Anonymous User wrote:Alright, spouse and I some life and job changes in circumstance and am hoping someone might be able to help us navigate.
Me: biglaw --> now public interest, no loans left (aggressively paid them down), ~60k salary
Spouse: PSLF-eligible job making $40k the next few years, then bumps up to $90k (still PSLF-eligible). He's got about $75k left on his loans.
Complicating factors: we are in a high COL area and have a daycare-aged kid. Joint income is thus around $100k and with rent and daycare, we are trying to figure out how we can make his PSLF payments as low as possible while we make it work the next couple years. We filed jointly this year, and I've heard varying opinions on whether married filing separately would help/hurt/not affect our situation.
Alternatively, don't even know if it's proper to ask this so please ignore if that's the case, but are there companies/consultants (?) that will look at all your numbers for you and determine which plan/strategy is the best? With PAYE, REPAYE, IBR I am pretty lost...
I would defer to Johann who probably saved me a lot of money but I would say get spouse in PAYE file separately have him contribute as much as y'all can afford to 401k to get his adjusted gross income down. With a 40k salary minus up to 18k for 401k you would get a very low payment for him maybe even 0. But if he doesn't qualify for PAYE, I think REPAYE incorporates your income anyway. Either way pay yourself in 401k as much as you can during the PSLF years rather than paying the government.
i agree with this. i havent run the exact numbers and might be missing something because there are several penalties to filing separately, but with that said:
since you have no debt, it's almost certainly better for him to file separately with that 40k salary. with a 5500 ira contribution or 401k contribution, he can get his AGI down to almost the poverty level and very very low payments. youd have to be comfortable living on your salary, but to the extent you can defer his salary (think of it as a joint retirement for you two) youre going to save a lot of money. note that on REPAYE, you have to file jointly, so he has to be PAYE eligible. PAYE is preferable to IBR because it is 10% of discretionary income rather than 15% of discretionary income (and has better interest capitalization rules). so that means PAYE is really your only option if eligible and you want to file separately.
some resources to make sure filing separately gives you better student loan treatment than what you lose in tax bonuseshttps://www.nytimes.com/interactive/201 ... .html?_r=0
this will show you your marriage penalty/bonus so to speak of the BENEFIT/DeTRIMENT to filing jointly
then you should compare that number to [(your household income combined - 1.5Xpoverty limit for 2 person household)/120] for monthly loan payment.
filing separately, you forfeit child tax credit ($4k), child care expense credit ($600-$1k), and student loan interest deduction ($2.5k) credit. rough math that means your payment under joint will be something like 100-7.5-24k(150% poverty)-(deffered income like 401k and IRA etc. that means your payment would be based on about 55k/120 without all that much work which is $450/month loan payment or $4,600/year. by filing separately youd be able to get your husband down to $0/month with some basic level deffering (IRA/401k). so question is if there are $4,600 of tax benefits on filing jointly and deducting $4k dependent and $2500 student loan interest. you could also maybe get really aggressive by maxing one your 401ks and get that 55k/120 to 45 (3,750 in annual loan payments) or even 40 which would
without knowing your exact returns and what your income/expense situatio is like (and thus your capability for deferring income), i think filing separately is the way to go and then PAYE for your husband because supposedly you have a tax penalty or at least no bonus for filing jointly with 1 kid.
happy to bounce some ideas further by pm if you want to give more specifics