MFS for a married CA and PA couple

[15Gornzz51]

For a married couple, if one is a Ca (Community Property) resident and one is a PA (Separate Property) resident, should one-half of the Ca income be reported on the MFS PA return?
The taxpayer will file a MFS PA return and the spouse will file a MFS CA return. This couple has no intention of divorcing and they spend time together during the year.

Also should the mortgage interest and real estate taxes on the Ca residence be split between them? Both of their names are on the Ca property's mortgage loan and on the deed.

[Rapid Robert]

"should one-half of the Ca income be reported on the MFS PA return?"

Yes, but it's more complicated than that. The CA income must all show up on a CA tax return somewhere, so the PA spouse would also need to file a CA non-resident return, reporting their share of CA source (community) income. That will lead to double-taxed income and an Other State Tax Credit (OSTC) which I assume PA offers to residents. The CA spouse should only report their one-half of community income on their CA return.

You didn't ask about federal, but the same thing applies -- the CA spouse will file a 1040 with their one-half of the income, and the PA spouse will file with 100% of their own income plus 50% of CA (no double taxation at federa level).

If the mortgage/prop tax was paid with community income, then yes you should split it. Use IRS Form 8958.

This then begs the question, why are they filing MFS? They may have non-tax reasons for doing so, but it seems for tax purposes, it would be easier to file MFJ, which for California means they would file a 540NR return. There would still be double-taxed income, but at least only two state returns instead of three, and no need for Form 8958. (I don't know what the PA filing issues might be, if any).

Finally, a technical point, community property application depends on domicle not residency, although they are usually the same thing.