Here is my deal: 10 YR Public Service Student Loan Forgiveness is messed up if you are married

[jsamuel]

- In order to actually get anything forgiven, you have to have a low enough income to qualify.
- If you are single, they take your AGI.
- If you are married, they take your joint AGI (or you can file federal taxes separately and they will take only your AGI).


Problem:
What if you are married? Your student loans will take your sum AGI if you are married filling joint.

Example:
Husband - AGI 30,000
Wife - AGI 30,000
Together - AGI 60,000

Student Loan total for wife - 60,000
Married filling jointly total loan forgiveness after 10 years - forgives 4,000
Single total loan forgiveness after 10 years - forgives 39,000
Married filling separately total loan forgiveness after 10 years - forgives 39,000


See the difference? Now why not just file separately then?

http://www.cclib.lib.pa.us/irs/taxmap/pub17/p17-013.htm

If you choose married filing separately as your filing status, the following special rules apply. Because of these special rules, you will usually pay more tax on a separate return than if you used another filing status that you qualify for.



1. Your tax rate generally will be higher than it would be on a joint return.
2. Your exemption amount for figuring the alternative minimum tax will be half that allowed to a joint return filer.
3. You cannot take the credit for child and dependent care expenses in most cases, and the amount that you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000 if you filed a joint return). For more information about these expenses, the credit, and the exclusion, see chapter 32.
4. You cannot take the earned income credit.
5. You cannot take the exclusion or credit for adoption expenses in most cases.
6. You cannot take the education credits (the Hope credit and the lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction.
7. You cannot exclude any interest income from qualified U.S. savings bonds that you used for higher education expenses.
8. If you lived with your spouse at any time during the tax year:
     1. You cannot claim the credit for the elderly or the disabled,
     2. You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and
     3. You cannot roll over amounts from a traditional IRA into a Roth IRA.
9. The following deductions and credits are reduced at income levels that are half those for a joint return:
     1. The child tax credit,
     2. The retirement savings contributions credit,
     3. Itemized deductions, and
     4. The deduction for personal exemptions.
10. Your capital loss deduction limit is $1,500 (instead of $3,000 if you filed a joint return).
11. If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.
12. Your first-time homebuyer credit is limited to $3,750 (instead of $7,500 if you filed a joint return).

So, if this couple also paid 10,000 dollars in tuition in the same tax year, they would get a $2,000 tax rebate from the lifetime learners credit. Instead, they have to eat the taxes in order to actually use the 10 year forgiveness program. In addition many tax deductions designed specifically for low income people and people in education are no longer applicable to the very people the forgiveness program is for. Also, this must be done for all 10 years the applicant is trying to pay back their loans, so the tax penalties will continue for 10 years.

This also ignores that the husband may have 60,000 of loans himself and the AGI of 60,000 would count both against him and his wife if they file jointly.

Note that a single person can take all the benefits of the lower AGI and not have any of the tax penalties.

Now the only reason they make married couples file separately is because they want third party verification of each individuals AGI. In other words, because they are worried people will lie and don't want any administrative overhead to check the numbers themselves. However, couldn't the IRS do a quick AGI/2 or some modification that could solve the problem without forcing married couples to file separately and take all the tax penalties for what is really just an administrative issue?

[jwirr]

1. There are more reasons to NOT get married in this country than

anything else.

[sinkingfeeling]

2. Student loans is why my son and his girlfriend aren't married, but live together.

[qazplm]

3. my understanding is

they dont start counting your payments until October of 07.

which means the ten years isnt until 2017.

it was a way of putting out a feel good measure while putting off the cost for ten years.

[jsamuel]

4. kick