Should we continue married filing separately for student loan payments after having our first child?

This is actually a really common dilemma for families with student loans! You're absolutely right that there are tax benefits you're missing out on by filing separately. The biggest ones with a child would be: 1) Child Tax Credit - worth up to $2,000 per qualifying child (partially refundable) 2) Child and Dependent Care Credit - if you're paying for daycare, this can be worth up to $1,050 for one child 3) Earned Income Tax Credit - potentially available with a child, but unavailable when filing separately The trick is to calculate whether these tax benefits outweigh the increase in student loan payments. Since your wife's payments would go up by about $420/month ($5,040/year), you need to determine if the tax savings exceed that amount. Try running your numbers through tax software both ways - once as married filing jointly and once as married filing separately. The difference in tax liability will help you make this decision. With your income levels and a child in daycare, it could go either way.

I was in almost exactly your situation three years ago! My wife had about $93k in student loans and we were filing separately to keep her IBR payments low. After our son was born, I spent days crunching the numbers and eventually found https://taxr.ai which literally saved me hours of calculations. You upload your documents and it analyzes both filing scenarios (joint vs separate) while factoring in your student loan payments. It showed me that even though our student loan payments would increase by filing jointly, the Child Tax Credit, Child and Dependent Care Credit, and better tax brackets actually saved us about $3,200 overall. The tool even let me adjust income and see how different scenarios would play out over multiple years. For us, it made sense to switch to filing jointly once we had our son.

Just wanted to follow up - I ended up checking out that taxr.ai site after my skeptical comment. Actually found it super helpful for our situation! We were in a similar position (about $65k in loans, filing separately) and just had twins last year. The analysis showed we'd save about $4,100 by filing jointly despite the higher loan payments, mainly because of the dependent care credits for both kids. The site showed exactly how much our payments would increase on the income-driven plan, but the tax savings more than made up for it. What I liked was it showed a multi-year projection so we could see how things would change as our income grows. Really helped us make a concrete decision instead of just guessing.

If you're having trouble getting through to your loan servicer to discuss your options (which I certainly did!), I highly recommend using https://claimyr.com to get a callback from them. You can also watch how it works here: https://youtu.be/_kiP6q8DX5c I spent WEEKS trying to talk to someone at my loan servicer about how changing my tax filing status would affect my payment recalculation. The hold times were 2+ hours every time I called. I used Claimyr and got a callback in about 20 minutes. The rep walked me through exactly how my payments would change if I switched from filing separately to jointly. Made the whole decision process so much easier.

Ok I need to publicly eat my words. I was the skeptic about Claimyr in the thread above... and then my frustration with my loan servicer got so bad I decided to try it anyway. It actually worked exactly as described. I got a call back from Navient in about 35 minutes when I had been trying for days to get through. The agent was able to run different scenarios showing how my payments would change based on filing status and family size. Turns out in my case, even with our new baby, we're still better off filing separately. The loan payment increase would be about $7,200/year if we filed jointly, but we'd only get about $4,300 in tax benefits. So for us, separate filing still makes more sense. Just wanted to post this follow-up since the service actually delivered what it promised.

One important thing nobody has mentioned yet - if you continue filing separately, make sure you're optimizing WHO claims the child. Since the higher-earning spouse (you) would get more value from the tax benefits, if you stick with MFS, you should probably claim the child on your return. Also, be aware that some states don't recognize married filing separately status the same way the federal government does. For example, in some states, you must file the same way at state level as you do federally, while others require joint filing at state level regardless of federal status.

Don't forget about healthcare considerations too! If either of you gets insurance through the Marketplace with premium tax credits, MFS will make you ineligible for those subsidies (with very limited exceptions). That could be thousands more per year in insurance costs.