Could a Virginia-resident spouse claim a proportional share of joint federal itemized deductions when the other spouse lived in another state?

Plain-English summary

Virginia allowed the resident spouse a proportional share of joint federal itemized deductions. The husband was domiciled in Virginia, the wife in another state, and they filed a joint federal return but separate state returns.

Each spouse had to account separately for income, deductions, and exemptions when possible. When a joint deduction could not be assigned directly, Virginia required proportional allocation based on the income attributable to each spouse.

The Department had disallowed the husband's entire deduction because all itemized deductions appeared on the other state's return. Virginia found that treatment incorrect. The allocation was to be computed using each spouse's federal adjusted gross income, and the audit was returned for revision.

Common questions

Q: Were joint deductions split equally?
A: No. Untraceable joint deductions were allocated by each spouse's share of federal adjusted gross income.

Q: Did claiming deductions on the other state's return eliminate the Virginia share?
A: No. Virginia still allowed the resident spouse's properly allocated portion.

Citations and references

• Va. Code §§ 58.1-322(D)(1), 58.1-324, and 58.1-326.
• 23 VAC 10-110-190(B).
• Virginia Public Documents 95-251 (September 29, 1995) and 11-170 (September 29, 2011).

Subject

Federal itemized deductions proportionally allocated between the Taxpayer and the wife

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 12-94

Original ruling text

June 11, 2012

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of the individual income tax assessment issued to * (the "Taxpayer") for the taxable year ended December 31, 2007. I apologize for the delay in responding to your letter.

FACTS

The Taxpayer is a domiciliary resident of Virginia. His wife was a domiciliary resident of * (State A). The couple filed a joint federal income tax return and State A income tax return. The Taxpayer filed a separate 2007 Virginia income tax return. The wife had no income from Virginia sources.

On the 2007 Virginia return, the Taxpayer claimed a prorated portion of the joint itemized deductions based on the income attributable to each spouse. Under review, the Department disallowed the Taxpayer's itemized deductions because all of the itemized deductions were claimed on the State A return and issued an assessment.

The Taxpayer appeals the assessment, contending he is eligible to deduct a proportional share of the itemized deductions.

DETERMINATION

Virginia Code § 58.1-322 D 1 allows a taxpayer to deduct from his Virginia adjusted gross income the amount allowed for itemized deductions for federal income tax purposes. In cases where a Virginia resident and nonresident spouse file separate state income tax returns, Virginia Code § 58.1-326 grants the Department authority to modify the allocation of exemptions and deductions claimed for federal income tax purposes under Va. Code § 58.1-324. Title 23 VAC 10-110-190 B provides that each spouse must account separately for items of income, deductions, and exemptions. However, when such items cannot be accounted for separately, deductions and personal exemptions must be proportionally allocated between each spouse based upon the income attributable to each. See also Public Document (P.D.) 95-251 (9/29/1995).

In this case, the Taxpayer claimed a portion of the joint itemized deductions. Such treatment is permitted under Title 23 of the Virginia Administrative Code (VAC) 10-110-190 B. As such, the Department's adjustment disallowing the entire deduction is incorrect.

In P.D. 11-170 (9/29/2011) the Tax Commissioner ruled that the apportionment computation for a resident taxpayer is based on his or her federal adjusted gross income (FAGI). Pursuant to Va. Code § 58.1-322, Virginia starts with the FAGI, requires certain additions, and permits certain deductions and subtractions in computing Virginia taxable income. Accordingly, the Department considers it rational to apportion deductions and exemptions between a husband and wife under Va. Code § 58.1-326 based on FAGI.

Accordingly, the 2007 assessment will be returned to the auditor to be adjusted in accordance with this determination. The Taxpayer will be permitted a deduction for federal itemized deductions proportionally allocated between the Taxpayer and the wife based sole on their FAGI. A revised bill showing the adjusted assessment will be issued upon completion.

The Code of Virginia sections, regulation and the public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, please contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4748124647.E