Currently, there are nine community property states:
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
Since income in a community property state is considered to belong to both husband and wife and is divided evenly between both, in tax year 2020 both the unemployment compensation received and the unemployment exclusion are divided equally between the taxpayer and spouse. Thus each spouse has a maximum exclusion of $10,200 for a total exclusion of up to $20,400.
Example: The taxpayer received $12,000 in unemployment compensation and the spouse received $9,000 for a total of $21,000. In a non-community property state the total exclusion on the return would be $19,200: $10,200 for the taxpayer plus $9,000 for the spouse. In a community property state, each spouse's unemployment compensation equals $10,500 (one-half of $12,000 plus one-half of $9,000), thus each spouse would receive the maximum exclusion of $10,200 for a total exclusion of $20,400.
Note: This is a guide to the 2020 federal unemployment exclusion in a community property state. This is not intended as tax advice.
Additional Information:
IRS: Unemployment Exclusion Update for Married Taxpayers Living in a Community Property State