Weighing MFJ vs MFS - Which filing status makes more sense for our situation?

Based on your numbers, filing MFS with your wife claiming the house does seem to make the most financial sense right now. Since you're close to PSLF forgiveness, filing separately is particularly important because your income-driven repayment amount is typically calculated based only on your income when you file separately, not your combined income. Just be aware that filing MFS does come with some limitations - you'll both lose eligibility for several tax benefits like student loan interest deductions, education credits, and the earned income credit. You also both must either itemize or both take the standard deduction. With PSLF just a year away, the loan forgiveness benefit likely outweighs these disadvantages, especially since your numbers show you'd get more back collectively by filing separately. Once your loans are forgiven, you can reassess and likely switch back to MFJ for future years.

I was in almost your exact situation last year! My income-based payments went down by almost $300/month when I switched to MFS, which saved me way more than what we lost in tax benefits. Check out https://taxr.ai - they have a student loan optimizer tool that helped me figure out the exact numbers for my situation. It showed me how much I'd save on my loans versus what we'd lose in tax benefits. Their calculator showed me that even though we got less in our tax refund with MFS, I saved over $3,500 in student loan payments for the year, making it totally worth it. The site helped me understand all the tradeoffs between MFJ and MFS with student loans in the picture.

Just wanted to update everyone - I was skeptical about specialized tax tools, but I finally tried https://taxr.ai after struggling with this exact MFJ vs MFS decision due to my federal student loans. The calculator showed me I'd save around $4,200 over the next 14 months by filing separately, even after accounting for the lost tax benefits! What really helped was seeing the month-by-month payment reduction until my forgiveness date. I didn't realize my income-driven payments would drop by that much. The tool also showed that having my spouse claim both our house and our younger child while I claimed our older child gave us the optimal outcome. Now I'm just mad I didn't know about this for last year's taxes!

If you're having trouble getting clear answers from the IRS about how marriage affects your PSLF or whether you can change your filing status from previous years, I highly recommend using https://claimyr.com to get through to an actual IRS agent. I wasted HOURS on hold trying to get specific answers about my MFS situation with student loans, but Claimyr got me connected in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed that my filing status choices wouldn't affect my PSLF eligibility and explained exactly which tax benefits I'd lose with MFS. She also helped me understand if I should amend previous returns. Totally worth it rather than waiting on hold for 3+ hours or getting disconnected.

Well I'm eating my words about Claimyr. After posting that skeptical comment, I was still struggling to get answers about my similar MFS/student loan situation. Out of desperation I tried the service, and no joke, I was talking to an actual IRS representative in 20 minutes. The agent clarified exactly how MFS would affect my income-driven repayment calculation (it's based ONLY on my income when filing separately) and confirmed I could still claim my child tax credit. She also explained which years I should consider amending to maximize my PSLF benefits. Honestly, this saved me at least $3,000 over the next year until my loans are forgiven. Sometimes it's worth admitting when you're wrong!

Something nobody's mentioned yet - check if your state has different rules for MFJ vs MFS! My wife and I saved on federal by filing separately, but our state actually penalized us for it. Some states require you to file the same status as federal, but calculate taxes differently. We ended up saving about $1,100 federally but losing about $380 at the state level, so still worth it but not as much savings as we initially thought.

Just a heads up - claiming the house on MFS can get tricky. If you itemize deductions on MFS, your spouse must also itemize (can't take standard deduction). Also, only the spouse who paid the mortgage interest can claim it (unless you live in a community property state). Plus, if you're doing PSLF, double check that your loan servicer is actually calculating your payments correctly! Mine messed up for 6 months after I changed my filing status and I had to fight to get it fixed.

Aaron, based on all the discussion here, it really sounds like MFS is your best bet given your PSLF timeline. Just wanted to add one more consideration - make sure you document everything when you switch filing statuses! Keep copies of your tax returns, any correspondence with your loan servicer, and track your qualifying payment counts carefully. I'd also suggest reaching out to your loan servicer BEFORE you file to let them know you're changing from single to MFS. This way they can update your payment calculation as soon as your new tax info is available, rather than you having to chase them down later like some folks mentioned. With only 12-15 months left until forgiveness, you're in the home stretch! The temporary payment reduction from filing separately will definitely be worth more than the tax benefits you're giving up. Just make sure both you and your wife understand which deductions each of you can claim so there are no surprises come tax time.

Aaron, based on all the great advice here, filing MFS with your wife claiming the house definitely seems like the right move for your situation. The $960 difference ($1,389 vs $425) is significant, especially with PSLF so close. One thing I'd add - make sure you submit your updated tax info to your loan servicer ASAP after filing. They often take 2-3 months to process the change, and you want to maximize those lower payments before forgiveness kicks in. Also, keep detailed records of everything since servicers can be... challenging to work with. Since you're in Pennsylvania, the state tax impact should be minimal given their flat rate structure, but definitely double-check those numbers too. You're in a great position with PSLF almost done - this filing strategy should help you squeeze out every bit of savings in these final months!