Filing status

[julie_b]

My spouse and I have filed married jointly for years. However there's a significant difference in our incomes and there is approx 35,000 of remaining student loans. Our combined income (mainly due to mine) is too high to take advantage of any income based repayment plans. Would it be beneficial to change to married filing separately, and would spouse then be able to potentially reduce student loan payments? Would the filing status change affect spouse's future social security benefits?

[DeepP]

Hi @julie_b,

We recommend you to run both scenarios (Married Filing Jointly or Married Filing Separately) to see which one gives you bigger tax break or refund. As for any repayment plan programs, each will have it's own criteria.  They may end up still wanting to tack on your income. As for Social Security benefits, are you both self-employed? 

[Terri Lynn]

Good afternoon, julie_b! Thanks for joining us today!

You asked "would it be beneficial to change to married filing separately, and would my spouse then be able to potentially reduce student loan payments? and,  Would the filing status change affect spouse's future social security benefits?"

No, married filing separate is almost never beneficial to a couple, when taking all things into consideration.

The first thing to consider is that the  married filing joint status allows for the largest standard deduction of all the filing status' which is  $27,700 for 2023.  Another  significant consideration is the fact that many credits and deductions are not allowed if one elects to file separately, instead of jointly.  If your spouse itemizes deductions, you can’t claim the standard deduction and must itemize too, often resulting in a much lower deduction.  Also, you will no longer qualify, as married fililing separately, to claim: the dependent care credit, student loan deduction, earned income credit, American Opportuity credit or Lifetime Learning credit, as well as many others. In addition to those not being allowed, the child tax credit and the credit for other dependents and the retirement savings contributions credits have reduced income limitations, to half.  Here is a link  to help you calculate your outcomes to help compare: How you can compare MFJ to MFS 

In terms of the impact on Social Security benefits, if you file as married filing separate, you will have to pay a greater percentage (up to 85%) of any social security or equivalent railroad retirement benefits you receive.  

You will need to reach out to the Social Security Administration if you are needing more information on how this will impact the amounts and eligibility for those benefits.  Here is a link for the  Social Security Administrations Site:  

Social Security Administration 

For more information please check out these links:

Is it better to file jointly or separately? 

MFJ vs. MFS 

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[Ruth C-L]

Hi there. I agree with the previous poster in terms of the impacts on your tax situation. However, I do taxes for a couple in this same situation and while they would see tax benefits from married filing jointly, the savings on the lower student loan payments by filing separately outweighs the tax benefits every year that I have run the scenarios. I recommend running the numbers to compare the tax benefits associated with filing jointly versus filing separately and compare it to the savings associated with lower monthly payments by filing married filing separately.