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Recertifying for PAYE in a Community Property State

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  • Recertifying for PAYE in a Community Property State

    I'm currently enrolled in the PAYE program with payments just over $240/mo.

    I finished up training last summer and so my 2019 tax returns will be half trainee salary, half attending, and some 1099 moonlighting.

    I'm married to a stay-at-home parent (no income) and have 3 kids.

    AGI if filing jointly will be $240,500.
    AGI if married filing separate will be $151,000 for me and $89,500 for her. It will also increase my total taxes by $1000.

    If I understand correctly, the PAYE program will only require my personal tax return if I filed separately ($151,000) and use that as my AGI to calculate next year's loan repayments instead of my cumulative household income ($240,500).

    TWO QUESTIONS:
    1. What would be my estimated payments with PAYE if I filed joint taxes and they used the $240,500 as my AGI? There's a PAYE cap (?) on monthly payments but the online calculators I've used keep telling me "you don't qualify for PAYE" with said AGI.
    2. If I file separate and they use my AGI of $151,000, my estimated monthly payment per online calculators would be around $900/month. Depending on the answer to question 1, the difference in monthly payments seems to greatly outweigh the extra $1000 in taxes spent upfront, yes?
    TIA!

  • #2
    Are you going for PSLF would be the first question. The second would be is it better to refi and payoff the loans? Loan balance an expected income might mean you actually want to ramp up your payments.

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    • #3
      I don’t know if you’re going to get actionable and specific advice on a public finance forum. I’d recommend checking with a couple of the vetted SL advisors on the WCI site who actually do this for a living.
      Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

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      • #4
        Yes, going for PSLF.

        And that's a fair point, Johanna. Thought I'd give it a shot though

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        • #5
          You are already enrolled in PAYE - you do not need to 'qualify' anymore. But a key component of PAYE is that the maximum monthly payment is calculated at the 10 yr standard payment amount. Ignore the "you do not qualify" and take a look at the standard payment number. Couldn't tell you what your payment amount is exactly as you didn't provide a few of the inputs, but hopefully my above comment solves for that part of the equation.

          With that said, the provided info doesn't make total sense anyways (not a CPA, so you confirm the next part on your own). Income in a community property state is shared, as are deductions. I'm sure there are unique situations, but are you sure about the split you mention above on the AGIs between you and your spouse? This is important as it could alleviate your comment of paying more in tax and make your second question moot.

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          • #6
            Originally posted by East coast View Post
            You are already enrolled in PAYE - you do not need to 'qualify' anymore. But a key component of PAYE is that the maximum monthly payment is calculated at the 10 yr standard payment amount. Ignore the "you do not qualify" and take a look at the standard payment number. Couldn't tell you what your payment amount is exactly as you didn't provide a few of the inputs, but hopefully my above comment solves for that part of the equation.

            With that said, the provided info doesn't make total sense anyways (not a CPA, so you confirm the next part on your own). Income in a community property state is shared, as are deductions. I'm sure there are unique situations, but are you sure about the split you mention above on the AGIs between you and your spouse? This is important as it could alleviate your comment of paying more in tax and make your second question moot.
            Very helpful. Thank you EC.

            And yes, the split is unusual because I had a significant amount of rollovers I did from residency retirement accounts into my Roth as well as $15K of moonlighting income.

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