Most college graduates—about three-quarters of them, in fact—are trying to repay student loan debt, so if that describes you, you’re not alone. The good news is that there is a student loan tax deduction to help those who are making payments. If you’re married, however, things get slightly more complex. Before you file your taxes as married filing jointly, read on.

What is the Student Loan Tax Deduction?

There is a deduction available to those who are making student loan payments and meet a few other criteria. You can deduct either $2,500 or the amount of interest you actually paid, whichever is less. It gets deducted as an adjustment to your income, so you won’t need to itemize it.

In order to qualify for the deduction, you need to meet the following criteria:

  • You paid interest on a qualified student loan in the prior tax year
  • You’re legally obligated to pay interest (you aren’t in school or in your grace period)
  • You are not filing as married but separate
  • Your modified adjusted gross income, or MAGI, is less than that year’s cutoff
  • You and your spouse, if filing jointly, can’t be claimed as dependents by anyone else

You might be thinking it makes the most sense to file jointly, but there’s a little wrinkle you should be aware of, especially if you’re on an income-based repayment plan.

How is the Student Loan Interest Tax Deduction Impacted by Marriage?

In order to get the interest tax deduction, you need to file taxes jointly with your spouse. If you’re on an income-based repayment plan, however, filing jointly can affect your monthly student loan payment amount. With this type of payment plan, the Department of Education looks at your income when determining how much you need to pay each month.

If you’re married filing separately, only your income will be considered. If you file jointly, however, your spouse’s income will be considered as well, and that can mean a much higher payment for you. In fact, in a given tax year, you could find yourself paying thousands more in student loan payments.

Does It Make Sense to File Separatly?

Whether you file jointly or separately should depend largely on the following factors:

  • What type of repayment you’re on: income-based repayment, a standard plan, or another repayment schedule
  • How much interest you’re paying: if it’s over $2,500 per year, you’ll still be limited to deducting only $2,500

If you are on the income-based plan, you may want to file as married but separate; you’ll miss out on the tax deduction, but you’ll be paying less each month on your loans. If you’re on a standard or other plan, you can still file jointly and take the tax deduction while not seeing your payments increase due to your spouse’s income.

How Long Does It Take to Get Approved for a Private Student Loan?

The best way to know whether you should file jointly or separately is to look at your payment amounts, income, and projected savings with the tax deduction. You may find that you save more money each year by being on a standard plan, filing jointly, and taking the deduction. You may, however, see that you’re saving more by filing separately, staying on an income-based plan, and letting the deduction pass you by.

You should also consider long-term vs. short-term savings. An income-based plan is easier financially in the short term but can end up stretching your loan out longer and costing you more in the long run. For some families, having the savings up front is better.

For others, taking the higher payment amount each month in a standard repayment and then getting the tax deduction is better; some families can afford that higher payment and are more interested in paying off the debt as quickly as possible.

What If the Married Couple Consolidated Their Student Loans Together?

You might not know that it’s possible for you to consolidate your student loans with your spouse’s. It can be advantageous to do so if one of you has a significantly higher credit score than the other. It can also, however, end up hurting you.

In a married consolidation, both parties are 100 percent liable for the repayment. You can’t, however, both take the interest deduction if you’re filing separately. If you’re on an income-based repayment, both of your incomes are being considered as well for the purpose of determining payment amounts.

As a result, if you consolidated your student loans, you will probably miss out on both the tax deduction and the lower payment amounts from filing separately. If you can afford the higher payments and are more concerned about paying the loan off quickly, then these issues probably won’t be as large for you.

Knowing how to best structure your student loans for tax time and how to get the best deal can be difficult. The absolute best way to ensure you’re getting the most money is to consult a tax professional who can advise you on how to set up your situation in the most advantageous way.