I am currently in Graduate school and plan on graduating in Summer of 2017. I have made very few payments on my student loans due to an AmeriCorps education award (this was around 2007 so I still need to apply and find out how many payments are going to count because I didn’t make 1 lump sum payment). Anyways I was married in January of this year and I live a community property state (WI). Our combined income this year is about $112,000 with my share being about $53,000. My husband had very small amounts of students loans from a 2 year school (he did not finish) and they are paid off. I have about $85,000 between undergrad and grad [both private schools]. I’m guessing it will be about $95,000 by the time I graduate.

I currently work for county government and expect to be on track for PSLF as my entire career has been in qualifying jobs and I plan on continuing that. My concern is how the income based repayment plans look at your income. I am aware that due to living in a community property state I would have the option to submit separate verification of my income if I file taxes as married filing separately (community property rules would require us to split things 50/50). Although I have not been able to find an answer on what happens with a child (we don’t have any yet but expect to within a couple years). We plan to hire an actual accountant this year to do our taxes as we also recently bought our first home and would like someone to walk us through the tax implications the first time.

I don’t expect our accountant to know everything about student loans but I am going to ask that they run the numbers both ways (married filing separately and jointly). As our incomes are relatively close and we are in a community property state I don’t imagine there being a huge difference but then again I don’t know.

Basically I"m wondering what factors to look at when deciding how to file our taxes. It’s my understanding that .10 of our discretionary income is what would be required on most repayment plans (15% on one). Discretionary income is defined as income exceeding 150% of the FPL. Since the FPL for 2 is not double the FPL for 1 it seems to me that I’d be better of filing separately and then submitting separate income verification (again due to the community property state this is allowed since my taxes will reflect part of my husband’s income since he makes more). I estimate my payments based on my income would be $294 (married filing separately with additional income verification) or $734 based (married filing jointly) (assuming 10%) [I used the FPL numbers I use in my job which could be slightly different then what they use]. A difference of $440 is substantial. I’m guessing filing jointly would put me at a level to pay off in 10 years and not qualify for PSLF whereas filing separately I’d qualify.

Any thoughts?

I’ve heard it’s a headache to file separately in a community property state so I’m trying to make sure it’s worth it.

I know this is an old post, but we’ve been filing separately in a community property state for 6 years.  I even did it myself after hiring tax preparer one year.  You create an income allocation worksheet and allocate 50% of income and taxes paid to each spouse and submit separate returns…that’s pretty much it.  The big issue that comes into play is that you lose some deduction options, such as for student loan interest, earned income, and others.  I actually did a test this year, joint vs. separate, and it didn’t have much of an impact financially since we don’t have a lot of deductions and end up taking the standard.  But everyone’s situation is different.  It’s a pain, but it’s surmountable. ALL that being said, there have been changes to the various programs, and new borrowers who enter certain repayment programs have to count both spouses’ income regardless of filing status….but I am not really familiar with the new options, so you should check on that for sure.

I know this is an old post, but we’ve been filing separately in a community property state for 6 years.  I even did it myself after hiring tax preparer one year.  You create an income allocation worksheet and allocate 50% of income and taxes paid to each spouse and submit separate returns…that’s pretty much it.  The big issue that comes into play is that you lose some deduction options, such as for student loan interest, earned income, and others.  I actually did a test this year, joint vs. separate, and it didn’t have much of an impact financially since we don’t have a lot of deductions and end up taking the standard.  But everyone’s situation is different.  It’s a pain, but it’s surmountable. ALL that being said, there have been changes to the various programs, and new borrowers who enter certain repayment programs have to count both spouses’ income regardless of filing status….but I am not really familiar with the new options, so you should check on that for sure.