Cheraw, SC asked in Tax Law for South Carolina

Q: The state of south carolina retained my income tax refund for unpaid student loans my wife incurred before we married.

She has no income. I do claim her as a dependent. Is it legal for them to retain my refund?

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1 Lawyer Answer
Michelle D. Wynn
Michelle D. Wynn
  • Tax Law Lawyer
  • Melbourne, FL

A: Typically if you claimed her as a dependent, the state would not keep your refund to apply it to her tax debt. However, you can only claim your spouse as a dependent if you file as Married Filing Separately and meet other qualifications.

If you filed as "Married Filing Jointly" and she merely did not have any income, then the state would be able to claim your tax refund for payment of her student loan debt. It appears that South Carolina will allow you to request "Injured Spouse" relief to allocate the portion of your joint refund due to you and the portion due to your wife. If South Carolina accepts this allocation, it would refund the portion of the refund due to you and keep any portion of the refund allocated to your wife towards her student loan liability.

I would also recommend that your wife contact her student loan servicer to try to address her defaulted student loans. They will often take her financial situation into account in arriving at a repayment option to allow her to cure the default and possibly allow you to receive your full tax refund going forward.

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