r/tax • u/pbsSD • 21h ago

Form 8958 Split, MFS, Community Property State, Student Loan issue question...

Bit of a multi-factor question.... We live in CA and Partner A has 300k in student loans earning $X annually. Partner B has 0 in student loans and earns $3X annually.

We need to file separately because filing jointly significantly increases our income based student loan payment going towards public service loan forgiveness.

Question is: If we file separately in a community property state does form 8958 always need to be split 50/50 so each spouse is allocated half the earnings; or can we allocate each partners earned income based on their W2 earnings?

We can certify income for the student loans using alternative documentation like 8958, paystubs, W2 but using paystubs always uses the earners gross instead of taking pre tax deductions into account.

Our accountant always splits 50/50 but I'm wondering if we can allocate 8958 based on each partners individual income to certify with that and keep our payments down.

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u/Excellent_Shallot999 15h ago

A post nup agreement is how you get around it. But it is a legal matter, not a tax matter. Consult your attorney.

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u/pbsSD 12h ago

I've never heard of the student loan servicer requesting a post-nup but the IRS could ask for one for proof?

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u/CommissionerChuckles 🤡 8h ago

Your wages / salary will always be evenly split in a community property state unless you do some legal agreement (pre- or post-nup agreements) or the “marital community” ends according to your state’s laws.

There are times when you can file separately and disregard community property laws, but usually this applies to separated spouses living apart who do not share their earned income in any way.

Community property laws vary by state, but there are general guidelines about federal tax treatment in this IRS publication:

https://www.irs.gov/forms-pubs/about-publication-555

In CA you should worry more about FTB than IRS checking for a valid pre- or post-nup if you don’t evenly split your community income on the tax returns.

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u/x5163x 17h ago

You could have a post-nuptial agreement so that community property wouldn't apply in this situation. This involves lawyers because of California and also the fact that it has significant legal implications.

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u/Puzzleheaded_Ad3024 15h ago

A legal separation or divorce are the only way you can avoid reporting and splitting income on a tax return.