Hello,

In California and other community property states, domestic partners must combine their income and split it evenly on their federal tax returns. Because I make more money than my partner, my overall income (which again is half of mine and his) is lower on my tax return that what would show up on my pay check. As a result, I would like to base the amount of the monthly IBR payment on my tax return as opposed to sending them my last few paychecks.

My question: Has anyone done this and does anyone know if there could be potential problems down the road by doing this? My worry is that I will do this, and then a few years from now, Dept of Ed will audit me or some other similarly situated borrower and say that Defense of Marriage act didn’t allow that, and I have to repay them. 

Thanks for any insight.

Income-based repayment is meant to be based on Adjusted Gross Income as reflected on the most recent federal tax return, but lenders who believe the tax return does not accurately reflect current income can request “alternate verification of income”.  However, the practice has been that if a borrower submits a recent tax return, the lender uses the AGI reflected there.

I’m not a tax expert and not your lawyer, right?

The way I see it, the rules for determining income don’t apply equally to every borrower due to the difference between tax rules in community property states vs non-community property states.  If a state extends community property rights to same sex domestic partners (like CA does), borrowers cannot separate their income from their partner’s income.  That’s true whether or not the marriage is recognized by the federal government.  Heterosexual couples in CA are treated the same way.  Some student loan borrowers earn more than their partners, others earn less.  They all report 1/2 combined income if they are in a community property state like CA that recognizes domestic partners.