Medical resident here in last year of training considering wide variety of employment opportunities. Married to another resident who will be starting a 3 year fellowship at the same time I become an attending. We both have about 200K in student loans. Mine are private (recently refinanced) at 4.25% with a 5 year payoff term once I become an attending. Her's are federal at 6.6% in an income based repayment model. Ideally we would continue filing "married filing separately" in order to keep her monthly loan payments low as she works to qualify for public service loan forgiveness. If we stay MFS, her loan payments would be ~400/month, while if we switched to MFJ they would be ~2000/month (since they would take into account my salary in their calculation). One opportunity recently presented to me is an independent contractor gig. If I took this job I would need to itemize my deductions, and, according to the rules of MFS, my wife would have to as well. The differential in our gross income would be substantial during this time (I would gross about 300K more than her while she is a fellow). Does it even make sense to take an IC job and file MFS? I am very confused as to how taking an IC job would impact our taxes if we filed MFS (i.e. her having to itemize deductions vs taking the standard deduction, etc).
Any guidance is greatly appreciated. Thanks in advance.
Medical residents; Married Filing Separately as Independent Contractor???
Re: Medical residents; Married Filing Separately as Independent Contractor???
You should post what payment plan your wife is on in order to get more specific help. You say "an income based repayment plan" does that mean IBR? I think REPAYE doesn't allow MFS to separate income for monthly payment purposes, so I assume she's on PAYE or IBR?
Re: Medical residents; Married Filing Separately as Independent Contractor???
She is on IBR. Specifically keeping her out of RePAYE for that reason. Unfortunately her loans don't qualify for PAYE.
Re: Medical residents; Married Filing Separately as Independent Contractor???
Why would you have to itemize deductions? If you're a 1099 person, you need to keep track of and deduct business expenses on Sched C, etc, but there's nothing to stop you from taking the Standard deduction( or half of it if filing as MFS) if that's advantageous.
Re: Medical residents; Married Filing Separately as Independent Contractor???
Ah I see. My understanding of the tax code is pretty limited. I am confusing "deducting business expenses" with "itemizing deductions."
To clarify: Even with married filing separately status I should be able to deduct business expenses while both my wife and I claim the standard deduction?
To clarify: Even with married filing separately status I should be able to deduct business expenses while both my wife and I claim the standard deduction?
Re: Medical residents; Married Filing Separately as Independent Contractor???
I don't see why not; but do realize the Standard Deduction for MFS will be equal to the Single amount. There are other consequences as well which are listed in Pub 17.ERandPeds wrote:Ah I see. My understanding of the tax code is pretty limited. I am confusing "deducting business expenses" with "itemizing deductions."
To clarify: Even with married filing separately status I should be able to deduct business expenses while both my wife and I claim the standard deduction?
Re: Medical residents; Married Filing Separately as Independent Contractor???
Yes. Before you tackle other parts of the 1040, you would fill out a Schedule C to come up with a 'net income'. Then the rest of the 1040 is completed using the 'net income' amount.ERandPeds wrote:Ah I see. My understanding of the tax code is pretty limited. I am confusing "deducting business expenses" with "itemizing deductions."
To clarify: Even with married filing separately status I should be able to deduct business expenses while both my wife and I claim the standard deduction?
Be sure to max out a solo 401k plan which you'll open when you set up your business.
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