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I'm a full year CA resident for 2019 living and working in California.

My spouse was working in PA from Jan 1 - July 2019 and moved to CA after her employment ended in PA. She did not work in CA, and I assume will be considered a part year resident since she moved mid year.

We will file federal returns as MFJ. I'm not so sure about the filing status for state taxes, but from my research, this is my understanding:

File CA state taxes as Joint non-resident (540 NR).

Sources:

File PA state tax returns for my spouse as MFS with only their PA income (not including my income from CA).

Is this correct, or am I missing something?

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For California that is correct.

For Pennsylvania, I believe your spouse can file as MFS or MFJ, but if MJF, then that will treat you as a PA resident for the same period she was a PA resident, so all of your income for the first half of the year would need to be reported on the PA tax return. Seeing as that PA has a flat income tax rate, I don't think there is any benefit to filing jointly, so she might as well file MFS, with her being a PA part-year resident and you being a PA nonresident.

Note that even if she files MFS, half of your income for the first half of the year will need to be reported on her PA tax return. This is because California is a community property state, and since you are domiciled in CA, that means your income is community income, and half of it is considered her income. Since residents are taxed on their worldwide income, and she was a resident of PA for the first half of the year, the half of your income that is "her income" for that half of the year is taxed by PA, and will need to be reported on her PA tax return. That amount being taxed by PA doesn't mean you can remove it from your joint CA tax return -- your joint CA tax return still contains your entire year's income, including the part that is also taxed by PA, since that part is still CA-source income, even though it is considered your spouse's (i.e. a CA nonresident's) CA-source income. However, she will be able to claim a tax credit on her PA tax return (for PA it is called "resident credit" calculated with Schedule G-L) for tax paid to CA on the doubly-taxed income. The amount of the credit is the lesser of the amount of tax paid for that income in CA or PA; so if your CA effective tax rate is higher than PA's, the credit will just equal the PA tax for that income, so she will pay the same amount of PA tax in the end as if that CA income weren't there.

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  • "That amount will also need to be reported on your joint CA tax return, since it is CA-source income, ..." Do you mean the CA income reported in the PA return need to be reported in CA return again? Would that cause double taxation in CA? – dev_musings Jul 7 at 22:29
  • @dev_musings: Sorry, I meant that your CA tax return will contain your whole year's income, including the part that is reported on your spouse's PA tax return. I will try to reword it. – user102008 Jul 8 at 1:57

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