Tax Rules: Final: 5703-7
5703-7-18 Nonresident “married filing
jointly”.
(A) For purposes of this rule a “non-liable MFJ spouse” is an
individual who for the taxable year meets all the
requirements in paragraphs (A)(1) to (A)(3) of this rule.
(1) The individual’s filing status for federal income tax
purposes is “married filing jointly;”
(2) For purposes of Chapters 5747. and 5748. of the Revised
Code, the individual is a full-year nonresident of this
state; and
(3) The individual did not directly, or indirectly on account
of either (or both) an equity investment in a pass-through
entity or a distribution from a trust, earn or receive income
which, for purposes of computing the nonresident credit
allowed by division (A) of section 5747.05 of the Revised
Code, would be apportioned or allocated to this state under
sections 5747.20 to 5747.231 of the Revised Code.
(B) Section 5747.08 of the Revised Code requires that an
individual’s filing status for the taxable year for Ohio
personal income tax purposes and for school district income
tax purposes be the same as the individual’s filing status
for federal income tax purposes (Title 26 of the United
States Code) for that taxable year. As such, each individual
whose filing status for federal income tax purposes is
“married filing jointly” for the taxable year must use the
“married filing jointly” status for that taxable year for
both Ohio personal income tax purposes and school district
income tax purposes. This requirement applies even if one or
both of the “married filing jointly” taxpayers are full-year
nonresidents of Ohio.
(C)(1)(a) Except as set forth in paragraph (C)(1)(c) of this
rule, when computing Ohio adjusted gross income less
exemptions, no individual is allowed a deduction for any item
of income or gain unless division (A) of section 5747.01 of
the Revised Code expressly provides for the deduction.
(b) Nothing in division (A) of section 5747.01 of the Revised
Code allows a deduction for income or gain of a non-liable
MFJ spouse solely because such income or gain is neither
earned nor received in this state.
(c) Paragraph (C)(1)(a) of this rule does not apply to
military service compensation described in the Servicemembers
Civil Relief Act of 2003, 50 U.S.C. 501 (hereineafter,
“Servicemembers Act”) as it existed on November 1, 2006.
Pursuant to that act a nonresident, when computing Ohio
adjusted gross income less exemptions, can deduct such
compensation.
(2) All items of income and gain which are not allowed as a
deduction under division (A) of section 5747.01 of the
Revised Code, and all compensation which is not deducted
pursuant to the Servicemembers Act, will enter into the
computation of the nonresident credit. Paragraph (C)(2) of
this rule applies even if the items and compensation are
those of a non-liable MFJ spouse.
(D)(1) The non-liable MFJ spouse shall not be liable for any
tax, interest penalty, or penalty due for the taxable year by
the spouse of the non-liable MFJ spouse.
(2) The non-liable MFJ spouse shall not be required to sign
the personal income tax return or the school district income
tax return required to be filed for the taxable year by the
spouse of the non-liable MFJ spouse.
(3) The non-liable MFJ spouse shall not be required to file
the personal income tax return or the school district income
tax return required to be filed for the taxable year by the
spouse of the non-liable MFJ spouse.
(E) Paragraphs (E)(1), (E)(2), and (E)(3) of this rule each
set forth an example illustrating the application of this
rule.
(1) H and W are a married couple with no dependents. H is a
full-year resident of Ohio with wages of $40,000 earned in
this state. W is a full-year resident of Pennsylvania with
wages of $60,000 earned in that state. They have no other
sources of income. They file a joint federal income tax
return reporting federal adjusted gross income of $100,000.
H is liable for Ohio tax, both as a resident of this state
and as an individual with income earned or received from
sources within this state. Since H and W filed a joint
federal income tax return, H must compute tax beginning with
the $100,000 joint federal adjusted gross income.
Accordingly, H must calculate Ohio income tax on $100,000
less the deduction allowed under section 5747.025 of the
Revised Code for two personal exemptions. H can then reduce
the tax so calculated by two exemption credits allowed by
section 5747.022 of the Revised Code and then reduce the net
amount by the joint filing credit allowed by division (G) of
section 5747.05 of the Revised Code. From that second net
amount H can then claim, under division (A) of section
5747.05 of the Revised Code, the nonresident credit. In this
example the nonresident credit will be sixty per cent
($60,000/$100,000) of the Ohio income tax after reduction for
the exemption credit and for the joint filing credit. The
remaining forty per cent of the calculated Ohio income tax
after reduction for the exemption credit and for the joint
filing credit is the net Ohio income tax that H owes before
reduction for refundable credits such as estimated tax
payments made.
Because for the taxable year W meets the definition of
“non-liable MFJ spouse” set forth in paragraph (A) of this
rule, W is not liable for any Ohio income tax and related
interest, interest penalty, or penalty due for that taxable
year; W is not required to sign the Ohio “married filing
jointly” income tax return, and W is not required to file the
Ohio “married filing jointly” income tax return (but H is
required to sign and file the Ohio “married filing jointly”
income tax return).
(2) H and W, a married couple with no dependents, are both
full-year residents of a state other than Ohio. They are
rental property owners in that state and earn profits from
their rental activities of $50,000 and $30,000, respectively.
W is also a limited partner in a partnership conducting
business in Ohio (assume the partnership’s property, payroll,
and sales Ohio apportionment ratio is .500000). For the
taxable year W has a $20,000 distributive share of ordinary
income from the limited partnership. Other than H’s profit
from rental properties located outside Ohio, H has no other
sources of income. H’s and W’s filing status for federal
income tax purposes for the year is married filing jointly.
They have no other income and no adjustments to gross income;
so, their adjusted gross income for federal income tax
purposes is $100,000.
Because W has a distributive share of income from a
pass-through entity doing business in Ohio, W is liable for
Ohio’s personal income tax. Since H and W filed a joint
federal income tax return, W must compute tax beginning with
the $100,000 joint federal adjusted gross income.
Accordingly, W must calculate Ohio income tax on $100,000
less the deduction allowed under section 5747.025 of the
Revised Code for two personal exemptions. W can then reduce
the tax so calculated by two exemption credits allowed by
section 5747.022 of the Revised Code. From that net amount W
can then claim, under division (A) of section 5747.05 of the
Revised Code, the nonresident credit. For purposes of
computing the nonresident credit, only $10,000 of W's $20,000
distributive share of partnership income is apportioned to
Ohio; so, the nonresident credit will be ninety per cent
($90,000/$100,000) of the Ohio income tax after reduction for
the exemption credit. The remaining ten per cent of the
calculated Ohio income tax after reduction for the exemption
credit is the net Ohio income tax that W owes before
reduction for refundable credits such as estimated tax
payments made.
Because for the taxable year H meets the definition of
“non-liable MFJ spouse” set forth in paragraph (A) of this
rule, H is not liable for any Ohio income tax and related
interest, interest penalty, or penalty due for that taxable
year; H is not required to sign the Ohio “married filing
jointly” income tax return, and H is not required to file the
Ohio “married filing jointly” income tax return (but W is
required to sign and file the Ohio “married filing jointly”
income tax return).
(3) For the taxable year immediately preceding the current
taxable year, H and W were full-year residents of Ohio. At
some time during the current taxable year W, but not H,
leaves Ohio and establishes residency in another state.
Meanwhile, H continues to reside full-time in Ohio. For the
current taxable year their federal income tax return shows
the following:
Their filing status is married filing jointly and they have
no dependents. H has wages of $25,000 earned in Ohio. W has
wages of $20,000 earned in Ohio (prior to establishing
residency in the other state) and wages of $30,000 earned in
the other state (subsequent to establishing residency in the
other state). W also has $10,000 of long-term capital gain
from the sale of publicly-traded securities (the sale
occurred prior to W’s establishing residency in the other
state) and has $15,000 of long-term capital gain from the
sale of publicly-traded securities (the sale occurred
subsequent to W’s establishing residency in the other state).
They have no other items of income or deductions, so their
federal adjusted gross income and their Ohio adjusted gross
income is $100,000.
For the taxable year H and W must file an Ohio income tax
return and indicate a filing status of married filing
jointly. They must enter on line 1 of their Ohio form IT-1040
for the taxable year the “married filing jointly” adjusted
gross income of $100,000 as shown on their federal income tax
return. They can claim two personal exemption deductions and
the credit allowed by sections 5747.025 and 5747.022 of the
Revised Code, respectively. They then can claim the joint
filing credit allowed by division (G) of section 5747.05 of
the Revised Code. With respect to the income W earned after
establishing residency in another state and with respect to
the capital gain W recognized after establishing residency in
another state, H and W can claim the nonresident credit
allowed by division (A) of section 5747.05 of the Revised
Code. In this example the nonresident credit will be
forty-five per cent ([$15,000 + $30,000]/$100,000) of the
Ohio income tax after reduction for the exemption credit and
for the joint filing credit.
Because for the taxable year neither W nor H meets the
definition of “non-liable MFJ spouse” set forth in paragraph
(A) of this rule, W are H are jointly and severally liable
for any Ohio income tax and related interest, interest
penalty, or penalty due. W and H are both required to sign
the Ohio income tax return, and they are both required to
file the “married filing jointly” Ohio income tax return.
Effective: 3-17-07
Promulgated under: 5703.14
Authorized by: 5703.05
Amplifies: 5747.01, 5747.02, 5747.022, 5747.05, 5747.08