Mike Davies
June 2016

The Modern Ball and Chain: Marrying into Debt – Video

Marrying into debt has become a reality for many couples across the nation. Even if a spouse does not have any student loan debt, their significant other may be chained to some student loan payments. Filing taxes together may cause some alarm during tax return season, in which case the IRS may legally garnish tax returns. Modern relationships just got more complicated with saddling thousands of dollars of student debt. Paying back thousands of dollars in federal loans and interest rates puts a strain on a relationship, particularly with young, newly wedded couples that are fresh out of college. The honeymoon is most certainly over, but there are economically feasible ways to save your tax returns and avoid financial conflicts with your spouse. For many couples, filing taxes separately is the best way to save money and avoid financial disaster.

Unfortunately, even if the payments are made on time and the spouse is in good financial standing, the IRS may still be able to withhold tax returns if a married couple files jointly.  If a couple had previously lost a great deal of money due to filing jointly, they may submit an injured spouse claim​ with Form 8379 on www.irs.gov​. It is important to note that this is only valid if the financially injured spouse is not legally responsible for paying back the debt. Another thing to consider when choosing to file taxes separately is that it helps qualify for public service loan forgiveness. These programs are beneficial towards refinancing, reducing, or eliminating student loan debt. Depending on the couple’s amount of student loan debt, filing separately may or may not be a good option for them. For instance, if one of the spouses have a large amount of debt in comparison to their income whereas their partner has a small amount in relation to their income, then it would make sense for the couple to file their taxes separately in order to save money on tax refunds and deductibles. There are other hurdles that couples who file taxes jointly may face, such as couples who use income­driven payment plans. Income­Driven Payment Plans cause some conflicts with filing jointly on taxes. This type of student­loan repayment plan deducts an average of 10­20% of the debtor’s annual income to construct a monthly payment plan that is relatively affordable. This can cause some conflicts for couples who file jointly because this accounts the income of both people, which significantly raises the payments to fit the combined household income. Filing taxes separately is the best option for many married couples to avoid losing money during tax season. However, it is important to evaluate individual couple’s needs before deciding to file separately. By filing separately, couples will be able to save money and repay their loans at lower payments and costs.

Ref: http://money.usnews.com/money/blogs/my-money/articles/2016-02-23/can-your-spouses-defaulted-student-loans-impact-your-tax-return


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Mike Davies

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