How does a married couple file Louisiana income tax when one spouse is a Louisiana resident and the other lives in another community-property state?

Plain-English summary

Louisiana Revenue Ruling 20-001 explains how a married couple reports income when one spouse is a Louisiana resident and the other is a resident of a different community-property state.

The couple must use the same filing status used on the federal return. In the ruling's example, the spouses filed federal married filing jointly, so they also filed jointly for Louisiana.

But they used Form IT-540B, the Louisiana nonresident return, even though one spouse was a Louisiana resident. IT-540B allowed the couple to separate the resident spouse's worldwide income from the nonresident spouse's Louisiana-source income while still reconciling to the joint federal adjusted gross income.

Louisiana adjusted gross income included:

• the Louisiana resident spouse's one-half share of all community income earned everywhere; plus
• the nonresident spouse's one-half share of community income earned in Louisiana by the resident spouse.

The ruling's example

For 2019:

• Spouse A was a Louisiana resident and earned $80,000 of Louisiana wages;
• Spouse B lived in another community-property state and earned $130,000 there; and
• the couple filed a joint federal return reporting $210,000 of federal adjusted gross income.

Both states treated the wages as community property.

Filing status and return form

La. R.S. 47:294 generally requires an individual to use the same Louisiana filing status used federally. Because the couple filed federal married filing jointly, the Louisiana filing status also had to be married filing jointly.

The return form was different from what the resident spouse might expect. Form IT-540 reports a resident's income from all sources, while Form IT-540B allows allocation of Louisiana-source income for a nonresident.

Because Spouse B was a nonresident with out-of-state income, the Department directed the couple to file Form IT-540B for the most accurate reporting.

The federal adjusted gross income line on IT-540B still had to match federal Form 1040: $210,000 in the example.

How Louisiana income was calculated

Louisiana taxes a resident on income from all sources and a nonresident on Louisiana-source income. Wages for personal services are sourced where the services are performed.

The ruling calculated Louisiana adjusted gross income as follows:

Spouse A's $105,000 share included half of both spouses' wages because the Louisiana resident was taxed on worldwide community income. Spouse B's Louisiana-source amount included half of Spouse A's Louisiana wages because those wages were community property earned in Louisiana.

The calculation did not include the other half of Spouse B's State X wages as Louisiana-source income.

Credit for tax paid to another state

La. R.S. 47:33 allowed the Louisiana resident spouse a credit for tax paid to another state on the same income taxed by Louisiana.

The ruling said Spouse A could claim that credit, but Spouse B could not because Spouse B was a nonresident.

Form IT-540B did not contain a line for the credit. The ruling instructed a taxpayer in this situation to prepare Form R-10606 and attach it to IT-540B.

What this means for you

Married couples living in different states

Do not assume separate residency means separate filing status or a standard resident return. Start with the federal filing status, then use the form and allocation method that correctly reports the resident's worldwide share and the nonresident's Louisiana-source share.

Tax preparers

Reconcile IT-540B to the full federal AGI before applying the Louisiana community-property modification. Track each spouse's residency, where services were performed, and how both states classify the wages.

Louisiana resident spouses

Review the other-state tax credit for community income taxed by both states. The ruling's procedure used Form R-10606 because IT-540B lacked a direct credit line.

Common questions

Q: Can the spouses use a different Louisiana filing status from their federal return?

A: Not under the ruling's general rule. A federal joint return required a Louisiana joint filing status.

Q: Why did a couple with a Louisiana resident use the nonresident form?

A: One spouse was a nonresident with out-of-state income, and IT-540B allowed the correct Louisiana-source allocation.

Q: Does the IT-540B federal AGI line include both spouses' full income?

A: Yes. It first matches the joint federal return, then Louisiana adjustments produce the taxable Louisiana amount.

Q: What was taxable in the example?

A: $145,000: the resident's $105,000 half of worldwide community wages plus the nonresident's $40,000 half of Louisiana community wages.

Q: Which spouse could claim the other-state tax credit?

A: The Louisiana resident spouse. The ruling denied that credit to the nonresident spouse.

Citations and references

• La. R.S. 47:31 and 47:290(B) — resident and nonresident taxation
• La. R.S. 47:243(A)(7) — wages sourced where personal services are performed
• La. R.S. 47:294 — Louisiana filing status follows federal status
• La. R.S. 47:33 — resident credit for tax paid to another state
• La. Civ. Code arts. 2334 and 2338 — community property and wages
• LAC 61:III.101(C) — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 20-001

Original ruling text

Revenue Ruling No. 20-001
January 30, 2020
Individual Income Tax
Tax Effect of Community Property Rules on Separate Residency of Married Persons
PURPOSE
The purpose of this ruling is to rule on the Louisiana individual income tax filing and reporting
requirements of married person when one spouse is a Louisiana resident and the other spouse is a
resident of another community property state.1
FACTS
For the 2019 tax year, Spouse A and Spouse B are legally married. Spouse A is a Louisiana resident
and earns $80,000 in wages in Louisiana. Louisiana is a community property state 2 which treats
wages earned in Louisiana as community property. 3 Spouse B is a resident of State X, which is
also a community property state which treats wages earned in State X as community property.
Spouse B earns $130,000 in wages in State X.
Other than wage income, neither spouse earns any additional income. Spouse A and Spouse B file
IRS Form 1040, U.S. Individual Income Tax Return and select the “married filing jointly” filing
status. Spouse A and Spouse B report federal adjusted gross income of $210,000 ($80,000 +
$130,000).
APPLICABLE LAW
Resident individuals are subject to Louisiana income tax on net income from whatever source
derived.4 Nonresident individuals are subject to Louisiana income tax on net income derived from
Louisiana sources.5 For purposes of determining a nonresident individual’s net income derived
from Louisiana sources, wages received for personal services are allocated to the state in which
the services are rendered.6 Wages earned in Louisiana are considered community property.7
1

In addition to Louisiana, community property states include Arizona, California, Texas, Washington, Idaho, Nevada,
New Mexico, and Wisconsin.
2
Louisiana Civil Code Article 2334
3
Louisiana Civil Code Article 2338
4
LA R.S. 47:31(1) and 290(B)
5
LA R.S. 47:31(2) and 290(B)
6
LA R.S. 47:243(A)(7)
7
Louisiana Civil Code Article 2338
A Revenue Ruling is issued under the authority of LAC 61III.101 (C). A Revenue Ruling is written to provide
guidance to the public and to Department of Revenue employees. It is a written statement issued to apply principles
of law to a specific set of facts. A Revenue Ruling does not have the force and effect of law and is not binding on the
public. It is a statement of the department's position and is binding on the department until superseded or modified by
a subsequent change in statute, regulation, declaratory ruling, or court decision.

Revenue Ruling No. 20-001
January 30, 2020
Page 2 of 3

An individual is required to use the same filing status as the individual used on his or her federal
income tax return.8 If married persons filed a federal income tax return using the “married filing
jointly” filing status, the Louisiana income tax return must use the same filing status.
ANALYSIS
Filing Status
Since Spouse A and Spouse B filed their federal income tax return using the “married filing jointly”
filing status, the general rule is that Spouse A and B must file with the “married filing jointly”
filing status on their Louisiana income tax return.
Resident vs. Nonresident Return
The Form IT-540, Louisiana Resident Income Tax Return is designed to report all income from
whatever sourced derived. The Form IT-540B, Louisiana Nonresident Income Tax Return allows
for allocation and apportionment of income to determine income derived from Louisiana sources.
Since Spouse B is a nonresident with non-Louisiana derived income, the Form IT-540B allows for
the most accurate reporting of taxable income. Thus, Spouse A and Spouse B should file the Form
IT-540B notwithstanding the general rule outlined in LA R.S. 47:294.
Reporting Louisiana Adjusted Gross Income
On the Form IT-540B, the federal adjusted gross income must match the amount from the Form
1040. Under these facts, this amount is $210,000.
However, a modification is required to account for the differing residencies of Spouse A and
Spouse B. The Louisiana adjusted gross income must include Spouse A’s income from all sources
and Spouse B’s income derived from Louisiana sources, including half of any community property
income earned in Louisiana by the Louisiana resident spouse (Spouse A).
Calculation of Louisiana Adjusting Gross Income
Spouse

8

Income Source

Percentage and Amount

A

One half of all community property income

50% of $210,000 = $105,000

B

One half of community property income earned
50% of $80,000 = $40,000
in Louisiana

LA R.S. 47:294

A Revenue Ruling is issued under the authority of LAC 61III.101 (C). A Revenue Ruling is written to provide
guidance to the public and to Department of Revenue employees. It is a written statement issued to apply
principles of law to a specific set of facts. A Revenue Ruling does not have the force and effect of law and is not
binding on the public. It is a statement of the department's position and is binding on the department until
superseded or modified by a subsequent change in statute, regulation, declaratory ruling, or court decision.

Revenue Ruling No. 20-001
January 30, 2020
Page 3 of 3

The Louisiana adjusted gross income is $145,000 ($105,000 + $40,000).9
RULING
Louisiana taxes all of the income of a resident and the Louisiana sourced income of a nonresident.
For married persons, where one spouse is a Louisiana resident and the other spouse is a resident
of another community property state, Louisiana will tax all of the income of the resident spouse
and the Louisiana sourced income of the nonresident spouse. The Louisiana resident’s income
will include one half of all community property income earned everywhere. The nonresident’s
Louisiana sourced income will include one half of the community property income earned in
Louisiana by the resident spouse.

Kimberly Lewis Robinson
Secretary

9

LA R.S. 47:33 provides resident individuals a credit for taxes paid to other states. Based on the facts provided,
Spouse A is entitled to a credit for taxes paid to other states, including a credit for tax paid on the same income subject
to tax by Louisiana. However, Spouse B cannot claim the credit because Spouse B is a nonresident. The Form IT540B does not include a line to claim this credit. Therefore, if a taxpayer is subject to the provisions of this ruling, the
taxpayer should prepare Form R-10606 as an attachment to the Form IT-540B.

A Revenue Ruling is issued under the authority of LAC 61III.101 (C). A Revenue Ruling is written to provide
guidance to the public and to Department of Revenue employees. It is a written statement issued to apply
principles of law to a specific set of facts. A Revenue Ruling does not have the force and effect of law and is not
binding on the public. It is a statement of the department's position and is binding on the department until
superseded or modified by a subsequent change in statute, regulation, declaratory ruling, or court decision.