community income, and so half of it is considered your income and half of it is considered your wife's income. The half that is considered your wife's will be CA-sourced income of a DC resident, so it will be taxed by both CA (since it's CA-sourced income) and DC (since it's income of a DC resident). So this basically means that all of your income will be taxed by CA, and half of it will be taxed again by DC, and you will have to claim a tax credit for that half that is doubly-taxed. In the case of CA and DC (it may be different for other pairs of states), the tax credit for doubly-taxed income needs to be claimed in the person's state of residence, so in your case, on the DC tax return, since it's CA income of a DC resident (your wife).

All of the above is true no matter if you file jointly or separately. Filing jointly doesn't mean that all of both of your incomes will be taxed by both states. When one resident and one nonresident (or part-year resident) file jointly, they are usually supposed to use the appropriate nonresident or part-year resident form so that only part of the income is taxed. For CA, a joint filing of a resident and nonresident uses the 540NR nonresident form, and taxes will be based on the portion of your joint income that is taxed in CA, and the rate of tax based on your whole joint income. For DC, I believe you would have to file separately if one is a resident and the other nonresident, but it is better for married couples to file separately in DC in general anyway (since DC has the same brackets for filing jointly and separately); your wife would claim the out-of-state tax credit on her separate DC return.

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  • I see. To make sure I understood correctly, would these be the returns we file: (1) We file a join federal return showing $200K of joint income (2) We file a joint 540NR showing $200K of joint income (3) I file a DC non-resident tax return showing no income (since all of my income is earned in CA and (4) Wife files a DC resident tax return, claim credit for taxes paid to CA – horse-radish May 2 '20 at 16:00
  • Also, do you have to wait till the next tax year to claim the credit? Or can you claim the credit for CA taxes on the same years DC return? – horse-radish May 2 '20 at 16:05
  • @horse-radish: That's basically correct. You claim it on the same year's return. I am not sure you need to file a DC return if you are nonresident. – user102008 May 2 '20 at 16:37
  • @horse-radish: In a more traditional state (not DC), you would typically file a joint nonresident return, with your full income as federal amounts, but only half of your income as that state's amounts, and then taking the credit for taxes paid to CA. – user102008 May 2 '20 at 16:40

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