Marriage Penalties with Student Loans

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Jolene Latimer

By Jolene Latimer

February 8, 2019

Getting married to the love of your life is exhilarating, but when the honeymoon is over and couples have to make tough financial decisions it can become stressful. Knowing about marriage penalties with student loans can help you make informed choices on how to file your taxes and budget your earnings after you say, “I do.”

When it comes to student loans and marriage, there are some financial trade-offs to assess. Though there could be tax advantages to filing jointly, there could also be a negative impact on your student loan repayment plan.

Here’s what you need to know about how getting married impacts your student loans.

Consider five marriage penalties affecting student loans

Do the math to find out how much these penalties will cost you if you’re still repaying student loans when you get married.

1. Income-driven repayment plans change if you file joint returns

If you’re repaying your federal student loans under Income-Contingent Repayment (ICR), Income-Based Repayment (IBR) or Pay-As-You-Earn Repayment (PAYE), choosing to file separate returns could save you some money.

A separate tax return won’t include your spouse’s income. That means your monthly payments won’t change after you get married.

If you decide to file jointly, your spouse’s earnings will be included in calculating your discretionary income. Your discretionary income is used to determine how much you’ll pay each month. As a result, your monthly payments could increase.

2. Revised Pay-As-You-Earn Repayment bases payments on joint income regardless

Revised Pay-As-You-Earn Repayment (REPAY) bases the monthly payment on a married borrower’s joint income regardless of whether you file your tax returns as married filing jointly or married filing separately. This can significantly increase the monthly loan payment and total loan payments. It can also decrease the amount of public student loan forgiveness available to you.

3. Income tax refunds could be diverted

If your partner has defaulted on their federal student loans in the past, filing jointly could cause your tax refunds to be offset to repay the defaulted federal student loans. There is a chance you could recover a portion of the withheld funds by filing an “injured spouse” claim with the IRS.

4. Student loan interest deduction doesn’t increase

The student loan interest deduction can be claimed as an exclusion from your income if you paid interest on federal and private student loans. The maximum student loan interest deduction is $2,500. If you file jointly, the maximum deduction doesn’t increase. Thus, even though you might have to pay more interest each month after you get married, you won’t get to deduct anything additional from your income.

5. You might not be eligible for all repayment plans

The monthly payment under Income-Based Repayment (IBR) and Pay-As-You-Earn Repayment (PAYE) is capped at the Standard Repayment amount. If you file a joint return, the monthly payment will be based on your joint income. This might increase the monthly payment enough to reach the standard repayment cap.

Should you file taxes jointly or separately with student loans?

It’s not easy to know whether you should file joint or separate tax returns if you have student loans.

Joint tax returns do come with some benefits. If one of you earns significantly less than the other, filing jointly could put you in a lower tax bracket. There are some other advantages, too. For example, you can deduct more for charitable donations as a married couple than you can if you file by yourself.

Tax credits such as the American Opportunity Tax Credit and the Lifetime Learning Tax Credit could be impacted depending on how much your combined income is. If you earn too much to qualify for the credit as a single person, but your spouse earns less than you, filing jointly could help you qualify again as the limit is raised for couples.

Even though filing separately could help with your student loan debt, you could also miss out on these other benefits of filing a joint tax return. There are also other tax benefits that may be impacted, such as the earned income tax credit and the childcare tax credit.

To help you decide what to do, consider using tax preparation software to tally what your tax return would be if filed separately versus if you filed jointly. Doing the math to compare both figures should make the decision easier.

A good place to start:

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