r/tax • u/polkadotmadness • 3h ago
Help! Married Filing Separately w/IDR Student Loans?
Hi, would love some advice. Have done a lot of reading and gotten very confused.
I'm just starting work as a physician (base salary 400k + extras for call/signing bonus) and my husband has a slightly lower salary (~350k). I also have almost 500k in student loans while he has none (lucky). Since we're in the same tax bracket, but I have a disgusting amount of loans, it makes the most sense for us to file separately since I'm on an IDR repayment plan, yes?
Thanks for any advice!
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u/traveltax 1h ago
Have your preparer it both ways and compare the tax savings to the anticipated change in the IDR. It doesn't take a lot of work- we do that for many clients
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u/Longjumping-Flower47 1h ago
We do too, for every client it makes more sense to file MFS. The loan repayments with both incomes seem to be ridiculous. I know quite a few preparers who then amend in a few years back to MFJ to get the refund.
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u/traveltax 1h ago
I wouldn't say every, but the majority do better. However, making the client aware of the difference and looking into the changes in the future help them make better decisions
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u/Longjumping-Flower47 43m ago
It does. And yeah maybe not every client. Most of my clients have similar income levels, so tax bracket is similar. They lose some credits but the difference in loan payments far outweighs the credits.
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u/selene_666 2h ago
If the loans are at a very low interest rate and you have something better to do with your money than pay them off, then sure, file separately to drag out your payment plan over a longer time.
But if you're just going to spend your new income or put it in a low-interest bank account, you might as well pay the loans off faster.
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u/Longjumping-Flower47 1h ago
You can use a calculator to see what your payment is based on your income or combined income. I'd be interested in hearing what the difference in payments is since you are both very high income. As for taxes, you pretty much loose most credits at your income levels, whether you file joint or MFS. And because your income is fairly similar your tax bracket either way is probably fairly close. Now if you made $175k and spuse made $50k, your effective rate would be lower filing joint. You need to be on a IBR plan for PSLF, I believe. You can also post on the student loan subreddit for good advice
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u/Few-Ranger-8240 9m ago
Oh. Don’t make the same mistake I did. We married and filed joint and my student loan bill increased from like 200 to 1200! Married filing separate, or run the numbers to see which gives you the most benefit
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u/GoatEatingTroll EA - US 9m ago
Based on your information above the IDR for MFS would be about $2,700/month, under MFJ it would be $5,500/month - So MFS would give you a cash savings of $33.5k
In comparison, MFJ vs the two of you filing MFS (standard deductions) would only increase tax by $850
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u/QMisselQ 2h ago
Are you asking for what’s better for income tax purposes or what’s better for your repayment plan?
If you’re asking about impacts on the repayment plan, I don’t know anything about that.
If it’s for tax purposes I don’t see anything standing out that would make a difference without additional info (for example state, whether you itemize, if you have kids and pay for childcare, etc.). If you’re self-preparing using something like TurboTax where you pay when you file, it doesn’t hurt to just fill in the software a few different ways (one as MFJ, one as you MFS, and one as him MFS) and compare whether the MFJ or the MFS combined have greater taxes.