The Optometry Money Podcast Ep. 151: How Filing Taxes Separately Impacts Student Loan Outcomes for Optometrists

[00:00:00] Hey everybody. Welcome back to the Optometry Money podcast. We’re help and ODs all over the country make better and better decisions around their money, their careers, and their practices. I am your host, Evon Mendrin, Certified Financial Planner(TM) practitioner, and owner of Optometry Wealth Advisors and independent financial planning firm just for optometrists nationwide.

Evon: And we are just about to be into one of the most joyous seasons of the year, and that is tax filing season. And of course, full of sarcasm there, but we are just on the brink of entering tax filing season. And you may be getting your documents into your tax preparers already.

many of you’re waiting for the books, for your practice to be finalized and for married optometrists with student loans that are heading towards forgiveness, planning towards forgiveness. How you file your taxes matters enormously. So for those who are married or planning to be married and wondering how that’s gonna [00:01:00] impact your student loans, this episode is for you because we’re gonna dive into how your tax filing status, especially filing taxes, separately impacts your student loan planning and can impact.

Student loan outcomes and given the changes from the 2025 One Big Beautiful Bill Act and that tax filing season’s right around the corner, I think it’s time to give all this a fresh look. So let’s dive in here.

The Core Student Loan Strategies Optometrists Should Consider

Evon: And I wanna start with just revisiting the three basic student loan approaches, that I talk about all the time.

The first approach is going to be treating your student loans like any other debt and planning to pay it off fully.

the second approach is using income-driven repayment plans towards forgiveness, and it’s either gonna be 20 or 25 or soon to be 30 year taxable forgiveness. Or it’s gonna be tax free public service loan forgiveness if you work for the VA or a government employer or nonprofit, and [00:02:00] that 10-year forgiveness is tax free.

And that approach, using IDR plans, income-driven plans towards forgiveness is totally different than treating it like any other debt because you are intentionally trying to lower your payments. Intentionally trying to pay as little into that debt as possible so that as much of it is forgiven as possible at the end of that time while preparing for a potential future, tax at forgiveness.

So it’s entirely different, the mindset, the approach to its totally flipped. From paying it down like you would any other debt.

And the third approach is using a bit of a hybrid approach where you are for certain cash flow goals, you’re using an income different plan temporarily to give as much wiggle room as much flexibility in your cash flow as possible.

And then as things change, your flipping a switch. Paying it down more aggressively. Some examples of that are trying to buy a house, trying to grow a [00:03:00] family and build up cash reserves or getting into practice ownership, cold starting, or buying a practice. Those are some examples of that. And so usually we’re projecting out your student loan repayment options and looking mathematically, looking at the math to say which of these approaches.

Are like most likely to have the lowest cost over time, and we’re looking at that in today’s dollars. What does that look like in today’s dollars?

Income is the Most Important Planning Lever for Income-Driven Repayment Plans

Evon: And when using income, different plans towards forgiveness, income matters a whole lot when you think about how IDR plans calculate payments each and every year.

it’s based on income and family size, a lower income. And larger family size equals lower monthly payments and a lower cost until forgiveness. and the definition of income, what income is, what it means for student loan purposes is hugely important, by default. The income that’s used is the [00:04:00] adjusted gross income, the AGI line item number on your tax return.

I think it’s line 11 on your personal tax return.

if your income has dropped since your last tax return, which is one of the questions they ask you as you are certifying your income, showing your income, you can use an alternative documentation of income such as a pay stub or if you have no income, you can self-certify.

and income is the biggest lever you have to plan around here. it’s hard to plan around family size. Yes, you might plan to get married. Yes, you might plan to have kids, but you’re not gonna go adopting more kids for the sake of student loan planning.

I think that’s a little bit too advanced of a strategy for almost everyone listening. So income is really the biggest lever that we have. Part of that is using pre-tax deduction strategically, like using, deduction and depreciation planning in your Optometry practice, using depreciation in real estate, for example.

but then there’s also using and [00:05:00] prioritizing pre-tax contributions to things like retirement accounts or health savings accounts. Those things are gonna help to lower that income number for student loan purposes, and not only help on tax planning, but as well as student loan planning. So that’s a part of it is using deductions and pre-tax contributions.

Filing Taxes Married Jointly Includes Both Spouse’s Income in the Student Loan Calculation

Evon: But tax filing status is extremely important because when you are married, filing jointly. the student loan calculation is gonna include the combined household income for the both of you, the combined household, AGI on that tax return. There’s no getting around that. If both spouses have loans, it’s gonna create essentially one household payment and then divide it proportionally , based on each spouse’s share of the total household debt, like if one spouse has 60% of the loans and the other spouse has 40% of the household loans then it would split up that payment proportionally. But if you’re filing taxes jointly and only [00:06:00] one spouse has federal student loans then that one spouse’s loan payments is going to include the entire household income.

How Filing Taxes Married Separately Allows for Better Student Loan Planning for Optometrists

Evon: However, when you file taxes separately. It allows you to exclude your spouse’s income for the student loan calculation. Each spouse’s payments is calculated separately, goes towards each individual student loan payment.

and this is where more strategic planning opportunities open up and again when we think about the recent changes due to the One Big Beautiful Bill Act,considering how the income-driven repayment options are merging towards IBR or the newly created RAP plan.

Many of you who are on Pay As You Earn are eventually going to be moved on to the old version of IBR. It’s a 25 year timeline forgiveness rather than 20. It’s a less favorable loan calculation. these strategic decisions around tax filing become really important

and so when you think about one borrower, households where only one spouse has student loans, even if your incomes are [00:07:00] pretty similar, filing taxes separately can be a big planning lever. Or when there’s uneven incomes between the two of you. Let’s say you are the spouse that has federal student loans and your income is much lower than your spouse’s.

That’s an example of that.

Example of How Filing Separately Can Improve Optometrists’ Student Loan Calculations

Evon: as an example of what a filing status does, let’s take a look at a married couple. Let’s assume no kids, just to keep this example simple. Each spouse earns $120,000.

So total household joint income is 240. if we were looking at the old version of IBR, meaning you took out your federal loans, your first federal loans before July 1st, 2014, if we were looking at the old version of IBR,

and let’s assume only one spouse had federal loans. again, to keep the podcast math here, simple. If this couple filed taxes jointly,the IBR payment for the next year would be $2,593. Pretty high, or $31,116 per year.

If they file taxes separately, [00:08:00] meaning we’re only using one spouse’s income for the student loan payment, that’s $120,000. That spouse’s loan payment would drop to $1,199 or about $14,000 per year. So that’s a savings over the full year o f over $16,000. That’s pretty substantial. That can change the math when you’re projecting the options quite a bit.

How Community Property States Magnify the Student Loan Planning Opportunities for Optometrists

Evon: And I would say there’s even more planning opportunities if you are in a community property state. So what is a community property state? there’s nine of ’em. That’s Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin.

And then Alaska is an opt-in community property state. So what’s different about a community property state? when you file taxes separately, and let’s call it a common law state, so all of the other states, each spouse’s income shows up on their individual tax return, on their individual separate tax return.

However, in a community property, state, income and deductions are split [00:09:00] evenly so on separate tax returns, total household income splits 50 50 between spouses. And you’re gonna see an IRS form in there, 8958, which shows you how all the income and deductions are split up and includes income from community property assets, for example, investment accounts, taxable investment accounts or investment real estate, things like that.

And so for tax purposes, this income is split evenly, deductions are split evenly, and for student loan purposes, income is split evenly as well.

and one example of this, which is extreme, but it’s not uncommon, this is actually more common than you think. Let’s imagine that there’s a married couple where one spouse is the practice owner, and the other spouse doesn’t work, or works part-time. very little taxable income generated.

So let’s imagine this example that the practice owner spouse earns $300,000 contributing to that AGI and the other spouse isn’t working. And generally when you look at optometrists, student loans might be somewhere [00:10:00] around $300,000 nowadays or not too much below that.

So in this scenario, if you’re filing taxes jointly, you’re gonna look at, Hey, I’m earning $300,000 of income. My student loans are less than my income at this point. Forgiveness probably isn’t in the cards. it doesn’t seem to make sense, and if you file taxes separately and one of those common law states.

all of that $300,000 of income still shows up on your separate tax return, so you’re still gonna account for that with student loans. However, in a community property state, what happens? that income is split 50 50 between spouses. So now you get to show for student loan purposes $150,000 of income.

That’s a much different opportunity there. And to look at the loan payments in this example, again, two spouses, no kids. Looking at that IBR plan, if you file taxes jointly with $300,000, that payment would be over $2,900 a month or over $35,000 a year.[00:11:00]

If you file taxes separately, split that income in half. Now your payment is about $1,500 a month or over $18,800 a year. So that’s a monthly savings of about almost $1,400 a month or over $16,000 a year. That’s pretty substantial and can change the math quite a bit and so while in every state filing separately needs to be looked at.

In community property states, there are especially big planning opportunities. I get really excited in community property states especially where there’s a huge difference in income, and especially where there’s one spouse working and the other isn’t.

And what if you are the lower earning spouse? So for example, what if you are working part-time, or whether you’re working in a role that has a lower W2 income, or whether you’re not working at all and you are the student loan borrower. How does that work? well, you can then use alternative documentation of income to use your lower income, like your lower pay stubs, for example, [00:12:00] and use that for your student loan calculations rather than the split tax returns.

And so really every year you get to look at that and say, okay, which income makes the most sense? If you’re the lower earning spouse, you can use that alternative documentation of income like pay stubs or if it’s more favorable you can use that, that separate tax return.

So there are some real opportunities here, depending on how you file your taxes now.

Additional Tax Costs to Consider When Filing Taxes Separately

Evon: There are additional costs to filing taxes separately. , It’s not only about the student loan payments alone.

There are some tax considerations, most likely additional tax costs to consider. the first one are tax brackets. So if you think about what’s happening when you file separately, you’re taking joint tax brackets and splitting them in half basically for each spouse.

So for those common law states, the non-community property states, if there’s a huge difference in income, t he higher earning spouse is forcing more income into smaller tax brackets, so you might see [00:13:00] higher taxes calculated because of that.

Of course, in community property states it’s split equally, so you don’t necessarily see that issue there. but there’s also lost credits and deductions. So for example, the child and dependent care tax credit. So if you have younger kids and you’re paying for daycare or or I believe even preschool, things like that, you don’t get to access this credit, your Roth IRA contributions, you can no longer make Roth IRA contributions directly to the Roth IRA because the income threshold to do that drops to $10,000 for each of you.

So it basically forces the backdoor Roth contribution strategy on you right away. Now, for the most part, ODs families tend to head that direction anyways. and because that backdoor method is available, it’s not a huge issue. but if you already did Roth contributions for 2025, for example, and now here in early 2026, you’re deciding, Hey, I’m gonna file my tax returns separately, now you have to go back most likely and correct those.

Corrections exist. It’s not a [00:14:00] huge deal, but it’s something you have to do.

student loan interest deduction. You don’t get to benefit from that, but you’re probably phasing out of that already.

And then another big one is the premium tax credits for ACA health insurance.

This is really big. If you are cold starting a practice or just purchased one. You have a lot of depreciation expense there and your income may be low enough to benefit from those health insurance premium tax credits , filing taxes separately makes you ineligible for that.

So that’s an additional tax thing you have to look at.

And, two other things. If you’re itemizing, if one spouse is itemizing expenses, the other spouse has to as well. One can’t take a standard deduction and the other itemized, you have to both do the same thing.

And then lastly, there might be potentially higher tax filing costs for filing two tax returns rather than one.

The Math – Compare the Student Loan Savings vs. Higher Tax Costs When Filing Separately

Evon: Now all that being said, I mentioned a bunch of negatives, right?

Negative tax considerations. But all we really have to do is compare the two and say, here’s the savings on the student loan side. Here’s the additional expenses or [00:15:00] taxes on the tax side if you file separately. And as long as that student loan savings is higher than the extra taxes, then that makes sense.

And , we’re running this with our clients every year we’re looking at the tax projection. We’re looking at the student loan projection, working with the tax professional and making that decision. But that’s the math you can do. And very often, the student loan math outweighs the cost on the tax side.

Now, one thing I’ll mention about tax preparers is that v ery rarely outside of student loan planning, is it gonna make sense from a tax perspective to file taxes separately as a married couple? And it’s not very common for tax preparers, tax professionals to understand the student loan system.

most financial Advisors don’t understand the federal student loan system and so be prepared to, Be prepared to explain why you want to file taxes separately and even to provide the student loan math or whatever it is, or have your advisor step in and communicate on your behalf. That’s just one thing to look out for is you’re [00:16:00] probably gonna be explaining the logic and explain the math behind it.

Next Steps for Optometrists

Evon: and so what should you do now as we’re heading into tax filing season? What should you do? Well run that tax projection calculation with your professionals, comparing, filing taxes, jointly, comparing, filing taxes separately.

Look at your income-driven repayment plan calculation. And compare both, tax filing statuses and make a decision from there. and of course, this all only makes sense if you are planning to go for forgiveness. If forgiveness isn’t in the cards, if it doesn’t make sense long term, then none of this may matter, right?

So this is primarily if you are planning to go for forgiveness. And there are some timing considerations and common mistakes to avoid. one thing is that if you file taxes married filing jointly and the April tax filing deadline comes and goes, you are stuck with that joint tax return.

You have to use joint income when calculating your student loan payments. You cannot, unfortunately, amend from a joint tax return [00:17:00] back to a separate tax return for the both of you. So once that’s, once that decision’s done and the tax filing deadline passes, you can’t go back.

Now let’s say you do this in February and you realize, oh no, like I, I shouldn’t have done that. One thing that can be done is called filing a superseding tax return. Now, this isn’t very common. This is something you’re gonna have to talk to your tax professional about, but there is one potential way to get outta that and file another tax return before that tax filing deadline called a superceding tax return.

But very important, if you file that joint, if you file that joint tax return, the filing deadline comes and goes, you’re sort of out of luck until you file that next tax return. And so depending on when you’re listening to this podcast, if you’re unsure about what’s going to make the most sense for you, it may make sense to file an extension.

Don’t file your tax return just yet. Talk with your tax professional about filing an extension. Give yourself more time to make that student loan decision or to reuse the previous year’s tax [00:18:00] return. And then when you’re ready, you can file that next tax return. Now on the other hand, if you file separate tax returns, the next tax season comes and goes. You then file the next year’s tax return. You can amend that return from separate tax returns back to a joint tax return. So if there is an extraordinary cost, tax cost to filing taxes separately versus jointly, you may wanna talk to your tax professional about once.

You no longer need it. for student loan purposes, meaning you’ve filed the next one, about amending those separate returns back to joint and whether you wanna deal with that extra work, in bunches, throughout the years. And so important tax considerations there. But this is a great example of student loan planning using IDR plans and tax planning really go hand in hand. I tend to look at Your IDR payments as really an additional tax. it’s effectively an additional tax. It’s effectively a 10% [00:19:00] or 15% additional tax on your income. And so when we are making decisions around, Hey, should we, should we prioritize these deductions or should we plan for Roth contributions or Roth conversions, or different things like that?

When we are looking at tax planning decisions, we have to keep in mind the additional 10 or 15% tax on the student loan side, and your professionals have to work hand in hand as well. Your student loan Planner, your financial advisor has to work hand in hand with your tax professional.

So hopefully this is helpful as you head into tax season and as you are preparing to file your 2025 tax return, it’s time to have these conversations now and as you’re doing so, I put together a free guide to help you sort through what documents you need to gather, what documents he need to collect, to file your 2025 tax return, and what are all the things your tax preparers gonna ask for, and so this is a bit of a survival guide for making sure you have all the stuff you need and you can click on the link in the show notes to download [00:20:00] your free guide, and if you’re ready to work with a financial advisor who understands how student loan planning impacts tax planning for optometrists and practice owners.

It’s time to reach out. Click on the link in the show notes to schedule a time to chat and we can talk about whatever’s on your mind financially and we can share how we help ODs all over the country navigate those same decisions. And with that, we will catch you on the next episode.

In the meantime, take care.