Community Income

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Definition: Community Income

Community Income refers to Income earned by taxpayers living in community property states. Just as the case with all other property owned/acquired by either spouse during marriage, community income is considered to belong equally to both spouses. Income earned by either individual prior to or after a marriage is usually not considered to be a community income.

Community property is a form of a marital-property regime that is now found in some jurisdictions. The western states of the United States mainly recognize community property. For example, due to community property, community income is earned in the community property US states of Arizona, California, Louisiana, New Mexico, Nevada, Idaho, Washington, Texas and Wisconsin. Community income implies Income of a married couple, in a community property state, considered to belong equally to each spouse, notwithstanding who receives the income.

By law, community income is income to be equally shared by the married couple. On the other hand, separate income is income belonging to either one spouse. Respective state laws need to be followed in determining a particular item of income as separate or community income. The nature of community property and community income depend on the state domiciled. If spouses have different domiciles, this is a question of legal scrutiny. State laws in which the individual is domiciled determine community property/community income or separate property/separate income for federal tax purposes. Factors considered in determining state of domicile include, location of state income tax paid, voting location, length of residence etc.

Community property

• Is property that a married person and his/her spouse or both acquire during marriage while residing and domiciled in a community property state.

• Property jointly agreed upon by the married couple to convert from separate to community property.

• Property that which cannot be identified as separate property.

• Real estate, land is treated as community property under respective laws of community property states

Community income

Generally, community income is income from salaries, wages, and other pay received by either spouse while domiciled in a community property state.

Features and kinds of Community Income

• Community income is the income generated by community property.

We assume community property state as the residence for the below points.

• Compensation in community property states whether wages, salaries, commissions and self-Employment income are treated as community Income belonging to the marital community.

• Income such as interest, dividends, rent, capital gains and other investment income can be separate or community income.

• Depending on how the property is held, gains and losses are classified as separate or community income.

• Pension distributions are separate or community income depending upon respective participation periods.

• Active military pay received when domiciled/married is a form of community income.

• Partnership income, attributable to efforts of any spouse, is a community property.

• Community Income has tax implications especially during divorces, etc.


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