How is the state income tax deduction handled when filing a dual-status return? IRS rules say that income on my W-2 can not be split with my wife even though we were living in California during our resident part (it's a community property state).


California does not conform to IRS rules on this so I have to adjust my income to split it with my wife on our state return. I have to split withheld state income taxes too. So do I only claim half of the state taxes as a deduction on Schedule A of my federal return?

Well, the FIRST question I must ask is:

Have you considered filing a JOINT federal return with your wife?

Whether you are coming TO the U.S. or have left and are filing your final return, you DO have the option of filing a joint return with your wife. You have to claim ALL world-wide income in either case, but you can mitigate any double taxation by claiming the Foreign Tax Credit (Form 1116) for any taxes paid to your home country.

If you insist on filing the dual-status return, then claim ONLY the taxes YOU paid to California as the itemized deduction.

If you need professional help filing this return, this IS what I do! If interested, email me at the email address in my profile.