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Financial Planning / Tax Strategies
|Subject: Re: Captial Gains for State Return||Date: 3/13/2006 2:24 PM|
|Author: ptheland||Number: 84931 of 121219|
I am assuming Turbotax does that all very efficiently.
I would not be so quick to make that assumption. It's been a difficult challenge to do correctly in every professional level software I've used. I would not assume that some consumer grade software makes it any easier. (Especially since I use one of the professional programs done by Intuit, who also does TT.)
Does it just boil down to mere technicality of what kind of account it is?
Absolutely not. The account can be titled any way you like. The issue is the source of the funds that went INTO the account.
If so, I might as well have carried out all transactions from my wife's individual account and we would have been able to save all the state income tax on those gains (FL does not have any state income tax), correct?
Again, no. If you earn money and send it into an account in her name, that remains community property income. So it would remain partially yours and subject to CA taxes.
There are some rather strict rules regarding community property. Once funds become community property, it is not easy to make them separate property. I do not know exactly how to accomplish this, or if it is even feasible to do so. I'd have to defer to a lawyer on this one, as it has little to do with taxes. Once the property is determined to be community or separate, then I can figure out how to tax it.
And you've got the further complication of one spouse being in a community property state - CA - and one in a state that does not use community property - FL.
In the end, I have less confidence in my first answer than I did when I typed it. I'm not sure if your wife's income is community property. I'm pretty sure yours is. This is one of the complications of unusual living arrangements like this. And it is not addressed very well in the tax codes or regulations.
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