Insurance payouts intended to cover the cost of repairing or replacing a damaged vehicle, or for medical expenses resulting from an accident, are typically not considered taxable income. If you received payouts from punitive damages, then these would be taxable if you were awarded damages in a court of law.
Car expenses are generally not deductible except if you are running a business and receiving income from it. if you are an employee, these expenses aren't deductible.
Based on this information, I would recommend to file jointly because of lower tax rates and access to more deductions/credits, including education-related benefits that might help with your wife's student loans.
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