PSLF-filter: tax filing status edition

February 13, 2023 11:02 AM

My spouse and I are both on track to have our student loans forgiven under PSLF, his is meant to be forgiven this year, while I still have several years' worth of payments to go. My question: should we file our taxes as married-filing-jointly as opposed to our standard joint filing in anticipation of my payments being recalculated once his are forgiven? If this is a question that requires a professional to answer, what kind of professional should I be looking for - a tax specialist, a student loan specialist, or a wacky third option?

Apologies for a probably-googleable question, but I'm having trouble figuring out the right way to phrase my question for those helpful robots.

Additional details that might help clarify my situation: we're both dealing with "classic" PSLF and not the recent $10-20,000 forgiveness plan that's ping-ponging around the courts. We're both currently on income-driven repayment plans that take our combined income into account, and it's my understanding that if we continue to file jointly, our combined income would be taken into account in calculating the payment amount (and we'd basically be paying the same total monthly payment we are now despite his loan being forgiven), but if we file separately, it would just be my income that's taken into account for the payment calculation - if that's not correct, I'd love to hear more about that! Also, my workplace partners with a business called Tuition.io that presumably helps with student loan-adjacent questions, though I haven't found it helpful for my PSLF queries in the past - but if anyone has any tips on getting more specific help from them, I'm all ears!

posted by quatsch to Work & Money (5 answers total)

I filed my student loans in both ways depending on things going on in my life, with which one made the most sense. In general the higher taxes made married filling seperarely vs married filing jointly with the change in monthly payment a fairly similar some years (my spouces income is fairly small though). When we were buying a house, when my child was born and other life events changed the calculation on which was better and less costly for our situation.

My spouse is a numbers person and in general she calculated out the whole thing both ways joint taxes and student payment and the married filing separately and student loan payment then picked. You could certainly do this yourself, but as long as your taxes aren't too complicated a general tax accountant should be fine.

Overall, it's really up to you. I didn't have any problems re forgiveness when I hit my ten year mark even with my changes in filling status.
posted by AlexiaSky at 11:29 AM on February 13, 2023

I am you, except my husband came into the relationship with no loans. Really looking forward to 2026, when I get forgiveness (and pension vesting!)

We ran the math. Did TurboTax for Joint or Married Filing Separately, as well as what my IBR would be under each condition (there's a calculator on one of the official websites.) It was a pain in the ass, but worth it to save a few thousand a year.

For us, married fuling separately was better.

This means that we haul ass to make sure my pre-tax paycheck deductions are maximized (I cover the FSA and do more pre-tax retirement contributions).

Which way the math works out depends on your income.
posted by DebetEsse at 12:17 PM on February 13, 2023

Do you usually itemize or take the standard deduction? If you file separately, you will both need to make the same choice, i.e. if you itemize, he must and if you take the standard, he must also do that. Broadly, the closer in income you are the less you are penalized by filing separately, but there are so many caveats to that so it is worth it to run it both ways to make sure.

There are at least four different income-driven repayment plans:
Income-Based Repayment (IBR).
Pay As You Earn (PAYE).
Revised Pay As You Earn (REPAYE).
Income-Contingent Repayment (ICR).

According to this page, if you are on REPAYE, then they take your joint income no matter how you file. In the other 3 programs, only your income is looked at when you file alone.

That company your employer uses might be helpful for figuring out what your payments will be under your current program, so just don't mention PSLF when you ask them.
posted by soelo at 12:27 PM on February 13, 2023

In terms of what kind of professional can help with this, the one year we (same ish situation) consulted a tax advisor, we got told that what they would do was charge us per tax return if we wanted to compare the results - so, we could pay 3x for mine, spouse, and together, or 1x for together and save the cost. This seems dumb and maybe another person wouldn't have charged it this way, but that's what we ran into.
posted by itsatextfile at 6:02 AM on February 14, 2023

Response by poster: Thank you all for your helpful answers! It sounds like I have a lot of math awaiting me in the near future.
posted by quatsch at 9:27 AM on February 23, 2023