Whats the difference between a community property state and a common law state for tax purposes?

Hello,

I am trying to determine personal and dependency exemptions for two different states:one common law state and another a community property state. Whats the difference between a community property state and a common law state for tax purposes? Can I claim someone as a dependent in one state while in the other I would not be able to?

Any clarification of this matter will be greatly appreciated.

thanks

Whats the difference between a community property state and a common law state for tax purposes?myspace tweaks

Dependents are not an issue. In a community property state, all property acquired by a married couple while living together is presumed to be owned by the "community" of the husband and wife unless they can show differently. Creditors can collect debts due from either spouse from communtiy property. In a non-community property state, income and assets are separate. There are good and bad points to either system.

Whats the difference between a community property state and a common law state for tax purposes?top 10 myspace myspace.com

I suspect you are saying common law when you mean common law marriage. Not much to say about the latter except that once the marriage is recognized, if the parties stay in the same state (or another state that recognizes it) they are married until they divorce.

A personal exemption is affected by CPS rules. Under community property rules, the w-2 of a spouse belongs 50-50 to each spouse. Thus if the two file MFS, each would declare 50% of the income and neither could claim the exemption of the other. In a non-CPS state, if one spouse has ZERO income, the other spouse may be able to claim their exemption on an MFS return.

Dependency is going to depend more on biology, where the dependent was living, etc. The IRS does say, once the relationship is established, you can continue to use a stepchild or inlaw relationship even if the marriage ends.
If you file a joint return there is no difference tax-wise.

In a community property state, each spouse has equal ownership of all assets and resources of the marital estate, including but not limited to real estate, income, personal property etc. They only maintain separate ownership of any assets that they brought into the marriage and, with some exceptions, property that is bequeathed to them. In general, if one buys property with the assets of the marital estate, BOTH acquire equal ownership of the property, and in most community property states that includes if they are not on the deed or title unless there is explicit wording on the deed or title that confers sole title. That usually requires the explicit consent of the other spouse.

As such, in a community property state if a couple files separate returns they each claim one-half of the total income of the marital estate and receive credit for one half of the total taxes paid or withheld on their separate returns. If both parties have equal or nearly equal income the point may be moot but their incomes are widely divergent the tax impact can be significant,

In a common law state, each spouse maintains ownership of their individual property regardless of when it was acquired. Only property purchased in joint title is the property of both spouses.

In a common law state when a couple files separate returns they each claim only their own income and take credit for the taxes that they personally paid or had withheld from their own wages. The other spouse's income is irrelevant to thier own tax return.