Might be a dumb question: The $50 deduction per dependent on the RAP plan, is that for both people in the household that is on RAP? My husband and I both have student loans, we files taxes MFJ, and we have two kids. When calculating our potential payments do I deduct $100 from each of our monthly payments or is it a combined $100? Also, it's a $50 deduction per dependent subtracted from the monthly payment, right? Not per year? Ugh…
$50 deduction for each dependent on RAP for both loan holders?
byu/northernbeachbum inStudentLoans
Posted by northernbeachbum
5 Comments
wait i think its per household not per person so you’d get the $100 total deduction split between both your payments based on how they calculate it. my friend went through this same thing last year and she said they treat it as household deduction even though you both have separate loans
the $50 is definitely monthly not yearly btw
If you both have student loans and filed MFJ, I would highly recommend Income based instead. Rap has no limit.
IBR factors in both of your student loans and you will only pay a max based on your joint AGI.
For example my wife and I both have student loans. On Rap we would both be looking at $1700/month payments.
On IBR our total payment will be around $1700
When you MFJ you have one total household student loan payment amount split proportionally by loan burden, regardless of plan. So your total $50 per dependent would also be split proportionally by loan burden. There’s no double dipping for $50 off of each.
For a couple filing jointly and both on RAP, the $50 deduction per month is per dependent claimed on the tax return and it looks like it would be split between the couple. They wouldn’t each get the $50: [https://www.reddit.com/r/StudentLoans/s/IzCRSlYKa8](https://www.reddit.com/r/StudentLoans/s/IzCRSlYKa8)
The $50 is definitely monthly, not yearly, according to the OBBB text that defines RAP. So that’s an easy one.
There seems to be a bit of debate about how RAP payment amounts are calculated for MFJ, although the general consensus seems to be “badly”. According to 34 CFR § 685.209, which describes Income-Driven Repayment (IDR) Plans, of which RAP is one, the payment amount is calculated based on the combined income, and then the calculated payment amount is split proportionally between the spouses based on their share of the loan balance. So if that’s correct, and if (for example) you and your spouse have equal amounts of student loan debt, and the payment amount calculated under RAP was $1,000/mo, you would each have a monthly payment of $500. And since the $50/mo is applied to the payment amount before it gets split proportionally, that means the $50 would effectively also be split proportionally.
Now, bear in mind there seems to be some disagreement about this. It looks like it comes down to the fact that RAP uses different inputs from previous IDRs as described in the CFR (e.g. AGI instead of “discretionary income”). Some are arguing that the way the relevant laws are written, *both* spouses might have the payment amount calculated based on the full combined income.
But in any case, it seems like if you are married with kids and you both have student loans, it would be a very good idea for you to run the numbers on preparing your taxes both jointly and separately, because RAP might make it make more sense to file separately.