What is Community Property?
Community Property is a type of joint ownership of assets between married couples. Generally, if you live in a community property state, spouses equally own all property acquired during marriage. In addition, half of each spouse’s income is owned by the other spouse during the marriage and debts incurred during marriage are generally debts that belong to the couple.
What assets are not considered Community Property?
The property that each partner brings into the marriage or receives by gift, bequest or devise during the marriage is considered separate property. This means that those assets belong to the partner who received the asset. It’s important not to comingle those funds with community property assets as this could change the asset from a separate property designation to community property.
Is California the only Community Property State?
No! There are several other states that are community property states. Other community property sates include: Alaska [by agreement], Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
How does Community Property affect my federal income tax return?
Community property laws affect how you calculate your income on your federal income tax returns if you are married and living in a community property state. If you are married, your tax will usually be less if you file married filing jointly than if you were to file married filing separately. However, sometimes it can be to your benefit to file separate returns. If you plan to do this, it’s best to determine community income and separate income and how those calculations could result in more or less tax payments.