Student Loans: Married Filing Separately or Jointly

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  • Student Loans: Married Filing Separately or Jointly

For those seeking student loan forgiveness via an income-driven repayment plan (IDR), there is a lot of confusion regarding how to file your taxes when you are married.  Specifically, the discussion I often times hear centers around how monthly payments are determined.

This article highlights what you need to know about filing your taxes separately or jointly and how payments are determined since they are based on income.  If you haven’t read our Student Loan Forgiveness Guide, we recommend you do so first before reading this article.

Table of Contents:

  1. To File Or Not To File Separately, That Is The Question
  2. Determining Your Monthly Payment When Filing Separately
  3. Determining Your Monthly Payment When Filing Jointly

FitBUX's Income Driven Repayment Tax Savings Solution

To File Or Not To File Separately, That Is The Question

First thing first, this conversation is for those on IBR and PAYE.  If you are on REPAYE, you’ll want to skip to the next section.

This question is confusing because people often contact their accountant to find answers. Most accountants, however, do not have the tools to calculate your estimated monthly payment based on your filing status.

Therefore, this is a three-step process.

Step 1: Ask your accountant how much more you would owe in taxes if you filed separately vs jointly. This can also be done using accounting software.

Step 2: Use FitBUX’s IDR calculator to calculate the difference in your estimated payments between filing separately and jointly.

Step 3: Compare results from Step 1 and 2. Go with the option that puts more money in your pocket.

For example:

Step 1: Let’s say you save $2,000 in taxes by filing jointly.

Step 2: Filing jointly increases your monthly payment by $500 ($6,000 annually) relative to filing separately.

Step 3: Filing jointly would cost you $6,000 annually on student loans and only save you $2,000 in taxes.  Therefore, filing separately would be the way to go in this example.

Determining Your Monthly Payment When Filing Separately

I want to emphasize one point before moving forward…this only applies to Federal student loans. This does not apply to private student loans OR Federal loans that you refinanced.

If you are on PAYE or IBR and file separately, then your monthly payment is based on your own income and your Federal student loan debt.  That is simple.

Determining Your Monthly Payment When Filing Jointly

Confusion lies on what happens when you file jointly.  The monthly payments are calculated differently depending on the plan you’re on, i.e. PAYE, REPAYE, or IBR. I break down each calculation below.

PAYE & IBR: Your payment is based on you and your spouses’ TOTAL income and Federal student loans. However, your monthly payment IS NOT COMBINED. Let’s use an example to illustrate this.

The situation:

Your Federal Student Loans: $140,000

Your Spouse’s Federal Student Loans: $160,000

Combined Federal Student Loans: $300,000

Your Combined AGI (Combined Income): $150,000

The total monthly payment will add up to $1,098 per month. Most people think that each spouse will have to pay $1,098 per month. THAT IS NOT THE CASE!  You and your spouse will each pay a portion of that payment, divided as follows:

Your federal student loans are approximately 47% of the total (140k/300k). Therefore, you would have a monthly payment of $512.40 (47% of $1,098) and your spouse’s monthly payment would be $585.60. (53% of $1,098)

If you hear stories that someone had their payments double, triple, etc. when they started filing jointly, this is not accurate. One of three things actually triggered that change:

  • Their student loan servicer made a mistake;
  • They had something else happen that increased their payment such as salary increase; and/or
  • They are utterly confused and are not familiar with the intricacies of loan forgiveness. In that scenario, we encourage you to share our student loan forgiveness guide with them.

Also, we constantly see loan servicers and borrowers make these mistakes annually.  Our student loan forgiveness technology makes sure you are not over charged.

REPAYE: The above example applies to REPAYE as well. However, with REPAYE you don’t get to choose whether you’re going to file taxes jointly or not.  The government automatically calculates your payment based on combined incomes and your combined Federal loans regardless of how you file.

If you want more details on the difference between REPAYE and PAYE, then check out this article.

IDR Tax Savings Solution

Our FREE student loan planners have helped thousands of Young Professionals manage and eliminate over $1.4 Billion in student loans. We help you develop your plan for free because planning your financial future should not cost you your financial future.

By Joseph Reinke, CFA, Founder of FitBUX

Joseph Reinke, CFA

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About the Author

Joseph Reinke is a Chartered Financial Analyst (CFA) Charter Holder and founder of FitBUX which has helped over 14,000 young professionals on their journey to financial freedom. Joseph has been personally investing since he was 12 years old.

In addition, he has experience in student loans, mortgages, wealth management, investment banking, valuation, stock trading, and option trading. He has been on 100s of podcast and has been invited to 100s of universities to discuss financial planning with their soon to be graduates.

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