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Unemployment benefits can help you get by in the event of job loss, but this money is subject to taxes just like any other source of income. How much your unemployment benefits are taxed depends on your filing status, tax bracket, and state of residence.

In this guide to unemployment benefit taxes, you’ll learn the ins and outs so you can pay Uncle Sam what you owe. Read on to find out:

•   Are unemployment benefits taxable?

•   How are unemployment benefits taxed?

•   What are tips for paying taxes on unemployment benefits?

Do You Have to Pay Taxes on Unemployment Benefits?

Yes, you do have to pay taxes on unemployment benefits. They are taxable like any other income. That means you won’t actually get to keep all the money the government gives you while you’re unemployed. You’ll have to give some of it back, just as you do on many other forms of money you receive. It’s simply part of being a taxpayer.

How Is Unemployment Taxed?

Now that you’ve learned that unemployment benefits are taxable, consider the details. How much are the taxes, is it just federal or state taxes too, and how do you pay them?

How Much Are Unemployment Benefits Taxed?

No matter which state you live in, your unemployment benefits are taxed at the federal level. That means everyone — including residents of states without income taxes — must pay taxes on unemployment compensation.

How much you owe depends on your filing status and tax bracket. The United States is on a progressive tax system: In general, the higher your adjusted gross income (AGI), the more you’ll pay in taxes.

For the 2024 tax season (filed in 2025), there are seven federal tax brackets, ranging from 10% to 37%.

Before filing your taxes, you’ll receive a Form 1099-G, Certain Government Payments, reflecting your unemployment benefits. This form will indicate how much unemployment compensation you received as well as how much was withheld, if applicable. You’ll need this form, plus any records of quarterly payments (more on those below) when filing your taxes.

Unemployment Benefit Taxes at the State Level

When determining how much unemployment benefits are taxed, don’t forget that federal taxes may not be the only funds due. Depending on where you live, you may have to pay state income taxes on your unemployment compensation, too. Nine states do not have personal income taxes on what are considered wages:

•   Alaska

•   Florida

•   Nevada

•   New Hampshire

•   South Dakota

•   Tennessee

•   Texas

•   Washington

•   Wyoming

If you live in one of those nine states, you don’t have to pay state income taxes on unemployment benefits.

That said, four states that do have a state income tax also don’t tax your unemployment compensation:

•   California

•   New Jersey

•   Pennsylvania

•   Virginia

If you live in one of the remaining 37 states (or Washington, D.C.), you’ll have to pay state taxes on any unemployment earnings.

How to Pay Taxes on Unemployment Benefit

Like it or not, you’ll owe taxes (federal and maybe state) on any unemployment compensation. Now that you know how unemployment is taxed, consider how you can pay those taxes. You have two main options:

•   Have the taxes withheld like you would from a paycheck

•   Estimate and pay the taxes each quarter

Here’s a closer look at each option.

Withholding Taxes

When you initially apply for unemployment, you can ask to have taxes withheld from your payments. However, federal law has established a flat rate of 10% for tax withholding for unemployment benefits.

When you receive income as wages, you can usually specify how much you want to have withheld via filling out Form W-4.

If you expect to be in a higher tax bracket and need to pay more in taxes than what’s being withheld, you can make quarterly estimated payments for the difference.

If you’re currently receiving unemployment compensation and taxes aren’t being withheld, you can submit Form W-4V.PDF File , Voluntary Withholding Request, to initiate the 10% withholding on future benefit distributions.

Recommended: Does Filing for Unemployment Affect Your Credit Score?

Paying Quarterly

To avoid owing an underpayment penalty when you file your taxes, you may need to make quarterly estimated payments on your unemployment earnings. You can use Form 1040-ES and send in your payment by mail, or you can pay online or over the phone.

If you’re new to estimating taxes, you can use the IRS resource for quarterly taxes , work with an accountant, or use tax software.

Tips for Paying Taxes on Unemployment Benefits

Being unemployed can be stressful, and on top of that, it may be hard to figure out how to properly pay taxes on unemployment benefits you receive. Follow this advice which can help simplify and clarify the process.

•   Opting into tax withholding: When you apply for unemployment, you can opt into automatic tax withholding at a flat 10% rate. While it may not be enough to cover your entire tax liability, it’s a good start — and can keep you from overspending your unemployment compensation.

•   Setting aside money in a high-yield savings account: If you don’t opt in to withholding (or if 10% is not enough to cover your tax liability), you’ll need to pay quarterly estimated taxes on your unemployment income. To avoid accidentally spending that money before it’s due, it’s a good idea to calculate what you’ll owe and put it in a savings account that pays a competition rate that you won’t touch until it’s time to pay Uncle Sam. Bonus: You’ll be earning interest on the money.

•   Keeping track of all your earnings and paperwork: Tax filing can be complicated — there are lots of forms to collect and statements to reference. Keeping clean records of benefit distributions and quarterly payments throughout is crucial to preparing for tax season.

•   Using IRS Free File: Because you have to pay taxes on all income, including unemployment, you’ll likely want some help. If your adjusted gross income is $84,000 or less, you can get free guided tax preparation software through IRS Free File . If your AGI is too high but you’re feeling overwhelmed by how complicated your taxes are, it might be a good idea to pay for tax software or hire an accountant.

•   Being aware of unemployment fraud: It’s possible for criminals to use your personal information to falsely make unemployment claims in your name. If you receive Form 1099-G for unemployment compensation but did not receive any unemployment benefits, follow the Department of Labor’s steps for reporting unemployment identity fraud .

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The Takeaway

Like other forms of income, unemployment benefits are subject to taxes. If you aren’t having taxes withheld from your unemployment compensation — or if the flat 10% rate is not high enough — the IRS requires that you pay quarterly taxes. Paying what you owe on unemployment benefits is an important and necessary step in correctly filing your tax return.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Do you pay less in taxes when you’re on unemployment?

Your tax rate depends on your adjusted gross income. If you earned less income because you were unemployed — and your unemployment checks are smaller than your paychecks had been — you can expect to pay less in taxes.

Are unemployment benefits taxed in states with no income tax?

Unemployment money is taxed at the federal level no matter which state you live in. However, if you live in a state with no state income taxes, you won’t have to pay state taxes on your unemployment benefits. Four states that levy income taxes also exempt you from paying those state taxes on unemployment compensation: California, New Jersey, Pennsylvania, and Virginia.

Was pandemic unemployment taxed?

Pandemic unemployment was not taxed for the 2020 tax year — to a certain degree. Following the historic job loss associated with the initial wave of COVID-19, the government passed the American Rescue Plan Act of 2021, which made the first $10,200 of unemployment benefits non-taxable.

However, this was a one-time exclusion. Though the pandemic continued beyond the 2020 tax year, unemployment income became completely taxable once again.

Photo credit: iStock/PixelsEffect

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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The cost of eating out, like just about everything else, goes up with inflation, but that doesn’t mean you have to skip it altogether. It can be a fun way to take a night off from cooking, try new foods, and perhaps most importantly, bond with others.

If you’d like to enjoy eating out without breaking the bank, try these strategies to make dining out more affordable. They include timing your visits wisely, seeking out deals, ordering strategically, and taking advantage of loyalty programs.

Choose Budget-Friendly Restaurants

The Bureau of Labor Statistics reports that the spending on food outside the home rose 8.1% in 2023. That’s a significant jump and can take a bite out of your discretionary spending funds. (There are, as you might expect, risks to not saving money or blowing your budget in this way.)

However, with careful planning, you can find ways to save and still eat out without going into debt. Opting for fast-casual restaurants is a good choice if you want to avoid an expensive meal. Prices at these restaurants are designed to appeal to typical Americans. Examples of fast-casual restaurants are Olive Garden, Outback Steakhouse, Macaroni Grill, and P.F. Chang’s.

The meals at fast-casual eateries straddle the line between fast food and fine food. You will also find an extensive children’s menu in many cases, which can be more affordable than ordering an adult-sized meal for a kid.

Time Your Visits Wisely

One simple way to save money when eating out is to go midday: Restaurant lunch menus tend to go easier on your eating-out budget. Lunch menus are cheaper because the portions tend to be smaller so the restaurant charges less. Also, the restaurant may want to encourage more diners at lunch time.

Many eateries will offer deals on certain days of the week, such as Mondays when people might tend to work from home and not dine out. A restaurant might allow children to eat for free on certain nights, making eating out on a budget easier for families.

Check local media and community pages to find out which restaurants are offering deals and when. Also look at restaurant Facebook pages, Yelp, and other social media for time-sensitive deals that can help you save money on food.

Take Advantage of Happy Hours

Happy hours are another way that restaurants try to attract business at slower times, and they can be a good deal if you are on a budget so you don’t deplete your checking account. Happy hours are often scheduled to increase foot traffic in the early evenings during weekdays. Although cheap drinks are usually what come to mind for happy hour, many restaurants offer discounts on food, too. You might have a budget-priced beer or glass of wine and some snacks and consider it dinner.

If you want to save as much as possible when eating out, consider stacking deals. You might be able to go out to eat on, say, a Monday during the happy hour and reap a double discount in some places.

Recommended: 50/30/20 Budget Calculator

Make the Most of Deals and Discounts

Lots of restaurants offer deals and discounts, you just have to know how to access them. That’s often through an app. Bigger chains like Panera and Olive Garden have an app with deals and offers reward points (more on that below), which can encourage customer loyalty and more frequent dining. According to Bluedot, a restaurant technology company, 51% of customers find deals using a restaurant’s app, while 43% find deals through coupons in the mail.

Other ways to find restaurant deals are to check such websites as Groupon and LivingSocial. You might also find discounted, restaurant-specific gift cards on these sites. Also look on social media for deals; you might see an offer, such as two pasta entrees and a bottle of wine, at a price that’s gentle on your bank account.

Another tip: At restaurant.com, you can buy a certificate for a specific restaurant at a discounted price, for example, a $25 gift certificate for $10.

Join Loyalty Programs

Restaurants use loyalty programs to attract consumers. According to PYMTS.com, 67% of restaurants now provide a loyalty program. Restaurants often offer incentives to sign up for loyalty points, such as a free appetizer, dessert, or entrée.

Panera has a popular program that is based on the number of visits members make to their locations. Members of the program receive personalized treats and rewards, such as free bagels, savings on salads and sandwiches, birthday surprises, and an unlimited coffee subscription.

Order Strategically

Plan ahead how you might keep your bill within your budget’s boundaries.

Sidestep Pricey Drinks

Alcohol tends to be expensive in restaurants, so you might stick with a soft drink or the cheapest option, free tap water. If you would like some wine with your dinner, call the restaurant and ask if they allow you to bring your own and if they charge a corkage fee. It might be cheaper to take your own wine and pay the corkage fee.

Also take note of how beverages like coffee and iced tea are handled. Some eateries offer free refills; others don’t. Know the impact on your wallet before you opt for that second (or third) serving.

Share Meals or Appetizers

Many restaurants serve large portions, so one strategy for saving money when eating out is to share appetizers with others or split an entrée. For example, you might make a meal for three people out of two entrees and a couple of sides instead of three entrées.

If you split an entrée, the kitchen might be willing to split it between two plates before serving it. If not, ask for an extra plate when the meal comes. You can then split the bill politely when dining out by asking the server to divide the amount or having one person pay and the others transfer their share to them.

Recommended: How Much of Your Paycheck Should You Save?

Set a Restaurant Budget

Set a budget for eating out each week or month so that you don’t spend too much. To help figure out the amount, track your current dining habits for a week, and then consider how much you can reasonably allow based on your lifestyle and total budget.

You might try out some different budgeting methods, such as the envelope system. With this technique, you could allot a certain amount of money to dining out at the beginning of the month. Once that money is gone, stop dining out, or else borrow from another spending category if you have wiggle room there. But this is not a moment to be transferring money from one bank account to another, as in from savings to checking, to fuel your restaurant tab. You want to stay on target and not put too much of your hard-earned cash towards eating out.

Recommended: How to Merge Bank Accounts

The Takeaway

Eating out can get expensive, but there are ways to lower the cost and still enjoy meals at restaurants. Timing your visits strategically, snagging deals via loyalty programs, and sharing food can be some of the ways to stick to your budget.
Another idea for helping your budget can be to pick the right banking partner.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How effective is it to split meals when dining out on a budget?

How to eat out inexpensively can include splitting meals for significant savings. However, some restaurants may add a meal-sharing surcharge or reduce portion sizes to discourage people from splitting meals. Use your judgment to see if this is a good tactic for lowering dining-out costs.

Are lunch menus typically more budget-friendly than dinner options?

Yes. Lunch menus tend to be cheaper because the portions may be smaller and fewer employees are typically required to staff a restaurant at lunchtime compared to dinner time.

What days of the week often have the best restaurant deals?

Mondays, Tuesdays, and Wednesdays tend to have the best deals to attract more diners vs. the standard “eating out” days of Friday and Saturday.

Photo credit: iStock/Daniel Suhre

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Tax deductions enable taxpayers to reduce their total taxable income. That can be a very good thing: It can result in a lower tax bill or, if you had too much withheld through the year, a larger refund.

While most people now take the standard deduction — especially since the Tax Cuts and Jobs Act of 2017 effectively doubled the standard deduction amount — some taxpayers may benefit from itemizing their deductions.

Doing so can be a somewhat complicated and time-consuming process, but it may save you money. Here’s your guide to itemizing deductions; read on to learn:

•  What is an itemized deduction?

•  How do itemized deductions differ from standard deductions?

•  What are examples of itemized deductions?

•  What are the pros and cons of itemizing deductions?

What Is an Itemized Deduction?

Itemized deductions are a strategy to lower your adjusted gross income for a tax year. Rather than taking a set standard deduction whose amount is determined by the Internal Revenue Service (IRS), some taxpayers choose to calculate all deductions for which they’re eligible. They can then decrease their taxable income by that amount.

It’s worthwhile for some taxpayers to do the math and see how much they can reduce their tax bill by itemizing. That said, many may realize they can actually reduce their taxable income more by taking the standard deduction. Why? The standard deduction is much larger than it used to be since the passing of the Tax Cuts and Jobs Act at the end of 2017.

For the 2024 tax year (filing in 2025), the standard deduction is:

•  $14,600 for single tax filers ($15,000 for tax year 2025)

•  $21,900 for heads of household ($22,500 for tax year 2025)

•  $29,200 for married couples filing jointly ($30,000 for tax year 2025)

Almost everyone can take the standard deduction — and there’s a lot less math and paperwork involved. But for a unique set of taxpayers, itemized deductions could yield an even larger tax liability reduction than what the IRS offers through the standard deduction.

Itemized vs. Standard Deduction: What’s the Difference?

So what are the differences between itemized deductions and the standard deduction? Let’s take a look.

•  Dollar amount: The standard deduction is a set amount. If you choose the standard deduction, you cannot reduce your tax liability further by tacking on itemized deductions. When itemizing, the amount by which you reduce your tax burden varies depending on your unique tax situation. In nearly every case, it only makes sense to itemize if the resulting deduction is larger than the standard deduction or if you aren’t eligible to take the standard deduction.

•  Process: Claiming the standard deduction is straightforward. You don’t need to produce receipts and sort through expenses. If you itemize, you’ll need to educate yourself about all the deductions for which you qualify, produce the proof that you qualify in case of a tax audit, and fill out what is known as Schedule A on your tax return.

•  Eligibility: Anyone can itemize their deductions, but the standard deduction has a few exceptions. For example, if you’re married but filing separately and your spouse itemizes, you must itemize as well. While almost everyone is eligible to take the standard deduction, it never hurts to check with the IRS or your accountant to ensure eligibility.

Recommended: How to Pay Less Taxes: 9 Simple Steps

How Do Itemized Deductions Work?

Now that you know what itemized deductions vs. standard ones are, consider a more specific example of how they work.

Itemized deductions reduce your overall tax liability, just like the standard deduction. The catch? You can only take the itemized deductions for which you’re eligible. If you can cobble together enough itemized deductions to equal a larger tax-liability reduction than the standard amount, it could be worth itemizing.

As an example, let’s assume your gross income was $100,000.

•  The standard deduction for this income for tax year 2024 is $14,600 for single filers, so your taxable income would be $85,400.

•  Let’s suppose your itemized deductions are worth $20,000. It will lower your taxable income to $80,000.

Because your itemized deductions are greater than the standard deduction, it makes sense to itemize. Doing so will lower your taxable income and can thereby reduce the taxes you pay.

While it may take longer to calculate your deductions and prepare your tax return, it may make good financial sense to keep that extra cash in your pocket (or savings account, as the case may be).

Types of Itemized Deductions

The IRS offers an extensive list of potential itemized tax deductions, but you’ll probably only qualify for a handful. Here are a few of the most common:

•  Property tax deduction

•  Mortgage interest deduction

•  Charitable contribution deduction

•  Deduction of state and local sales taxes

•  Deduction of certain medical and dental expenses

While the IRS used to have a long list of miscellaneous deductions — from moving expenses to unreimbursed job expenses to tax preparation fees — many of these disappeared with the Tax Cuts and Jobs Act.

Independent contractors may want to consider itemizing; check out the tax deductions for freelancers to see which ones you may qualify for. As you itemize your business expenses, pay attention to the home office tax deduction, as well as how much you spend on office supplies, travel, and other business-related expenses. Make sure to keep good documentation of what you’ve paid.

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How to Claim an Itemized Deduction

To claim itemized tax deductions on your return, you’ll need to fill out IRS Schedule A with your Form 1040. Here’s what that process looks like:

1.   Research itemized deductions. It’s helpful to know which deductions you qualify for — and to gather up necessary documentation to enter in all the information beforehand. Preparing for tax season can make the process go much more smoothly!

2.   Fill out Schedule A. You’ll enter in all your expenses and add them up to get your total deduction.

3.   Compare it to the standard deduction. Before copying that total over to your Form 1040, it’s wise to reference the standard deduction for your filing status this year. Once you’re sure that the itemized deduction can yield larger savings, you can write down the number on Form 1040 and continue filing your taxes.

While the process sounds straightforward, it can be difficult to find out which deductions you’re eligible for and how to tabulate all your expenses. If you’re unsure, it may be a good idea to work with an accountant or at least professional tax preparation software.

Recommended: How to File Taxes for the First Time

Pros and Cons of Itemized Deductions

So what are the benefits and drawbacks of itemizing your deductions? Let’s take a look.

Pro: Itemizing could help lower your taxable income and save you more money than the standard deduction.
Con: Given changes to tax law a few years back, there’s a good chance you may save more with the standard deduction.
Pro: Because you’re writing off certain expenses and know which expenses are deductible, you may be more prudent with your spending habits throughout the year.
Con: Itemizing can involve a lot more paperwork and effort. It can be confusing, and you must make sure you’re only itemizing deductions for which you actually qualify to avoid trouble with the IRS.

The Takeaway

Most people will likely save more money on their taxes with the standard deduction, but depending on your scenario, you could see a greater reduction in your tax liability by itemizing. If you have the time, it may be worth it to go through the process of itemizing, just to see if you could save money. If you can, great! And if not, the standard deduction also offers great savings.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Can anyone itemize a deduction?

All taxpayers are permitted to itemize deductions, but the Tax Cuts and Jobs Act has made it less attractive to itemize for many Americans. Why? The standard deduction essentially doubled in size, while fewer expenses became eligible for itemizing.

Still, it may be worth calculating your itemized deductions to see if you can save more than you would with the standard deduction.

What are some things that you cannot itemize?

Since the Tax Cuts and Jobs Act, there are fewer things that you can itemize on your tax return. Even some popular deductions that people used to take are no longer eligible, including moving expenses, tax preparation fees, and unreimbursed business expenses.

Many deductions have a lot of fine print — both for inclusion and exclusion — so it’s a good idea to work with an accountant or professional tax preparation software to determine what counts as an itemized deduction.

Do you need proof for itemized deductions?

Generally, you should have proof for expenses that you are claiming as an itemized deduction. Such documentation would prove that you paid the expenses and that they were eligible for the deduction. The IRS calls this the burden of proof.

Photo credit: iStock/Milan_Jovic
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.


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