Form 8958 - Allocation Of Tax Amounts Between Certain Individuals In Community Property States Page 3

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Form 8958 (Rev. 11-2014)

Page

General Instructions

These distributions are wholly taxable to the spouse or RDP whose

name is on the account. That spouse or RDP is also liable for any

Future developments. For the latest information about developments

penalties and additional taxes on the distributions.

related to Form 8958 and its instructions, such as legislation enacted

Pensions. Generally, distributions from pensions will be characterized

after they were published, go to

as community or separate income depending on the respective periods

Purpose of Form

of participation in the pension while married (or during the registered

domestic partnership) and domiciled in a community property state or in

Use Form 8958 to determine the allocation of tax amounts between

a noncommunity property state during the total period of participation in

married filing separate spouses or registered domestic partners (RDPs)

the pension. These rules may vary between states.

with community property rights. If you need more room, attach a

Partnership income. If an interest is held in a partnership, and income from

statement listing the source of the item and the total plus the allocated

the partnership is attributable to the efforts of either spouse or RDP, the

amounts. Be sure to put your name and social security number (SSN) on

partnership income is community property.

the statements and attach them at the end of your return.

For RDPs, the self-employment income from a partnership is

Community property laws affect how you figure your income on your

also split for self-employment tax purposes. See Self-

federal income tax return if you are married, live in a community

TIP

employment tax, later.

property state or country, and file separate returns.

This form is used for married spouses in community property states

who choose to file married filing separately. This form is also for RDPs

Tax-exempt income. For spouses, community income exempt from

federal tax generally keeps its exempt status for both spouses. For

who are domiciled in Nevada, Washington, or California. For 2010 and

following years, a RDP in Nevada, Washington, or California generally

example, under certain circumstances, income earned outside the United

must follow state community property laws and report half the

States is tax exempt. If you earned income and met the conditions that

combined community income of the individual and his or her RDP.

made it exempt, the income is also exempt for your spouse even though

he or she may not have met the conditions. RDPs should consult the

RDPs are not married for federal tax purposes. They can

▲

particular exclusion provision to see if the exempt status applies to both.

only use the single filing status, or if they qualify, the head of

Income from separate property. In some states, income from separate

household filing status.

property is separate income. Other states characterize income from

CAUTION

separate property as community income.

Community or Separate Income

For more information, see Pub. 555. For specific information that

pertains to your situation, check with the laws of your state.

In a community property state, if you file a federal tax return separately from

Deductions

your spouse, you must report half of all community income and all of your

separate income. Likewise, a RDP must report half of all community income

If you file separate returns, your deductions generally depend on

and all of his or her separate income on his or her federal tax return.

whether the expenses involve community or separate income.

Generally, the laws of the state in which you are domiciled govern whether

you have community income or separate income for federal tax purposes.

Business and investment expenses. If you file separate returns,

expenses incurred to earn or produce community business or

Generally, community income is income from:

investment income are generally divided equally between you and your

spouse or RDP. Each of you is entitled to deduct one-half of the

• Community property.

expenses on your separate returns. Separate business or investment

• Salaries, wages, or pay for services of you, your spouse or RDP, or

income are deductible by the spouse or RDP who earns the income.

both during your marriage or registered domestic partnership.

Other limits may also apply to business and investment expenses. For

• Real estate that is treated as community property under the laws of

more information, see Pub. 535, Business Expenses, Pub. 550,

the state where the property is located.

Investment Income and Expenses, and Pub. 555.

Generally, income from separate property is the separate income of

IRA deduction. Deductions for IRA contributions cannot be split

the spouse or RDP who owns the property.

between spouses or RDPs. The deduction for each spouse or RDP is

For more information, see Pub. 555, Community Property.

figured separately and without regard to community property laws.

Personal expenses. Expenses that are paid out of separate funds, such

Identifying Income and Deductions

as medical expenses, are deductible by the spouse or RDP who pays

You and your spouse or RDP must be able to identify your community

for them. If these expenses are paid from community funds, divide the

and separate income, deductions, credits, and other return amounts

deduction equally between you and your spouse or RDP.

according to the laws of your state.

Deductible portion of self-employment tax. The deductible portion of

the self-employment tax is split only when the self-employment tax is

Income

split by the spouses or RDPs. See Self-employment tax, later.

The following is a discussion of the general effect of community property

Credits, Taxes, and Payments

laws on the federal income tax treatment of certain items of income.

Self-employment tax. Although the self-employment tax rules contain a

Wages and self-employment income from sole proprietorship. A

provision that overrides community income treatment in the case of

spouse's or RDP's wages and self-employment income from a sole

spouses (IRC 1402(a)(5)), this provision does not apply to RDPs. RDPs

proprietorship are community income and must be evenly split.

split self-employment income from sole proprietorships and

For RDPs, the self-employment income from a sole

partnerships for self-employment tax purposes.

proprietorship is also split for self-employment tax purposes.

TIP

The following rules apply only to persons married for federal tax

See Self-employment tax, later.

purposes.

Sole proprietorship. With regard to net income from a trade or

Interest, dividends, and rents. Interest, dividends, and rents from

business (other than a partnership) that is community income, self-

community property are community income and must be evenly split.

employment tax is imposed on the spouse carrying on the trade or

Gains and losses. Gains and losses are classified as community or

business.

separate depending on how the property is held.

Partnerships. All of the distributive share of a married partner's

Withdrawals from individual retirement arrangements (IRAs). There

income or loss from a partnership trade or business is attributable to the

are several kinds of individual retirement arrangements (IRAs).

partner for computing any self-employment tax, even if a portion of the

Distributions of IRAs by law are deemed to be separate property, even if

partner's distributive share of income or loss is community income or

the funds in the account would otherwise be community property.

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