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My spouse is eligible to file the yearly tax (in April) with a state that has zero state tax because that is how she gets the W2, and it is a huge tax saving in the state tax. On the other hand, I have had to tax with a state that has state tax. For many reasons, I can NOT move to the tax that has zero state tax. So, the options are:
Option 1. We both file with the state that has state tax and my spouse ends up paying state tax on her part of the income (because her state did not deduct any state tax to start with, and never had to)
Option 2. We file as "married filing separately" for federal, but she files with the state with zero tax (as her state has no tax), and I pay for the state tax. This is tax savings, but this raises the question of whether the husband and wife live separately, as her state will be different from mine, and the two states are 6+ hours of driving distance each way.
Has anyone faced a situation like this? I would prefer Option 2 of cost savings but that may raise questions on different state domiciles in Citizenship when they ask for the tax returns.
Option 1. We both file with the state that has state tax and my spouse ends up paying state tax on her part of the income (because her state did not deduct any state tax to start with, and never had to)
Option 2. We file as "married filing separately" for federal, but she files with the state with zero tax (as her state has no tax), and I pay for the state tax. This is tax savings, but this raises the question of whether the husband and wife live separately, as her state will be different from mine, and the two states are 6+ hours of driving distance each way.
Has anyone faced a situation like this? I would prefer Option 2 of cost savings but that may raise questions on different state domiciles in Citizenship when they ask for the tax returns.
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