@arclark77 wrote:
Thank you! That's where I was unsure. It sounds like if I'm filing separately, that should not affect the tax credit status. I will need to adjust my W4 because I definitely didn't have enough taxes taken out to file separately this year. I just got confused with my verbiage lol.
I don't understand this whole question or even some of the answers...
Let's start with some basics.
1. Your W-4 is only used to calculate your withholding so you come close to what you owe (not too much or too little taken out of your pay.) The W-4 has nothing to do with how you file your actual tax return.
2. To claim the child tax credit, you must have income earned from working, and you must have a qualifying child dependent under age 17. There is no requirement that you be single, married or divorced, and no requirement as far as filing MFS, MFJ, HOH or anything else. However, if there is more than one person who could claim your child as a dependent, you must be the person who actually claims your child, and if more than one person claims the same child, the IRS will apply the tiebreaker rules to determine who is allowed to claim the child and the credit.
https://www.irs.gov/credits-deductions/individuals/child-tax-credit
3. A step-parent has the same legal right to claim a child as a dependent as the biological parents, even if the stepparent does not formally adopt the child. So in your situation, if you are married to someone who is not the biological parent, there are at least 3 people who could potentially claim the child as a dependent--mom, stepdad, and bio-dad. They are all the same under the tax laws. Who actually can claim the child depends on where the child lives, and other rules described in publication 501.
https://www.irs.gov/pub/irs-pdf/p501.pdf
4. If the child lives in your home (with you and your spouse) more than half the nights of the year, then you and your spouse can claim the child and the other parent cannot, unless you sign a waiver and give it to the other parent.
5. If you choose to file as MFS, then either you or your spouse could claim your child as a dependent. Whether it makes a financial difference depends on your overall situation, and no one can tell you for sure. You would have to test things both ways.
6. Filing separately may increase your tax (and deny certain other tax benefits) more than the savings in loan payments. Also, under the current tax law, loans forgiven in 2026 or later are treated as taxable income on your tax return for the year the balance is forgiven. The law may change, but that's the current situation. Also, meeting all the requirements to prove your are entitled to PSLF can be challenging, and at least in the early days of the program, the percentage of claimants who were granted forgiveness was very low. It's a complicated and always-changing tax situation, and you would need to speak with a financial advisor who is expert in this, to determine if the tax cost of lowering your payments is worth the eventual benefit. It's not right for everyone.
