First, this article reviews the tax law differences between MFJ and MFS. Next, the three income – driven plans that calculate payments differently depending upon filing status are discussed. Using various taxpayer scenarios, this article compares the tax cost of MFS with the reduction in loan payments, using individual versus joint income under the three income – driven plans.

A couple filing MFS returns generally incur a greater tax liability than if they file an MFJ return, because of the numerous differences in the tax law between the two filing statuses. The differences include tax rates, the opportunity to claim various exclusions and credits, and lower eligibility or phaseout levels.

The usual assumption that the higher marginal rate for couples filing separately results in a greater tax liability is true in most situations. However, couples with relatively equal incomes are not significantly affected by differences in marginal rates since the MFS marginal rate shifts occur at levels equal to one – half of the MFJ Marginal Tax Rates and Bracket Shift,” below.)

The tax liability of a couple filing MFJ with $100,000 of taxable income is $13,717. The tax liability of a married individual filing separately with $50,000 of taxable income each is $6,, exactly one – half of the tax liability of the MFJ couple. Lees verder →