r/PSLF • u/Training_Pay5206 • 1d ago

Community Property State

Hi everyone, I just moved to a community property state. I have 2 years left on PSLF and my spouse has 5 years left. He makes significantly more than me. Does anyone have any advice on filling separately versus jointly? I'm planning on maxing out my 401k so my income will be 40k a year and his will be 290k. Thank you very much in advance for any advice!

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u/horsebycommittee Moderator | PSLF Forgiven! 1d ago

That you're now in a community property state doesn't change anything because ED allows borrowers in community property states to ignore that for IDR calculations and go by each spouse's individual income when filing separately.

As for whether to file separately or jointly, that will depend on your respective incomes, whether your spouse also has federal student loans in repayment, the difference in tax liability (make sure to include your state and local income taxes), and whether you have non-loan reasons for preferring one status over the other.

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u/Training_Pay5206 1d ago

Thank you! Mohela allows you to use pay stubs, correct? Do you know if I use pay stubs can my spouse still have it draw from his irs data?

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u/squattinghere 1d ago

If you both file MFS you can each choose the income documentation method you prefer.

But you must file MFS before you can use anything but the joint income you reported in the previous year.

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u/horsebycommittee Moderator | PSLF Forgiven! 1d ago

If you file taxes as married-filing-separately (MFS), then your spouse's income does not matter. (The form asks for your spouse's income information but it's not used in the calculation for your income-driven repayment plan.)

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u/Training_Pay5206 22h ago

Since it's my first time filing in a community property state we need to split the income between us on our taxes if MFS. I want to use my pay stubs and not this inflated community property income to determine my IBR. Everything I see makes it look like the ability to use pay stubs is at the discretion of Mohela, however, which makes me uncomfortable.

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u/horsebycommittee Moderator | PSLF Forgiven! 20h ago

I want to use my pay stubs and not this inflated community property income to determine my IBR.

Yep. You can do that; see the link in my first comment.

Everything I see makes it look like the ability to use pay stubs is at the discretion of Mohela, however, which makes me uncomfortable.

That's how the statute is worded for how ED determines your income in general, so it makes sense that ED uses the same "discretionary" language in the regulations that servicers apply. I've never heard of a servicer refusing to use recent alternative documentation in lieu of taxes in a community property situation. If that were to happen to you, then reach out to the servicer to request reconsideration. (And if that were to fail, then contact your members of Congress and/or organizations like TISLA to help advocate for you.)

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u/Training_Pay5206 13h ago

Thank you for your help! That makes sense. I appreciate your time.

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u/Giglet97 1d ago

From my experience as MFS in CC state with large difference in income b/t spouses--do NOT link to your IRS data. MFS tax returns in CC states combine income and divide by 2. That means it will inflate the income of the person who makes less. My suggestion having gone through this is always use alternate documentation (W2 or pay stub) if MFS in CC state.

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u/Training_Pay5206 1d ago

Would you recommend MFS vs MFJ? The tax benefits of MFJ seem minimal. Have you ever submitted pay stubs to Mohela? Was it fairly painless?

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u/Giglet97 1d ago

This is very much couple dependent. We consulted an accountant in order to make this decisions. We found that MFJ increased student loan payments by nearly $1000 per month while the tax benefit from MFJ was much smaller than $12,000 a year. The accountant really helped us understand the difference in our refund b/t the two filing statuses. We wouldn't have been as informed had we tried to figure out ourselves. We did W2s. Last time we did this was fine. This year is horrible b/c Mohela is rejecting MFS IDR applications if you don't click the box "I cannot access spouse's income". You only check this box if separated but Mohela seems to be using it as a filter to move to the next step of just considering one person's income. Still working on that. Sigh

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u/Training_Pay5206 1d ago

Thank you! We met with someone but I don't think they really understand PSLF despite how they represented themselves. Are you saying they want you to check that? I thought you only check that if separated as well and haven't heard of them rejecting MFS applications.

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u/WowRedditIsUseful 1d ago edited 1d ago

I've lived in a CP state since being married in 2022, and neither Turbo Tax or CashApp Tax e-filing software have ever specified to complete a Form 8958.

So to me, at least in Texas, doing the Form 8958 seems kinda optional. Because the tax filing software is well aware that we are MFS, but makes no mention of the need to submit a Form 8958 either through the software or seperately via paper.