FYI-310

FOR YOUR INFORMATION

Tax Information/Policy Office  P.O. Box 630  Santa Fe, New Mexico 87504-0630

COMMUNITY PROPERTY, DIVORCE, SEPARATION, AND

CONTENTS

New Mexico Personal Income Tax .........................................page 2

Community Property ...................................................page 2

Separate Property ......................................................page 2

Federal and State Filing Status ..............................................page 3

Filing Jointly ................................................................page 3

Filing Separately .........................................................page 4

General Federal Assistance ...................................................page 10

Taxpayers should be aware that subsequent legislation, regulations, court decisions, revenue

rulings, notices, and announcements might affect the accuracy of this publication’s contents.

Please contact the district tax office nearest you (see the last page of this publication) or check the

department’s website at www.tax.newmexico.gov. Click on “forms and publications”.

FYI-310  Rev. 5/2018

New Mexico Taxation and Revenue Department

Most New Mexico income tax laws are based on federal income tax laws. When filing New Mexico

personal income tax returns, including those of divorced or separated taxpayers, the first step is to

complete a federal return (form 1040 or 1040A and all necessary schedules). The Internal

Revenue Service requires you to decide your filing status and exemptions for yourself and

dependent children. A taxpayer filing a New Mexico income tax return uses the same filing status

and number of exemptions for New Mexico as for the federal return (Regulation 3.3.12.12 NMAC).

IRS Publication 504, Divorced or Separated Individuals, and IRS Publication 555, Community

Property, are helpful to review before you fill out your return. Look for them on the IRS website at

www.irs.gov.

In a community property state, all assets and liabilities you acquire during the marriage that are

not separate property are community property. For a thorough definition of community property

please refer to Sections 40-3-8 (B) and 40-3-8(C) NMSA 1978.

Separate property is real estate or personal property – including gifts, inheritance, savings, rental

income, etc. – you acquire before the marriage, or non-business or business income you receive

after the marriage is dissolved. If either you or your spouse receives a gift or an inheritance as

sole-and-separate property during the marriage, that property remains sole and separate. You

may also acquire property separately during a marriage when you buy it with separate funds, or

you exchange separate property for other separate property. New Mexico allows you at any time

during your marriage to designate separate property through a formal, written agreement between

you and your spouse. For a more thorough definition of separate property, please refer to Section

40-3-8(A), NMSA 1978.

divorce is pending or not.

New Mexico Taxation and Revenue Department

There are rules and exceptions too complicated to list in a general publication on separate and

community property. If you believe that certain assets and liabilities are sole and separate, please

consult an accountant or attorney well acquainted with community property law. You may also

review IRS Publication 555, Community Property, before you fill out your return.

FEDERAL AND STATE FILING STATUS

If your divorce becomes final during the tax year for which you are filing, the matter is simple.

Unless you have remarried, you are considered unmarried for the whole year. Your status on

December 31 governs the full year even if the divorce becomes final on December 31. Report half

Divorced or Separated Individuals, lists the categories of people you can include in your

household for tax purposes.

A couple whose divorce will not be final until the following year faces another decision: whether to

file "married filing jointly" or "married filing separately" while the divorce is pending.

The Internal Revenue Service offers relief from liability in certain situations. See Section 6015 of

the Internal Revenue Code. The federal relief includes innocent spouse, separation of liabilities, or

If your spouse underreported the amount of tax on your jointly filed return, you may apply to the

Internal Revenue Service for relief from additional federal tax that may be due. Please refer to IRS

Publication 971, Innocent Spouse Relief (And Separation of Liability and Equitable Relief). (See

references on page 1.) Although state law prohibits the Department from forgiving the additional

state taxes due, the Department Secretary has the discretion to decline to bring collection actions

against the “innocent spouse” when it is unfair to hold that spouse liable (Sec. 7-1-17.1 NMSA

1978, Regulation 3.1.12.13 NMAC).

New Mexico Taxation and Revenue Department

You and your spouse may choose "married filing separately" because you cannot get along well

enough to cooperate on a joint return. Perhaps you had considerable amounts of sole-and-

separate property that you brought to the marriage or acquired as sole-and-separate property

court order directs otherwise, each must report half the combined community income, deductions,

and credits in addition to any separate income and deductions. Please attach the federal

worksheet and your 1040 or 1040A return to your state return showing how you allocated your

income and deductions. You cannot take certain federal deductions if you file separate returns.

Please refer to IRS Publication 504, Divorced or Separated Individuals, for more information.

There are special provisions for some community income:

A spouse may not have to report half of certain combined community income (e.g., wages,

4. You and your spouse did not transfer, directly or indirectly, any of the wages, salaries,

Report half the total of all other types of community income (dividends, rents, royalties, or gains) if

you meet all the above criteria.

A spouse who filed a married-filing-separately return may be relieved of reporting an item of

community property if all the following conditions exist:

New Mexico Taxation and Revenue Department

Revenue Code at www.irs.gov. The following conditions must exist for all community income to

belong to you:

1. You did not file a joint return;

2. You treated the item as if only you are entitled to the income, and

3. You did not notify your spouse of the nature and amount of the income by the due date

Half the wage income from employment in Texas is the property of each spouse. The instructions

for PIT-B, line 1, require that half of the New Mexico resident’s wage income is allocated in full to

New Mexico, even if the income was not earned in New Mexico. The non-resident spouse’s share

of the community wage income is not allocated to New Mexico, because the income is not from

services performed in New Mexico.

Example 2. Use the same facts as example 1, except the wage income is the separate income of

the New Mexico resident spouse due to a separation agreement. All wage income is allocated to

New Mexico, because the spouse entitled to the benefit of the entire amount of wage income is a

resident of New Mexico. The New Mexico resident must allocate this wage income according to

non-community property states, special allocation and apportionment rules are not needed. Half of

the community income is allocated to New Mexico, based on the instructions for the resident

spouse’s share of the community income. The other half of the community income is not allocated

to New Mexico, based on the instructions for the non-resident spouse’s share of the community

income.

Example 4. If both spouses are residents of New Mexico, all community wage income is allocated

to New Mexico.

New Mexico Taxation and Revenue Department

Very specific rules apply to whether you can change your filing status by amending your return.

Please refer to IRS Publication 504, Divorced or Separated Individuals for more information. New

Mexico law does not permit you to change your filing status by an amended state return unless

you attach your amended federal return.

With respect to income, New Mexico (and the federal government, because it defers to state law

in this matter) requires community property to retain its character until the date of a decree or

court order ending the marital community. When the court order is final, all income from what was

once community property becomes separate income. Although a court order may be entered long

before the divorce is final, it can dissolve the community and the community character of income

from property. See Sections 40-4-3 and 40-3-8, NMSA 1978.

You and your spouse report half the combined gain from the sale of community property. Your

spouse is taxed on half the community income for the part of the year before the community ends.

When you file separately, list the community property allocation plus whatever income you have

from separate sources, provided that there has been no mixing of funds from separate property.

Whatever filing status you choose, plan ahead. Provide each other with copies of prior-year tax

New Mexico Taxation and Revenue Department

For information on ending the marital community, see IRS Publication 555, Community Property,

and IRS Publication 504, Divorced or Separated Individuals.

Determinations of exemptions you may take and dependents you may claim occur under federal

rules on your federal form 1040 or 1040A. You must do the same for state tax purposes. If you are

still legally married, a full exemption is allowed for each spouse. Note, however, that a spouse is

never a dependent no matter how little income the spouse may earn. Each person filing a

separate or head-of-household return may claim a personal exemption. On married-filing-

separately returns you may each claim an exemption. Take an exemption for your spouse only if

your spouse had no gross income and was not a dependent of another taxpayer. The question of

You may take an exemption for each dependent who meets the five-part test of dependency in

Section 152 of the Internal Revenue Code. This is set out in IRS Publication 504, Divorced or

Separated Individuals. Usually the parent with physical custody of the dependent child for the

larger portion of the calendar year claims the federal and state exemptions for the child, but only if