The holidays are over, and we’re already tired of winter. You know what that means: It’s tax season!

As your W-2’s, 1099’s, and other tax forms start arriving in the mail this month, it’s a good time to discuss how your student loans can affect your taxes, and how your taxes can affect your student loans.

Tax-Deductible Interest

Some of the interest that you paid on your student loans during 2015 may be tax deductible. In other words, you might be able to reduce your tax bill (or increase your tax refund) if you made student loan payments. Each of your student loan lenders should issue you a special tax form called a 1098-E Statement, which will show the amount of payments on interest received by that lender during 2015.

Although you may have paid a lot of student loan interest last year, the amount of this deduction is capped at $2,500.00. Furthermore, the deduction is phased out for higher income earners, starting at $65,000.00 for single borrowers and $130,000.00 for married borrowers. Be sure to talk to your accountant to see if you’re eligible for this deduction.

The Importance of Adjusted Gross Income (“AGI”)

The most common (and often the most favorable) method for calculating your monthly student loan payment under a federal income-driven repayment plan (like IBR, ICR, PAYE, or REPAYE) is via the “Adjusted Gross Income” (AGI) figure on your tax return. AGI is not the same thing as your earnings as shown on your paystubs, your total wages as shown on your W-2 forms, or your total gross annual salary. AGI is, by definition, “adjusted” and takes into account various pre-tax deductions like certain types of retirement contributions, qualifying business expenses, qualifying health care expenses, mortgage interest payments, student loan interest payments under certain conditions (see above), and other items. Thus for many student loan borrowers, using their AGI will result in a lower monthly payment under an income-driven plan than using, say, a paystub, which just shows unadjusted gross income.

Special Issues for Married Borrowers

If you’re married, and one or both of you have federal student loans, you’re definitely going to want to think about how you file your taxes as a married couple.

Under three of the income-driven repayment plans for federal student loan borrowers (the Income-Contingent Repayment (ICR) plan, the Income-Based Repayment (IBR) plan, and the Pay As You Earn (PAYE) plan), your federal loan servicer will consider your joint income with your spouse only if you file joint tax returns. This means that for some married couples, filing jointly could result in a significantly higher monthly payment under ICR, IBR, or PAYE than if the couple filed taxes separately, because the combined income of both spouses would be used to calculate the monthly payment. (Note that this payment inflation could be mitigated if both spouses have federal student loans and they both repay their loans under one of the above income-driven plans, since your federal loan servicer will consider your combined federal student loan debt, as well).

However, under the new Revised Pay As You Earn (REPAYE) plan, your federal loan servicer will consider your spouse’s income regardless of how you file your taxes. REPAYE is generally a cheaper repayment plan as compared to ICR and IBR, but it may actually result in higher payments for some married couples who have been repaying their loans under ICR, IBR and PAYE while filing taxes separately.

To complicate matters even further, you could have completely different tax obligations depending on how you file. For example, filing taxes separately could result in higher overall taxes for the household, even if it saves the borrower some money on monthly-income-driven payments. If those higher taxes offset the lower student loan payments, there might not be much of a benefit to filing separate tax returns.

With the introduction of the REPAYE plan, this is a potentially very confusing time for married couples repaying their student loans under an income-driven plan. If you are unsure of your options, you should consult with a qualified student loan expert and a qualified tax expert.

Family Size and Dependents

Under any of the income-driven repayment plans (ICR, IBR, PAYE, and REPAYE), your loan servicer will consider your family size as well as your income. Generally speaking, the larger your family size, the lower your payments will be. Family size includes you, your spouse, any children who receive more than half of their support from you, and anyone else who lives with you and who receives more than half of their support from you. It does not matter whether they are claimed as dependents on your tax return.

Borrowers in Default on Their Student Loans

If you’re in default on your federal student loans, you may have been referred to the Treasury Offset program, which allows the IRS to intercept your federal tax refund and apply it to your federal student loans. Many people are surprised that this happens, but it is the most common way that the government uses its collections powers to pursue defaulted borrowers. It’s a major incentive to resolve your federal loan defaults.

Consequences of Settlements, Discharges, and Write-Offs

Did you settle or discharge a student loan last year, or have a student loan written off? If so, your former lender may send you a Form 1099-C, requiring that you report the portion of your loan balance that was waived as “income” on your tax return. This may cause you to incur a higher tax bill.

However, there are some ways of avoiding or reducing this tax (for example, if you were insolvent at the time that the debt was canceled, meaning your total debts exceeded your total assets). An accountant or qualified tax advisor can help you navigate the 1099-C if you receive one.

Get Professional Advice

Student loan law and tax law are perhaps two of the most complicated and convoluted fields. Navigating all of this by yourself could be challenging. Don’t be afraid to seek out help from a qualified expert – on the student loan side, the tax side, or both. Speaking for myself, while I specialize in student loan law and know a few things about taxes, I am not a tax specialist, and I always recommend that my clients and my readers obtain tax advice from a qualified tax expert.

Good luck!