Community Property States

Community property means spouses who acquire property during marriage own property equally. If the couple divorces, community property is divided 50/50. Divorce laws vary by state, with some leaning more toward the community property concept. Nine states are community property states as of 2024.

In a community property state, couples are required to split equally all assets acquired during their marriage. By having the law define the division, states aim to prevent squabbling over who gets what and how much.

Key Takeaways

• Community property law requires that a divorcing couple split assets 50/50.
• Property owned by either spouse before the marriage or after a legal separation may not be considered or divided as community property.
• Only nine states are classified as community property states.

Community Property State List

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

Five other states—Alaska, Florida, Kentucky, South Dakota, and Tennessee—have an opt-in community property law. Registered domestic partners who live in California, Nevada, or Washington are also subject to community property laws.

What's Included and Excluded?

• All earned income, called community income, real or personal property paid for with community income, and funds in retirement and savings accounts.
• Debts taken on during the marriage will be subtracted from the total to be divided.
• Community property does not include assets owned by either spouse before the marriage or acquired after a legal separation.
• Gifts or inheritances received by one spouse during the marriage are also excluded.
• Debts before the marriage are not shared and are not considered community property.
• If a property was purchased with community and individual funds, only the part bought with community funds is considered shared.
  

Divorce courts in a community property state commonly split all other assets 50/50 unless both parties agree on another arrangement. This may require that joint property is sold so former partners can split the proceeds.

Assets in Multiple States

Property purchased in a community property state using funds earned in a state that is not a community property state is commonly excluded from the assets to be split 50/50. The opposite is also generally true. Property purchased using money earned in a community property state is community property regardless of where it was bought or located.

For those living in multiple states, one is a community property state, where an individual holds permanent legal residence is the valid domicile and state, according to the Internal Revenue Service. Some factors that determine domicile include citizenship, where individuals pay state income tax, vote, live most often, and where their business and social ties are.

In the case of the death of a spouse, community property states assume that the surviving spouse owns any joint property.

Prenuptial Agreements

The existence of a prenuptial agreement signed before the marriage will almost certainly determine the division of property in a divorce, even in a community property state. A "prenup" normally overrides the community property law. As long as the agreement is valid and doesn’t violate state or federal law, the judge will likely accept it as proof that the couple agreed to a split of their assets that isn't necessarily 50/50.

Community Property vs. Common Law Property

The majority of states rely on the concept of common law property to determine who owns property acquired during a marriage. In a common law state, if one spouse purchases a car or a boat and their name is on the title, the asset belongs to that individual. By contrast, if the couple lives in a community property state, the vehicle would automatically become the property of both spouses unless the individual who bought it used their separate funds for the purchase.

Divorcing parties often work out how they divide their assets and debts on their own or with the help of a neutral party, such as a mediator. If they cannot agree, the courts decide on property division based on the state where the couple lives.

In a common law property state, equitable distribution is the guiding principle. The idea is that property ownership is inherently unequal due to factors such as spouses' levels of education, employability, earnings level and potential, financial needs, age, and health.

What Tax Considerations Are Important for Divorcing Couples in a Community State?

If a married couple files taxes separately, figuring out what is community property and what isn't can get complicated. The ownership of investment income, Social Security benefits, and even mortgage interest can be complicated by state laws. Tax professionals advise figuring out the tax both jointly and separately. Many people discover the difference is so slight it's not worth the hassle of filing separately—except in certain circumstances.

Does the U.S. Government Oversee Community Property State Laws?

No. Each U.S. state is responsible for its property laws. As of 2024, just nine states have community property laws.

Why Does a Community Property State Matter?

Such a state may matter because its community property law affects the division of assets in a divorce for couples who live within its boundaries. A couple may choose to live in a community property state knowing that all assets acquired during marriage will be divided equally in the event of divorce.

The Bottom Line

A community property state has laws that require that assets acquired during marriage be split evenly between spouses if they divorce. Not all assets fall under this law. Assets and debt acquired before marriage are not considered community property. The nine community property states in the U.S. are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.