Tax and student loan implications of getting married Forum

[Anonymous User]

My significant other and I are considering getting married. We're both in public interest. I make $75K /year and my signicant other makes $55k /year. We both have student loans but she is going to have hers paid off pretty soon, so assume those are irrelevant. My student loans, on the other hand, and ridiculously large, but I make payments based on PAYE and my law school currently makes my payments. If we get married, my entire PAYE payments will continue to get paid by my law school assuming I file my taxes separately (and not jointly). If we get married, what would our tax implications be? My understanding is that we would lose the $2,500 deduction for student loan interest payments (the entirety of my PAYE payments goes towards interest)--is that correct? Would there by any benefits in terms of tax reductions that outweigh the loss of that $2,500 deduction (assuming I lose it)? It seems like we might be better off filing jointly if it weren't for my student loans, but my PAYE payments would nearly double if we do (and my law school wouldn't cover that increase). Thanks in advance.

[estefanchanning]

Why would you lose the $2500 tax deduction? The phase-outs for the tax deduction are between 65k-80k if single, 130k-160k if joint. If anything, it would work in your favor since your spouse makes less than you.

On the other hand, you and your spouse make roughly the same amount. Naturally you will pay more taxes than if you each filed jointly. The tax benefits come if you and your spouse are in different tax brackets. The "marriage penalty" comes under section 68, which phases out how much you can deduct from your adjusted gross income based on how much you earn. Unlike phase-outs for interest payments, section 68 doesn't change if you file jointly or single. Therefore the more income, the worse.

TLDR: don't file jointly.

[Anonymous User]

Why would you lose the $2500 tax deduction? The phase-outs for the tax deduction are between 65k-80k if single, 130k-160k if joint. If anything, it would work in your favor since your spouse makes less than you.

On the other hand, you and your spouse make roughly the same amount. Naturally you will pay more taxes than if you each filed jointly. The tax benefits come if you and your spouse are in different tax brackets. The "marriage penalty" comes under section 68, which phases out how much you can deduct from your adjusted gross income based on how much you earn. Unlike phase-outs for interest payments, section 68 doesn't change if you file jointly or single. Therefore the more income, the worse.

TLDR: don't file jointly.

So am I actually better off filing seperarely as a married person relative to filing single as an unmarried person? I was just looking at the tax brackets, and it looks like I'd be bumped to the 28% tax bracket for any amount I make over roughly $75k as a married but filing seperarely person (which is probably only a year away that I'll be making over $75k); whereas, I wouldn't be in the 28% tax bracket until I make over roughly $91k as a single person, unmarried, person.

My Google search says that I lose the $2,500 student loan interest payment deduction ? http://www.investopedia.com/articles/ta ... rately.asp

Can you explain how I'm better off filing as a married but filing seperately person rather than filing as a single and unmarried person? (In other words, how is legally getting married advantageous to us in terms of taxes?)

[estefanchanning]

Why would you lose the $2500 tax deduction? The phase-outs for the tax deduction are between 65k-80k if single, 130k-160k if joint. If anything, it would work in your favor since your spouse makes less than you.

On the other hand, you and your spouse make roughly the same amount. Naturally you will pay more taxes than if you each filed jointly. The tax benefits come if you and your spouse are in different tax brackets. The "marriage penalty" comes under section 68, which phases out how much you can deduct from your adjusted gross income based on how much you earn. Unlike phase-outs for interest payments, section 68 doesn't change if you file jointly or single. Therefore the more income, the worse.

TLDR: don't file jointly.

So am I actually better off filing seperarely as a married person relative to filing single as an unmarried person? I was just looking at the tax brackets, and it looks like I'd be bumped to the 28% tax bracket for any amount I make over roughly $75k as a married but filing seperarely person (which is probably only a year away that I'll be making over $75k); whereas, I wouldn't be in the 28% tax bracket until I make over roughly $91k as a single person, unmarried, person.

My Google search says that I lose the $2,500 student loan interest payment deduction ? http://www.investopedia.com/articles/ta ... rately.asp

Can you explain how I'm better off filing as a married but filing seperately person rather than filing as a single and unmarried person? (In other words, how is legally getting married advantageous to us in terms of taxes?)

I don't understand what you're saying here. There are only 3 ways you can file: single, joint, or head of household. There's no difference in filing "single unmarried" vs. "single married".

You make 75k, your wife makes 55k. Combined that's 130k. There is no difference in how much you'll be taxed if you file joint vs. single. The difference comes in deductions and phaseouts. Joint filers simply reach phase-outs more quickly than single filers (unless the two incomes are drastically different).

The link you showed me is not really relevant because it talks about itemization. As a regular tax payer, you don't itemize so it's irrelevant to you. (if I'm wrong and you DO itemize, let me know).

Stated differently: if you file jointly, you'll owe the gov around 18k pre-deductions. If you file separately, collectively both of you will owe the gov, again, around 18k pre-deductions.

However, if you file single, you can apply more deductions. If you file joint, some deductions will be phased out because your combined income is too high.

[unlicensedpotato]

I don't understand what you're saying here. There are only 3 ways you can file: single, joint, or head of household. There's no difference in filing "single unmarried" vs. "single married".

You make 75k, your wife makes 55k. Combined that's 130k. There is no difference in how much you'll be taxed if you file joint vs. single. The difference comes in deductions and phaseouts. Joint filers simply reach phase-outs more quickly than single filers (unless the two incomes are drastically different).

The link you showed me is not really relevant because it talks about itemization. As a regular tax payer, you don't itemize so it's irrelevant to you. (if I'm wrong and you DO itemize, let me know).

Stated differently: if you file jointly, you'll owe the gov around 18k pre-deductions. If you file separately, collectively both of you will owe the gov, again, around 18k pre-deductions.

However, if you file single, you can apply more deductions. If you file joint, some deductions will be phased out because your combined income is too high.

They aren't currently married - they're considering whether to get married.

[estefanchanning]

Oh, well in that case, don't get married.

[bk1]

They aren't currently married - they're considering whether to get married.

This. And OP is correct that MFS filers are ineligible for certain credits/deductions that are available to MFJ/single filers.

@OP: Calculate your and your spouse's tax liability based on MFJ vs MFS vs single and compare the results. You might be able to use free tax software to do it (not sure how far things like TurboTax let you go if you aren't actually filing).

[estefanchanning]

They aren't currently married - they're considering whether to get married.

This. And OP is correct that MFS filers are ineligible for certain credits/deductions that are available to MFJ/single filers.

@OP: Calculate your and your spouse's tax liability based on MFJ vs MFS vs single and compare the results. You might be able to use free tax software to do it (not sure how far things like TurboTax let you go if you aren't actually filing).

Yes my apologies I got confused. My point being: If you are married, you don't automatically forfeit your 2500 deduction for student interest payments.

I think overall, like bk1 says, it will depend on your particular situation. But I haven't really seen a situation similar to yours where filing jointly is better than filing separatly.

[bk1]

Yes my apologies I got confused. My point being: If you are married, you don't automatically forfeit your 2500 deduction for student interest payments.

I think overall, like bk1 says, it will depend on your particular situation. But I haven't really seen a situation similar to yours where filing jointly is better than filing separatly.

I agree with this. And that single is probably better than both MFS and MFJ.

[Anonymous User]

Yeah, I've been trying to do some tax calculations. It's pretty clear that getting married and filing jointly doesn't make sense, since my student loan payment would go up $450 /month and I won't be saving that much in taxes by filing jointly rather than as a single unmarried person. Based on my calculations, it looks like my taxes wouldn't be vastly different at the moment with MFS, but the tax brackets are more favorable as a single unmarried person in the $75-91k salary range, which I will be in as of next year.

So it seems like the consensus is don't get legally married because we're better off filing as single people?

[Anonymous User]

Oh, well in that case, don't get married.

Whether or not we should legally get married in the first place was a part of my question (we're not already married). We're both pretty rational people and don't see the point of filing for a marriage license with the state if it's not going to benefit us. (We're not in a common law marriage state.) It seems like most of the non-monetary benefits we'd get, we can accomplish through things like living wills, etc, and we can obviously get legally married before we start getting social security, etc (a loooonnnngggg time from now). So it sounds from a financial standpoint that it doesn't make sense to get married (at least not until after my student loans are forgiven or are circumstances change)?

[First Offense]

Oh, well in that case, don't get married.

Whether or not we should legally get married in the first place was a part of my question (we're not already married). We're both pretty rational people and don't see the point of filing for a marriage license with the state if it's not going to benefit us. (We're not in a common law marriage state.) It seems like most of the non-monetary benefits we'd get, we can accomplish through things like living wills, etc, and we can obviously get legally married before we start getting social security, etc (a loooonnnngggg time from now). So it sounds from a financial standpoint that it doesn't make sense to get married (at least not until after my student loans are forgiven or are circumstances change)?

My heart swells with emotion.

[estefanchanning]

Oh, well in that case, don't get married.

Whether or not we should legally get married in the first place was a part of my question (we're not already married). We're both pretty rational people and don't see the point of filing for a marriage license with the state if it's not going to benefit us. (We're not in a common law marriage state.) It seems like most of the non-monetary benefits we'd get, we can accomplish through things like living wills, etc, and we can obviously get legally married before we start getting social security, etc (a loooonnnngggg time from now). So it sounds from a financial standpoint that it doesn't make sense to get married (at least not until after my student loans are forgiven or are circumstances change)?

Correct. And even when you get married, often times filing separately is better than filing jointly even if you take care of your student loans.

[Anonymous User]

Oh, well in that case, don't get married.

Whether or not we should legally get married in the first place was a part of my question (we're not already married). We're both pretty rational people and don't see the point of filing for a marriage license with the state if it's not going to benefit us. (We're not in a common law marriage state.) It seems like most of the non-monetary benefits we'd get, we can accomplish through things like living wills, etc, and we can obviously get legally married before we start getting social security, etc (a loooonnnngggg time from now). So it sounds from a financial standpoint that it doesn't make sense to get married (at least not until after my student loans are forgiven or are circumstances change)?

My heart swells with emotion.

In fairness, what does filing a marriage license with the state truly accomplish? If you can still have a marriage ceremony, tell the entire world that you're married, get most of the benefits of legally being married through other avenues (like a living will, etc.), and for all practical purposes act as a married couple without the financial burden that legally being married causes, what kind of a rational couple would legally get married? People are dumb.

Oh, well in that case, don't get married.

Whether or not we should legally get married in the first place was a part of my question (we're not already married). We're both pretty rational people and don't see the point of filing for a marriage license with the state if it's not going to benefit us. (We're not in a common law marriage state.) It seems like most of the non-monetary benefits we'd get, we can accomplish through things like living wills, etc, and we can obviously get legally married before we start getting social security, etc (a loooonnnngggg time from now). So it sounds from a financial standpoint that it doesn't make sense to get married (at least not until after my student loans are forgiven or are circumstances change)?

Correct. And even when you get married, often times filing separately is better than filing jointly even if you take care of your student loans.

Cool, thanks for the info!

[BigZuck]

You should get down on one knee and instead of pulling a ring out from your pocket unfurl a living will and get her to sign it.

That'd be thinking with the ol' brainhole!

[Anonymous User]

You should get down on one knee and instead of pulling a ring out from your pocket unfurl a living will and get her to sign it.

That'd be thinking with the ol' brainhole!

Lol. But wouldn't it be more practical to pull out a ring, have a wedding, and then later instead of signing a marriage license with the state, signing a living will?

[curepure]

sorry that my answer might not be as useful, but why don't you ask your accountant?