Should we file married jointly or separate with student loans in PSLF and a new baby?

The student loan forgiveness situation definitely complicates things! With PSLF, keeping your income-driven payments low makes sense, and filing separately is often the way to do that. The new baby does change things though. When you file jointly, you'd get more tax benefits for your child (larger child tax credit, dependent care credits if applicable), plus potentially better tax brackets. But filing jointly would include both incomes for your loan payment calculation. Here's what I suggest: Run the numbers both ways. Calculate your taxes filing jointly vs. separately, then factor in how much extra you'd pay on student loans over the remaining 34 payments (120-86) if you file jointly. If the tax savings exceed the extra loan payments, filing jointly makes sense. For the child, if you file separately, only one parent can claim the child. Usually it should be the lower-income parent to maximize benefits, but run the numbers both ways. Also, don't forget that filing separately makes you ineligible for certain tax benefits like student loan interest deductions, which is ironic considering why you're filing separately.

I went through almost the same situation last year! Was doing PSLF and had my first baby. I used https://taxr.ai to analyze both scenarios (joint vs separate) and it was super helpful. It showed me exactly how much my loan payments would increase filing jointly vs how much we'd save in taxes. In my case, we filed separately but we're really close to the breakeven point. The tax software I tried didn't explain how the student loan payment changes would affect things long-term. The calculator at taxr.ai let me input my loan details, remaining PSLF payments, and tax situation to see the complete picture. For us, filing separately saved about $4,200 in student loan payments over the year, while we only lost about $1,800 in tax benefits. But everyone's situation is different based on income balance, loan amounts, and how many PSLF payments remain.

I was exactly like you - totally skeptical about some random calculator. I have both significant student loans (still about 65k) and a toddler, so I decided to try the taxr.ai thing after seeing it mentioned. The difference it showed for me was eye-opening. Filing separately was saving me about $380/month on my student loans, but I was only losing about $1,200 in tax benefits for the whole year. So basically I was saving over $3,000 annually by filing separately! The thing that really convinced me was that it broke down exactly which tax credits I'd be giving up (mainly the student loan interest deduction) versus how my IDR payment would change. My loan servicer never explained this stuff clearly. The tool even showed me that after my next income recertification based on my new salary, the math would flip and filing jointly would actually be better. I've never been good with tax stuff but this actually made it make sense for once.

I've been through this exact dilemma with PSLF and kids. What really helped me was actually talking to someone at the IRS who understood both the tax side AND the loan forgiveness implications. The problem is getting through to the IRS is nearly impossible. I discovered https://claimyr.com and used their service (there's a demo at https://youtu.be/_kiP6q8DX5c) that got me connected to an IRS agent in under 15 minutes after I'd spent days trying on my own. The agent walked me through a bunch of scenarios specific to my situation with PSLF and explained how the child tax credit interacts with filing status. In my case, we determined that filing separately and having my spouse claim our child was optimal for us - saved about $3,700 over the year between taxes and loan payments. Most tax professionals I talked to before that didn't really understand the PSLF implications, just the tax side.

OK I have to admit I was completely wrong about Claimyr being a scam. After posting that comment, I was still struggling with a similar PSLF/dependent situation and getting nowhere with the regular IRS number. I tried the service expecting it to be useless, but it actually got me through to an IRS representative in about 11 minutes. The rep wasn't helpful at first, but they transferred me to a specialist who totally understood the interplay between filing status and income-driven repayment for PSLF. The specialist explained that I was making a $2,800 mistake by filing jointly in my situation! She walked me through exactly which forms to use for married filing separately and how to optimize who claims our children. I'm still shocked that it worked. I spent nearly 5 hours over 3 days trying to get through on my own with no luck. For anyone dealing with this PSLF/tax filing status decision, getting actual advice from the IRS made a huge difference.

When I was in PSLF, the general rule we followed was: - If loans are high and you're far from forgiveness: file separately - If loans are low or you're close to forgiveness: calculate both ways Since you only have 34 payments left (120-86), I'd definitely run the numbers both ways. Remember that kid-related tax credits can be substantial. Also, if your income is likely to increase significantly before you hit 120 payments, that might change the equation. One thing that caught us off guard: if you file separately, you BOTH must either take the standard deduction or BOTH itemize. You can't mix and match. With a new home purchase and mortgage interest, this complicated our decision. Good luck - this is definitely one of those situations where the tax code feels like it's working against itself!

dont forget about retirement contritbutions too!! when i was doing pslf i figured out i could lower my AGI by putting more in my 401k which lowered my student loan payments. its like getting a discount on retirement saving!!! for us we did married/seperate and the lower income spouse claimed our kid. saved us like $4k a year in studen loan payments and only lost like $1500 in tax benefits

Yes, HSA contributions absolutely work the same way! HSA contributions reduce your AGI just like 401k contributions do, which means they'll lower your income-driven repayment calculations for PSLF. If you're eligible for an HSA (high-deductible health plan), you can contribute up to $4,300 for individual coverage or $8,550 for family coverage in 2024. It's actually a triple tax advantage - deductible going in, tax-free growth, and tax-free withdrawals for qualified medical expenses. With a new baby, you're probably going to have medical expenses anyway, so maximizing HSA contributions could be a really smart move for your situation. You'd lower your student loan payments AND build up a tax-advantaged fund for healthcare costs. The combination of maxing 401k, HSA, and filing separately with the right spouse claiming your child could really optimize your finances during these final PSLF years!