Paying Back Student Loans and Tax Returns

 A favorite topic of  mine is financial aid, specifically student loans.  Recently, I consolidated my student loans and applied for the income based repayment plan.

 If you owe student loans , and need advice on consolidating and different repayment plans, feel free to send me a message. I worked in financial aid and I am successful in managing my student loans .

Recently, I talked about Married Filing Jointly vs. Married Filing Separately. I will like to add a benefit of filing Married Filing Separately. If you owe student loans and are in repayment , it may be advantageous for you to file Married Filing Separately. This may save you thousands and thousands of dollars over your lifetime.

 If you file Married Jointly, your student loan repayment plan is based on  your income and your spouse's income.  The  combined incomes may  disqualify you for the income based repayment plan and your student loan payments could be significantly higher than if you have not married.

Filing Married Filing Separately may decrease your student loan  payments by  thousands of dollars each year. You may potentially qualify for the income based repayment plan.
 an example of how filing status may affect your student loan payments:

You owe $60,000 in student loans. You make $39,000/year and your spouse makes $63,000/yr.

If you file married filing jointly with your spouse, your student loan payment will be based on $102,000 of yearly income. You will disqualify from the income based repayment plan , you will instead qualify for the standard based repayment plan and will pay $690 a month.

If you file married filing separately, your student loan payment will be based only on your income of $39,000. You will qualify for the income based repayment plan and will pay $130 a month.

 Filing married filing separately will save you $560 a month, that's $6720 a year!

If you want more information, please feel free to comment on  TaxCharm.
Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.

Married Filing Jointly vs. Married Filing Separately

Welcome back to Tax Charm, I hope everyone had a beautiful Christmas!

 Married Filing Jointly (MFJ) vs. Married Filing Separately (MFS) is the topic I will discuss in today's post.  This is a very popular question . My married girlfriends call me up and  tell me they want to file Married Filing Separately because their husband makes too much money. I usually advise them against filing separately.  The Married Filing Separately status robs people of a vast amount of tax benefits, the IRS wants all married couples to file their taxes together. There are only a few amount of circumstances in which I would advise a person to file MFS. I will discuss these at the end of my post.The number one circumstance I will advise someone to file MFS  if he/she owe  federal student loans and are in repayment( discussed in next post).

The following  tax benefits are  disallowed by the IRS if one files Married Filing Separately:

•  Earned Income Credit
• Child Tax Credit
• American Opportunity Credit or Lifetime Learning Credit
• Child and Dependent Care Credit
• Tuition and fees deduction
• Student loan interest deduction
• Tax-free exclusion of US bond interest
• Student loan interest deduction
• Tax-free exclusion of US bond interest
• Tax-free exclusion of Social Security benefits
• Credit for Elderly and Disabled

 
Also, if one spouse itemizes deductions, the other spouse would also have to itemize. This tax rule holds true even if the other spouse has limited expenses to itemize. The spouse would be forced to itemize although it would be more beneficial to take the standard deduction.

So ,if you qualify for any of the above tax credits , File Jointly with your Spouse.


There are only a few instances when it makes since to file Married Filing Separately.

•   You suspect your spouse is evading taxes and you don't want to be held responsible
•  One spouse has a significant amount of medical expenses
•  Great amount of personal casualty losses incurred by one spouse (deductible only to the extent they exceed 10% of AGI).
•  A vast amount of un-reimbursed employee business expenses,  tax advice fees and preparation, and investment expenses that are incurred by one spouse (deductible only to the extent they exceed 2% of AGI).
• You are repaying federal student loans

When in doubt, work the numbers both ways, Married Filing Separately and Married Filing Jointly. Do this to find the tax situation in which the couple owes the less money or gets the most money back.

That's all folks!

Tax Charm blog is not legal or professional advice.

You are reading Tax Charm blog at your own free will and you are taking the information provided at your own risk.

I am the legal copy righter of this blog, you may not use, reprint or publish information from this blog without my permission.
 

“Tax Us, We Don’t Mind.” Celebrities and a CEO who want to pay Higher Income Taxes

Warren Buffet says he wants to pay higher taxes. While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks," Warren Buffet writes.

What’s a few billion to 46 billion? Warren Buffet pays an effective rate of 27.9% tax rate, while he says his secretary makes $60, 000 and pays a tax rate of 30%. Although If I was Billionaire Warren Buffet’s secretary, I would be asking for a raise…..

Jay-Z He says “Obama Can Tax Me.”  Jay-Z does not mind paying higher income taxes if it goes to education and poverty.
 
Jay, we got 99 Problems and Mitt Romney ain't one! I can say that with my chest now.

Eva Longoria "The Eva Longoria who worked at Wendy's flipping burgers -- she needed a tax break,” Longoria told the crowd at the Democratic National Convention. "But the Eva Longoria who works on movie sets does not."

 Right on Eva! Eva has a net worth of 35 million. While the average 2012 Wendy’s worker makes $7.25 an hour and has a net worth in the negative.

JP Morgan Chase’s CEO Jamie Dimon CEO Dimon supports paying 39.6 percent in taxes, up from what Dimon paid last tax year. Dimon also said he might back an increase in the capital gains tax rate to around 24 percent from 15 percent, a proposal by President Barack Obama, for people making above $250,000.

Ben Affleck "I don't know, you know, what your nut looks like," Ben Affleck said to O'Reilly, "but I don't spend so much that I can't afford to pay a little bit more in taxes."

Will Smith says he is very supportive of President Obama's proposal of increasing taxes on the wealthy?"America has been fantastic to me. I have no problem paying whatever I need to pay to keep my country going."

Chris Rock  " I’ll pay higher taxes," Chris Rock told the Associated Press. "I look at it this way: I can pay higher taxes and people can have jobs, or I can pay lower taxes and I have my kid’s teacher asking me for a loan because she’s going to lose her house, which is true,” “So I’m going to lose the money no matter what."

Mind you, this conflicts with what Chris Rock said on the YouTube videos. However, that was the Comedian Chris Rock relating his comedy to us not so rich folks.

  So readers,  there you all go, there are rich Americans who don’t mind higher taxes. Some of the wealthy and more fortunate American citizens consider paying higher taxes as giving back and making the United States go round!!


  “I’m thankful for the taxes I paid because that means I’m employed” Nancie J. Connelly