Marriage-Tax-Penalty-Graph-FL.gif' alt='Can I - File Married Filing Separately' title='Can I - File Married Filing Separately' />Tax Filing Status and Student Loan Payments. If you are married and have an IBR, ICR, or PAYE student loan payment plan, your tax filing status can affect the amount of your monthly student loan payment. If you are married and repaying student loans under a federal income driven repayment plan, you have an important choice to make when filing your tax return whether to file as married filing jointly or married filing separately. Choosing one over the other might lower your monthly student loan payment. What Are Income Driven Federal Student Loan Repayment Plans Income driven federal student loan repayment plans are plans that set a monthly payment based on your current income and family size. Payments under these plans are generally lower than payments under a Standard Repayment Plan. Depending on the plan, payments can range from 1. Your loan servicer will re set your monthly payment amount each year, based on information from your tax return. Income driven repayment plans include the Income Contingent Plan, the Income Based Plan, and the Pay As You Earn Plan, all described in Nolos article Whats the Difference Between Income Contingent Repayment Plans and Income Based Repayment PlansIRS Filing Status Affects Student Loan Monthly Payments. Your monthly payments under an income driven repayment plan are set each year based on the information in your federal tax return. Your loan servicer will request a copy of your tax return, look at your income, family size, and debt load, and use those factors to calculate your payment for the year. If you file your taxes as married filing separately, your loan servicer will consider only your income, not your spouses, in calculating your monthly payments. If youre married, you have two options on how to file your income taxes You can file a joint return, or you and your spouse can each file an individual return. This can have a significant effect on your monthly payment possibly saving you thousands of dollars. Example. Lets take a family with two children. One spouse makes 5. The spouse with the student loans debtor is in the Income Contingent Repayment program ICR. If that spouse files a tax return as married filing separately, the monthly ICR payment could be as low as 2. ICR payment will be around 6. YaN1s3vo/hqdefault.jpg' alt='Can I - File Married Filing Separately' title='Can I - File Married Filing Separately' />For married couples, the decision to file jointly or separately will affect your income. How to File for Bankruptcy Without Your Spouse. Filing for bankruptcy is a procedure that can discharge your obligation to pay some or all of your debts. If you are. Is the Married Filing Jointly Filing Status Right for Me If you are married, you have the option of filing your tax return jointly or separately. If youre in the middle of a divorce, you may file a joint return only if you are married at the end of the tax year December 31 and both of you agree to the filing. You can run your income and expense numbers and see the effects on different repayment plans with the Department of Educations Repayment Estimator. Disadvantages of Choosing Married Filing Separately Status. Be aware that there may be some disadvantages if you file as married filing separately. You May Lose Tax Credits and Deductions. Many valuable tax credits and deductions are not available to married couples who file their federal tax return as married filing separately. The disallowed tax benefits include Child and Dependent Care Credit. Earned Income Tax Credit. Student Loan Interest Deduction, and. Hope or Lifetime Learning Educational Credits. MT-10.gif' alt='Can I - File Married Filing Separately' title='Can I - File Married Filing Separately' />There may be other tax benefits, and other public benefits, that are disallowed for those filing married filing separately. Most of the tax benefits listed are only available for families with lower incomes. For example, families earning more than 5. Earned Income Tax Credit. It may be worth having your tax preparer run your tax filing as both married filing separately and married filing jointly to see the difference in your tax bill. Remember, income driven repayment plans require repayment for 2. Possible Tax Consequences Down the Line. One other trade off from making lower payments in an income driven repayment plan is the likelihood that you will have a larger forgiven loan balance at the end of the repayment period. Forgiven student loan debt may be considered income on your tax return. For example, for the family described above, 1. Assuming a low 1. Taxes on forgiven debt are not an issue for people repaying student loans under the 1. Public Service Loan Forgiveness program any balance left after ten years of payments is forgiven without a tax penalty. Some other career specific loan repayment programs have the same terms. Check with your loan servicer to see if you qualify for one of those programs. In addition, as of 2. Congress was considering changing the law to make all forgiven student loan balances non taxable. Tax Requirements if Married and Filing Separately. To fulfill the married filing separately requirements, youll each report your own income separately. However, if you live in a community property state, you must report half of all community income and all of your separate income on your return. Community property states include Arizona. California. Idaho. Louisiana. Nevada. New Mexico. Texas. Washington. Wisconsin. Community property is property that you, your spouse, or both acquire During your marriage. While you and your spouse are living in a community property state. Separate property is property that you or your spouse Owned separately before your marriage. Earned while living in a non community property state. Received separately as a gift. The Worlds End Vostfr. Bought with separate funds. Acquired through separate funds. The laws of your state govern whether you have community or separate property and income. You must attach Form 8.