Just graduated and got married. Should I file jointly or separately?

[David Hasselhof]

I've searched the forums and couldn't find anything really specific. This will be my first real experience with taxes and loan repayment, so I've been trying to do my homework in the midst of starting internship. I've spent hours reading tax laws, White Coat Investor, etc.

Anyways, I graduated med school this May and I was married in June. I have ~ $200,000 in loans, my wife works and makes around $45,000 a year. I'll make around $48,000. We don't have any kids.

I guess I'm going to do IBR. I've briefly used some calculators and it seems if I run it with the joint filing status, my monthly IBR will be $700, whereas if I run it with a separate filing status it goes down to $150. That seems like a huge difference so I'm not sure if I'm doing everything correctly.


So it seems like IBR is the way to go, but my questions are:

1.) Should I file my taxes for this year separate or jointly?
2.) When I apply for IBR, do I have to specify up front how I will be filing?

Anyone have any general advice? Thanks!

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[DrBowtie]

I've searched the forums and couldn't find anything really specific. This will be my first real experience with taxes and loan repayment, so I've been trying to do my homework in the midst of starting internship. I've spent hours reading tax laws, White Coat Investor, etc.

Anyways, I graduated med school this May and I was married in June. I have ~ $200,000 in loans, my wife works and makes around $45,000 a year. I'll make around $48,000. We don't have any kids.

I guess I'm going to do IBR. I've briefly used some calculators and it seems if I run it with the joint filing status, my monthly IBR will be $700, whereas if I run it with a separate filing status it goes down to $150. That seems like a huge difference so I'm not sure if I'm doing everything correctly.


So it seems like IBR is the way to go, but my questions are:

1.) Should I file my taxes for this year separate or jointly?
2.) When I apply for IBR, do I have to specify up front how I will be filing?

Anyone have any general advice? Thanks!

Run your refund both ways to see how it shakes out. It depends on your deductions too since if you file separate if one person does standard, the other must too and same with itemizing.

If the goal is to minimize IBR payments, I suspect filing separate will be best at the expense of not maximizing your return.

 

[Wealth Anatomy]

Agree with DrBowtie.

It is true that you can file separately and not claim your spouses income for IBR calculations but you will lose some tax advantages if you file separately. Here is a link where you access your loans and calculate your IBR payments: https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action

If you can file jointly and still qualify for IBR, that may work but the only way to know for certain is to run your numbers for IBR and work with a CPA to estimate tax savings for filing jointly vs. separate. If the tax savings aren't significant, file separately.

 

[RangerBob]

Why file separately? Unless you're tight on money it sounds like the two of you can afford the $700/month IBR payment, and then you can take advantage of all the tax benefits of being married (lower taxes, ability to deduct $2500 in student loan interest, etc.). Overall I'm sure you'll spend more money this way vs filing separately, but in the long run you'll pay less. Take advantage of what the government will pay you for (such as being married).

Also--are you sure you're running the numbers correctly? I don't see how a resident gets an IBR payment of $150. Most residents are paying closer to $400-$500 for IBR or around $300 for PAYE. Unless you're only factoring in half your salary (which is all you'll get paid for your first fiscal year of internship), but technically you aren't supposed to use that to calculate your IBR payment. If your tax return only reflects half your salary, then keep in mind the IBR application asks you if your tax return adequately reflects your current income. Most service reps I spoke with said within a few thousand dollars is ok, but over $5-10k means you should be submitting proof of your current monthly income (and thus IBR will be calculated at a higher rate). I opted to play it safe and submit proof of my current income, so I didn't benefit from the lower IBR payment you could get--but technically it would mean lying on the application. I wasn't ok with that, but I know other residents who are. (In their defense, the government really doesn't define what would be considered within the realm of "adequately reflecting your current income.")

Still--I agree with the others. If your goal is to make as minimal payments as possible, file separately (but only after crunching tax numbers has filing separately coming out ahead). If your goal is to pay less taxes but more in student loans (and thus actually save more money in the long run since you'll be paying down more debt) then you'd be better off filing separately, getting the tax benefits of being married, and making the larger payments.