I have a peculiar situation.

I am a resident physician making $55k a year, with significant student loan debt

I just became married to a person who makes $160k a year, without student loan debt.

I am in an IBR plan.  Since we are married, we will file married filing separately to reduce the monthly IBR payment.  However, since we live in a community property state, my adjusted gross income is about (55k+160k)/2 = $107k. 

As a result of this, I will file an “Alternative Documentation of Income”.

http://www.nelnetloanservicing.com/wp-content/uploads/IBR_alt.pdf

However, there is no place on the form for:
1) Student Loan Interest Deduction
2) IRA Deduction
3) Tuition deduction (since I’m taking a couple of graduate school classes, as well)

If I was able to include these deductions, then I could decrease my IBR monthly payment even further.

1) Has anyone had any success with somehow adding these deductions somewhere on the “Alternative Documentation of Income” form?

2) Word to the wise, if you are in this situation, then for god sakes, don’t “actually” get married. You’ll only end up losing money.  When you file Married Filing Separately you lose several deductions, such as the following. 

The child and dependent care tax credit
The adoption credit
The Earned Income Credit
Tax-free exclusion of U.S. bond interest
Tax-free exclusion of Social Security benefits
The credit for the elderly and disabled
The deduction for college tuition expenses
The student loan interest deduction
The American Opportunity Credit and Lifetime Learning Credit for higher education expenses
The deduction of net capital losses
Traditional IRA deductions
Roth IRA contributions

3) Do you have any advice for my situation?  Perhaps a “Legal Separation” might work, since all income after the “Date of separation” becomes “separate property” and not “community property”.  Thus, if I had “Legal Separation” status, then I could file my taxes as a single person with all of the aforementioned deductions.

No one can offer you legal advice or tax advice on the forum.
1) But I am not sure why you need to deduct Student Loan Interest, IRA Deduction, and Tuition Deduction. You need to consult your tax person. You should be disqualified from those deductions anyway. The IRA deduction might still be possible if neither your spouse or you are covered by a retirement plan at work. I am not sure why you would try to take deductions on your Alternative Income Document that you are not allowed to take on your taxes.

2) You need to talk to a lawyer (and your spouse) about legal separations as it depends on your state laws.

Wulfric. I do not think you are very informed on IBR and Community property states based on your response
1) He’s like everyone else. He doesn’t want to pay more. I am in the same situation. The Alternative document is supose to address the Education department’s mandate that people should not pay more based on their location. IE I’m in Washington and therefor if I use alternative documentation I do not get to utilize deductions before his AGI is utilized for determining how much I pays on my loan. If I were in Montana, my AGI would be based on my own AGI after deductions and therefor I would pay less. As it is right now the loan servicers ARE making people in communal property states pay more in payments then individuals in non-communal property states. There needs to be some mechanism to fix this.
2) He’s probably not serious about it, but it does cross eveyone’s mind that is in this situation because it is inherently unfair.  There is a serious “Marriage tax” going on for people on IBR because of the penalties you take for filling separately.

I too would love to know if someone has had any success using “Alternative documentation” that would capture the deductions. I had my accountant fill out a 1040 as though I was not in a communal property state and I submitted it with a letter certifying from him what it was with his credentials. It was denied without response. It sounds like there needs to be some lobbying to our representatives going on if this continues.

Jared,

You can speak of ‘marriage tax’ and community property inequality, but I still do not agree with lying to your lender. If the IRS says you are not entitled to a deduction on your tax return, I still view it as fraudulent to tell your lender you are entitled to deduct it on your ADOI. But that is purely a personal opinion. Most people would tell you that if it is approved by the lender, then it is perfectly fine.

To answer your question: No, I have not heard of any success using Alternative documentation to take deductions. I have heard of a few individuals who walked their lender through calculations to remove non-taxable income from their paystubs. I have seen a few articles online that say W-2s are acceptable supporting documentation. But everyone in the forums and writing articles admits that it depends on your lender. .

Please remember that some of us on the forums (like myself) are required to report our spouses income regardless of filing status or ADOI. Excluding your spouses income is a benefit of IBR, but it has drawbacks. Not everyone on here gets that option with their plan. We just hope our plan benefits and tax savings out weight the extra income we have to report.