I resided in CA and owned a house (already sold) until 1995. I currently work overseas but intend to return to CA in the future. I have continued filing CA state tax as non-resident since 1997. I last visited CA in 2004.

I receive interest income from CA banks and other non-state banks. The bank accounts are owned jointly with my wife. Is this income community property ? Can I claim half of total interest income as my income and other half as my wife's income in my Federal tax ? I intend to file "married filing separate" status.

Mr. Diego:

I answered this question via email. It is listed below.

California IS a community property state, and since you have retained California residency, the bank income is considered community property. So, yes, you CAN split the money equally between the Married Filing Separately tax returns.

If that is her ONLY income, then she does NOT have to file.

However, it is likely BEST that you file JOINTLY to take full advantage of her personal exemption (to offset some of your income).