In 2023, the SAVE (Saving on A Valuable Education) plan was introduced as a new repayment option for student loans.
The main points of the new repayment plan included a 225% federal poverty line multiplier
(meaning you save more money), 5% payment of discretionary income for undergraduate loans (meaning you save more money), and that you can file separately!
For this article, I want to focus on why you should at least explore filing separately.
There are two things to consider when filing separately:
1. What will your student loan payment be per month (and per year).
2. How much more tax will you owe (if any) by filing separately.
If the amount you save on student loan payments exceeds the extra amount you will likely pay
by filing separately, then it is a no-brainer!
Let’s see how this plays out with an example. For this example, we are going to assume that
spouse 1 makes is a teacher with student loans who makes $70,000 and spouse 2 makes
$100,000. They have two children.
If this couple were to file their taxes as Married Filing Jointly, they would have a starting income
of $170,000. Using the 2.25 multiplier for their family size, they will get to deduct $70,200 from
their adjusted gross income. This leaves them with $99,800. If all of their loans are from
graduate school or beyond, they will owe $831 per month or $9980 per year.
Now, let’s use those exact same numbers but do the calculation as married filing separately.
This time, we will only be able to use a family size of 3, so the deduction will be $58,095 rather than $70,200. The difference is, we are only using the $70,000 income rather than the $170,000
total income!!!
The total monthly payment now is $99 per month or $1190 per year.
Here’s the big question…
How much more will you owe by filing separately (if any)???
Unfortunately, that is a challenging question to answer as there are so many variables. Luckily,
my friends at Holistiplan have given me an amazing tool that allows me to input all of the
variables and run side-by-side comparisons to see how Married Filing Jointly and Married Filing Separately will impact your tax return.
Comentarios