Ever heard the one about the little boy who asked his dad, “Daddy, how much does it cost to get married?”

The father replied, “I don’t know son, I’m still paying.”

(*Cue the laugh track*)

To be fair, you could easily substitute a parent or child of the other gender and the joke still works. Either way, marriage is an easy target for funny-because-its-kinda-true jokes like this knee-slapper.

We take this joke in the lighthearted spirit in which it was intended. And yet, as a technical matter, there’s some truth to the idea that getting married can have a big impact on your finances… especially for early career physicians who are swimming in student debt and unfamiliar with the impact your tax filing status as a married couple can have on both your tax bill and student loans.

To understand this better, we need to examine the distinction between filing taxes jointly (MFJ) or separately (MFS) as a married couple.

What is MFJ / MFS?

‍First things first: let's define MFJ and MFS. MFJ stands for "Married Filing Jointly," while MFS stands for "Married Filing Separately." As you may know, when you file your taxes as a married couple, you have the option to choose between these two filing statuses.

In general, MFJ is the most common filing status for married couples because it often results in a lower tax bill. By combining your income and deductions and filing jointly, you'll likely qualify for more tax breaks, such as a higher standard deduction, lower tax brackets, and eligibility for certain tax credits.

However, MFS can be the better option for couples in which one spouse has a high-income job and the other spouse has a lower income or no income.

But the distinction between MFJ and MFS grows in financial importance when physician student loans are involved. Here’s how:

The Impact of MFJ/MFS on Your Student Loan Repayment‍

Filing taxes jointly or separately can directly affect your student loan payments.

If you're enrolled in an income-driven repayment plan (known as “IDR,” which encompasses the IBR, PAYE, REPAYE, and ICR payment programs) for your federal student loans, your monthly payment amount is based on your income and family size.

When you file taxes jointly, both your and your spouse's income will be considered when calculating your monthly payment amount. In many cases, this can lead to a higher monthly payment than if you were to file separately. Generally, the higher your combined income, the higher your monthly payment amount.

On the other hand, if you file taxes separately, only your income willbe considered when calculating your monthly payment amount. In this case, filing separately could result in a lower monthly payment amount, making it easier to manage your debt.

Where filing separately can be especially beneficial is when you’re on the public service loan forgiveness, or PSLF, path. If you are on an income-driven repayment plan, your payments—both during the training years and after—are based on your adjusted gross income, your AGI. And again, when you file separately, only your income is factored into your AGI. i.e. Your spouse’s income is removed from your loan payment calculation.

This is a big deal because most physicians will have a low AGI while in training. The lower the AGI, the lower your loan payment. And the lower your loan payment now, the more debt that is ultimately forgiven through PSLF.

Now, filing separately will oftentimes mean you and your spouse together may pay more in taxes now, but you'll almost always make up for the slightly higher tax bill (often many times over) by reducing your monthly loan payments and having more debt forgiven down the road. ‍

What Should You Do?‍

Deciding whether to file taxes jointly or separately can be a tricky decision, especially if you're not familiar with tax laws and regulations. And as you’ve seen, the distinction can have a sometimes significant impact on your finances, especially when student loans are involved.

But here’s the good news: figuring out which way to go comes down to good ol’ fashioned math. So consult with a tax professional or financial advisor, who can crunch the numbers help you understand the impact of each filing status on your tax bill and student loans, and determine which makes the most sense in your situation.

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Important Note: This blog post is intended to provide general information and should not be considered as professional advice nor investment advice. Please consult with a qualified financial or insurance professional for personalized guidance based on your specific circumstances.