What Is Community Property?

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Definition

Community property is a type of joint ownership of assets between a married couple. With some variation by state, it means all assets purchased or acquired by a couple during their marriage are owned equally by them.

Key Takeaways

  • Community property is a form of joint property ownership law in nine states and two territories; it is optional in three states.
  • Assets acquired before a marriage are excluded. Gifts and inheritances received during the marriage are also separate.
  • Income and debt are jointly owned in community property states unless the income or debt is from a separated asset.
  • Prenuptial agreements can override community property law if explicitly specified.

How Community Property Works

Community property is joint ownership of all assets purchased during a marriage, no matter which spouse purchased them. Under this system, all community property must be split evenly if a couple divorces. However, gifts and inheritances are separate property, not owned by both spouses. If one spouse receives an inheritance or gift, it is theirs alone—no matter what their marriage status is.

Community property is the law in nine states:

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

Note

Alaska, Tennessee, and South Dakota allow community property if both spouses agree to live under community property rules. In addition, there are two U.S. Territories that are community property jurisdictions—Guam and Puerto Rico.

In these states and territories, assets that enter the lives of a couple after they are married are considered community property. These assets include income, furniture, vehicles, or anything purchased during the marriage.

Example of Community Property

In a community property state, if you purchase a house during the marriage and put only one partner's name on the deed, the other partner is still the legal co-owner.

Types of Community Property

Assets

Assets that each spouse owned before the marriage date are not included in community property. For example, if Salazar owned a home before he married Siobhan, she isn't considered an equal owner of that property.

However, property can transmute ("change") into community property. For example, if a spouse is the sole owner of a bank account but uses the account to withdraw and deposit community money, the account is a community asset. However, the rules for transmutation can be nuanced and it's not always easy to tell if property has transmuted.

Income

Income counts as well. For example, suppose Eva and Laia are getting a divorce. They are both employed and earn income, and they both share each other's income. Therefore, it's possible under community property rules that each would own half of the total income and wages after the date they were married.

Debts

Debts also fall under the umbrella of community property. Depending on state laws, debts are equally owed by both spouses, regardless of which one incurred the debts. For example, if Clyde's husband Charles were to run up a $10,000 credit card bill and fail to make the payments, the lender could pursue the couple's community property to pay for the debt.

Taxes

Community property laws affect federal income taxes, too. If spouses file separate income taxes, each is taxed on 50% of the total income, no matter which spouse earned it. For example, if Mary brought in $75,000, and John only brought in $25,000, and they filed separately, they would each pay federal taxes on $50,000 of income for the year.

Note

Make sure you understand how state taxes work if you live in a community property state. If you're unsure, contact your state's tax authority.

Community Property vs. Common Law Property

Under common law, each spouse is a separate individual and their legal and property rights are separate. Forty-one states use common law. In these states, for example, each spouse is responsible for their own tax bill.

In community-property states, spouses are seen as partners in a community. They each contribute with their labor to benefit their community, so they each get a 50% share of all community property.

Community Property and Divorce

When a couple divorces in a community property state, each spouse is generally entitled to half of their marital or community property. Likewise, each spouse would be responsible for an equal share of all marital debts.

Divorce laws can vary somewhat among the community property states, so consult with an attorney who practices in your state if you want to know the state's rules. For example, a prenuptial agreement can override community property law in California.

If both spouses consent to a non-community-property arrangement in writing and their agreement meets all the rules for a qualified prenuptial, their property and debts would be divided according to the agreement, not community property law.

Note

All other states, sometimes called "equitable distribution" states, divide marital property and debts in a way that seems equitable and fair to the court.

Community Property and End of Life

As with divorce, asset distribution following the death of a spouse in a community property state depends on state law. If the couple didn't make an estate plan with a will, the intestacy laws of the state where they lived would govern who gets what. These laws tend to vary a great deal among community property states.

For example, a surviving spouse would inherit all the community property in Texas if the couple had children together. But if the spouse who died had children that weren't also the surviving spouse's children, those children would receive their parent's 50% share of the community property and the surviving spouse would receive the other 50%.

Frequently Asked Questions (FAQs)

What is an example of community property?

In a community property state, a home would belong to both spouses even if one spouse bought the house in their name after their marriage.

What is the difference between separate property and community property?

In general, separate property is property a spouse obtained before the marriage, while community property is obtained during the marriage.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. IRS. "Community Property Law." Part 25.18.1.3.19.

  2. IRS. "Publication 555, Community Property."

  3. IRS. "Internal Revenue Manuals: Part 25. Special Topics. Chapter 18. 8 Community Property Section 1. Basic Principles of Community Property Law." See heading 25.18.1.2.2 (03-04-2011).

  4. IRS. "Internal Revenue Manuals: Part 25. Special Topics. Chapter 18. 8 Community Property Section 1. Basic Principles of Community Property Law." See heading 25.18.1.3.22.

  5. IRS. "Community Property Law." Internal Revenue Manual, Part 25.18.1.2.2

  6. Jin Kim. "Splitting Community Property Assets and Debt."

  7. IRS. "Internal Revenue Manuals: Part 25. Special Topics. Chapter 18. 8 Community Property Section 1. Basic Principles of Community Property Law." See heading 25.18.1.2.4.

  8. IRS. "Internal Revenue Manuals: Part 25. Special Topics. Chapter 18. 8 Community Property Section 1. Basic Principles of Community Property Law." See headings 25.18.1.2.1 and 25.18.1.2.2.

  9. IRS. "Internal Revenue Manuals: Part 25. Special Topics. Chapter 18. 8 Community Property Section 1. Basic Principles of Community Property Law." See Exhibit 25.18.1-1

  10. Ham Family Law. "What You Need To Know About Prenups in Contra Costa County, California."

  11. Legal Information Institute. "Equitable Distribution."

  12. Texas Constitution and Statutes. "Estates Code: Title 2: Estates of Descendants." Sec. 201.003 (b)(2).

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