IDR Tax Savings Solution
IDR Tax Savings Solution Questions
What it is
The FitBUX IDR Tax Savings Solution helps you:
Understand: Since the forgiven amount is treated as regular, taxable income at the end of your IDR plan, our solution helps you understand what your tax liability will be at the end of your IDR plan, how it is calculated and the main variables that will influence your tax bill.
Plan: We help you determine how much you need to be saving each month to cover the estimated tax liability at the end of the timeframe.
Implement: Our solution holds you accountable by tracking in real-time whether you’re on track saving for the estimated tax liability, providing notifications and reminders to ensure you are pursuing the strategy correctly, and updating the estimated tax liability over time by taking into account your latest income and household changes when you recertify your income each year.
To be able to forecast your tax liability and track your progress over time, we require the following information:
1- Your Federal student loan types, balances, terms, and interest rates….We have read-only access to your account once it is linked.
2- The balance of the account you are using to save for the future tax liability. This is done by linking your online bank account to your FitBUX account. You can link a bank account, savings account, brokerage account, etc. We have read-only access to your account once it is linked.
We offer three different payment plans:
A monthly subscription of $5 per month; or
an annual subscription of $50 per year; or
a one-time fee of $600 for the duration of your IDR plan.
How it works
Linking your NSLDS account allows us to retrieve your student loan details, including the principal balances, loan types, and interest rates for each of your Federal student loans.
Linking the account(s) where you’re going to save the money to pay your tax bill allows us to update your recommended required minimum savings amount as well as inform you in real-time if you need to make changes to your savings plan. In addition, you will know in real-time if you are over-saving or under-saving.
Any account that you designate as the account you are using to save for the IDR tax liability.
Yes, you will receive notifications if the linking process needs to be fixed or re-linked.
We make 3 key assumptions to forecast how much you need to save and whether you are on track:
1- Your long-term expected annual rate of increase in income. This is key to forecast what your monthly payments will be over time.
2- Your long term estimated tax rate. This is key to estimate what your tax liability will be.
3- Your long-term expected annual rate of return on your savings. This is key to model what your minimum monthly savings amount should be at any point in time.
You can modify these assumptions as follows:
1- From your dashboard, go to “My Tracking” on the left-hand side.
2- Scroll down to the bottom of that page and click on “Update my assumptions”.
3- Click on the 3rd tab labeled “Update Assumptions”.
It is important to keep your information current to ensure the accuracy of your strategy and progress.
There are key elements you want to make sure are current:
- Your income certification information.
- Your linked accounts.
- The underlying assumptions when it comes to your income growth over time, the expected rate of return on your saved money, and your expected long term tax rate.
You can update this information by following these steps:
- Starting from your Dashboard page, click on “My Tracking” on the left side menu.
- Once you’re on the main tracking solution page, scroll down and click the “Update My Assumptions” button.
We will send email updates and post updates and notifications within your account as well.
Your spouse’s loans have their own repayment plan, interest rates, and start date and therefore require different assumptions to estimate your spouse’s tax liability.
In order to correctly estimate that tax liability, your spouse will need to create a separate FitBUX account and subscribe to our FitBUX IDR Tax Savings Solution separately.
To update your recertification information, visit the recertification screen:
1- Scroll to the bottom of the main FitBUX IDR Tax Savings Solution screen and click on “Update my assumptions”.
2- Click on the Recertification tab at the top of that page.
3- Update your recertification information as needed.
Income-Driven Repayment Plans
Recertification simply means you are submitting your income and household information for verification. The information you submit will determine what your required monthly payment will be for the next 12 months.
For more information regarding recertification, please read this article: 2 Costly Mistakes of Income-Driven Repayment Plans To Avoid
Yes, you can change your plan. However, every time you do, the deferred interest on your loan is capitalized. Capitalization means that all of the deferred interest will be added to the outstanding principal balance and it will start to compound interest. Simply, this means that your loan balance will grow at a faster rate over time.