IBR tax ?

[dsherida]

I will be graduating in May and starting to look at loan payments It sounds like we aren't able to defer loans anymore and will have to use IBR. I am married with 2 little ones. My wife is an RN and I was hoping someone could tell me if it then would make sense for us to file seperate tax returns; not this year, but next when I actually have a salary. The IBR payment would be ~$600 if I have to included our joint income, but only ~$250 if I file seperately. However, am I losing way too much in taxes???? Thanks

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[edmadison]

I will be graduating in May and starting to look at loan payments It sounds like we aren't able to defer loans anymore and will have to use IBR. I am married with 2 little ones. My wife is an RN and I was hoping someone could tell me if it then would make sense for us to file seperate tax returns; not this year, but next when I actually have a salary. The IBR payment would be ~$600 if I have to included our joint income, but only ~$250 if I file seperately. However, am I losing way too much in taxes???? Thanks

My guess is that you will get lose much more by filing separately. My suggestion for you is get a copy of Turbo Tax and run a mock scenario each way.

Ed

 

[nontrdgsbuiucmd]

The way IBR was initially set up was not well thought out; if I + spouse file separately and we both have IBR (due to both of us with grad school loans) she would pay 15% of her income to her loans & I would pay 15% of my income to my loans. If we file jointly, she would pay 15% of our JOINT income to her loans and I would pay 15% of our JOINT income to my loans. So it would most likely make sense only to file separately. Note there's a interest deduction for student loans (can deduct up to 2,500 of loans from income last I checked) that is not available if a married couple files separately, but paying an extra 15% of our joint income seems much worse than losing this little deduction.

So I'd suggest you keep up to date with IBR revisions in case this oversight is corrected, and if it's not corrected, look into filing separately.

 

[TMP-SMX]

Well the first year after graduation you should be eligible for the lifetime learning credit and the student loan interest deduction. Obviously it isn't ideal having to pay 30% of the joint income but it isn't an extreme inconvenience either compared to the amounts you would be paying on a normal repayment plan. Pay as much as you can afford to prevent the loan from enlarging.