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No matter your age, it’s probably a good time to think about getting life insurance. It’s a key step in financial planning, so let’s get to know the two main types – term and permanent – so you can understand which is the right option to protect your loved ones.

First, a crash course in what insurance is: When you purchase a life insurance policy, you make recurring premium payments. Should you die while covered, your policy will pay a lump sum that you’ve selected to the beneficiaries you have designated. It’s an important way to know that if you weren’t around, working hard, your loved ones’ expenses (housing, food, medical care, tuition, etc.) would be covered.

Granted, no one wants to imagine leaving this earth, but buying life insurance can give you tremendous peace of mind.

Types of Life Insurance

Now that the basic concept is clear, let’s take a closer look at the two types of life insurance policies: term and permanent.

Term life insurance offers coverage for a certain amount of time, while permanent life insurance provides coverage for the policyholder’s whole life as long as premiums are paid. (These policies come in a variety of options. We’ll break those down for you in a moment.) There’s no right or wrong type; only a policy that is right for you and your needs. Figuring out which one will be easier once you understand the eight different kinds of life insurance and the needs they were designed to satisfy.

1. Term Life Insurance

Term life insurance, as the name suggests, protects a policyholder for a set amount of time. It pays a death benefit to beneficiaries if the insured person dies within that time frame. Term life insurance coverage usually ranges from 5 to 30 years. Typically, all payments and death benefits are fixed.

There are several reasons why a term life insurance policy might be right for you. Perhaps there is a specific, finite expense that you need to know is covered. For instance, if covering the years of a mortgage or college expenses for loved ones is a priority, term life insurance may make the most sense.

These policies can be helpful for young people too. If, say, you took out hefty student loans that are coming due and your parents co-signed, you might want to buy a life insurance policy. The lump sum could cover that debt in a worst-case scenario.

Another reason to consider term life insurance: It tends to be more affordable. If you don’t need lifelong coverage, a term policy might be an excellent choice that’s usually easier on your budget.

A few variables to be aware of:

•   Term life insurance may be renewable, meaning its term can be extended. This is true “even if the health of the insured (or other factors) would cause him or her to be rejected if he or she applied for a new life insurance policy,” according to the Insurance Information Institute. Renewal of a term policy will probably trigger a premium increase, so it’s important to do the math if you’re buying term insurance while thinking, “I’ll just extend it when it ends.”

•   If you would be comfortable with your coverage declining over time (that is, the lump sum lowering), consider looking into the option known as decreasing term insurance.

💡 Quick Tip: Term life insurance coverage can range from $100K to $8 million. As your life changes, you can increase or decrease your coverage.

2. Whole Life Insurance

Whole life insurance is the most common type of permanent life insurance, which protects policyholders for the duration of their lives.

As long as the premiums are paid, whole life insurance offers a guaranteed death benefit whenever the policyholder passes. In addition to this extended covered versus term life insurance, whole life policies have a cash value component that can grow over the policy’s life.

Here’s how this works: As a policyholder pays the premiums (these are typically fixed), a portion goes toward the cash value, which accumulates over time. We know the terminology used in explaining insurance can get a little complicated at times, so note there’s another way this may be described. You may hear this referred to as your insurance company paying dividends into your cash value account.

This cash value accrues on a tax-deferred basis, meaning you, the policyholder, won’t owe taxes on the earnings as long as the policy stays active. Also worth noting: If you buy this kind of life insurance and need cash, you can take out a loan (with interest being charged) against the policy or withdraw funds. If a loan is unpaid at the time of death, it will lower the death benefit for beneficiaries.

The cash value component and lifelong coverage of this type of life insurance can be pretty darn appealing. And it may be a good fit for funding a trust or supporting a loved one with a disability. However, buying a whole life policy can be pricey; it can be many multiples of the cost of term insurance. It’s definitely a balancing act to determine the coverage you’d like and the price you can pay.

For those who are not hurting in the area of finances, whole life can have another use. A policy can also be used to pay estate taxes for the wealthy. For individuals who have estates that exceed the current estate tax exemption (IRS guideline for 2024) of 13.6 million, the policy can pay the estate taxes when the policyholder dies.

3. Universal Life Insurance

Who doesn’t love having freedom of choice? If you like the kind of protection that a permanent policy offers, there are still more varieties to consider. Let’s zoom in on universal life insurance, which may provide more flexibility than a whole life policy. The cash account that’s connected to your policy typically earns interest, similar to that of a money market. While that may not be a huge plus at this moment, you will probably have your life insurance for a long time, and that interest could really kick in.

What’s more, as the cash value ratchets up, you may be able to alter your premiums. You can put some of the moolah in your cash account towards your monthly payments, which in some situations can really come in handy.

This kind of policy is also sometimes called adjustable life insurance, because you can decide to raise the benefit (the lump sum that goes to your beneficiaries) down the road, provided you pass a medical exam.

4. Variable Life Insurance

Do you have an interest in finance and watch the market pretty closely? We hear you. Variable life insurance could be the right kind of permanent policy for you. In this case, the cash value account can be invested in stocks, bonds, and money market funds. That gives you a good, broad selection and plenty of opportunity to grow your funds more quickly. However, you are going to have more risk this way; if you put your money in a stock that fizzles, you’re going to feel it, and not in a good way. Some policies may guarantee a minimum death benefit, even if the investments are not performing well.

This volatility can play out in other ways. If your investments are performing really well, you can direct some of the proceeds to pay the premiums. But if they are slumping, you might have to increase your premium payment amounts to ensure that the policy’s cash value portion doesn’t fall below the minimum.**

This kind of variable life insurance policy really suits a person who wants a broader range of investment options for the policy’s cash value component. While returns are not guaranteed, the greater range of investments may yield better long-term returns than a whole life insurance policy will.

5. Variable Universal Life Insurance

Variable universal life insurance is another type of a permanent policy, but it’s as flexible as an acrobat. If you like to tinker and tweak things, this may be ideal. Just as the name suggests, it merges some of the most desirable features of variable and universal plans. How precisely does that shake out for you, the potential policyholder? For the cash account aspect of your policy, you have all the rewards (and possible risks) of a variable life insurance policy that you just learned about above. You have a wide array of ways to grow your money, which puts you in control.

The features that are borrowed from the universal life model are the ability to potentially change the death benefit amount. You can also adjust the premium payments. If your cash account is soaring, you can use that money towards your monthly costs…sweet! It’s a nice bonus, especially if funds are tight.

6. Indexed Universal Life Insurance

This is another type of permanent life insurance with a death benefit for your beneficiaries as well as a cash account. You may see it called “IUL.”

In this instance, the cash account earns interest based on how a stock-market index performs. For instance, the money that accrues might be linked to the S&P (Standard & Poor’s) 500 composite price index, which follows the shifts of the 500 biggest companies in America. These policies may offer a minimum guaranteed rate of return, which can be reassuring.

On the other hand, there may be a cap on how high the returns can go. A IUL insurance plan may be a good fit if you are comfortable with more risk than a fixed universal life policy, but don’t want the risk of a variable universal life insurance product.

7. Guaranteed or Simplified Issue Life Insurance

With most life insurance policies, some form of medical underwriting is required. “Underwriting” can be one of those mysterious insurance terms that is often used without explanation. Here’s one aspect of this that you should know about.

Part of the approval process for underwritten policies involves using information from exams, blood tests, and medical history to determine the applicant’s health status, which in turn contributes to the calculated monthly costs of a policy. Underwriting serves an important purpose: It helps policyholders pay premiums that coincide with their health status. If you work hard at staying in excellent health, you are likely to be rewarded for that with lower monthly payments.

However, sometimes insurance buyers don’t want to go through that process. Maybe they have health issues. Or perhaps they don’t want to wait the 45 or 60 days that underwriting often requires before a policy can be issued. With guaranteed or simplified issue life insurance, the steps are streamlined. Applicants may not have to take a medical exam to qualify and approvals come faster.

These policies tend to have lower death benefits (think $10,000, $50,000, or perhaps $250,000 at the very high end) than the other types of life insurance we’ve described. Less medical underwriting also means policies tend to be more expensive. Who might be interested in this kind of insurance? It may be a good option for someone who is older (say, 45-plus), has an underlying medical condition that would usually mean higher insurance rates, or has been rejected for another form of insurance. The coverage may suit the needs of someone looking for insurance really quickly, like the uninsured people who, during the COVID-19 pandemic, wanted to sign up ASAP.

One point to be aware of: Many of these policies have what’s called a graded benefit or a waiting period. This usually means that the beneficiaries only receive the full value of the policy if the insured has had it for over two years. If the policyholder were to die before that time, the payout would be less — perhaps just the value of the premiums that had been paid.

Of the two kinds we’ve mentioned, guaranteed is usually the easiest to qualify for (as the name suggests) but costs somewhat more than the simplified issue variety, which tends to have a few more constraints. You might be deemed past the age they insure or a medical condition might disqualify you.

Worth noting: You may hear these life insurance policies are known as final expense life insurance or burial insurance. As with any simplified issue or guaranteed issue life insurance policies, no medical exam is required. These plans typically have a small death benefit (up to $50,000 in many cases) that is designed to cover funeral costs, medical bills, and perhaps credit card debt at the end of life.

8. Group Life Insurance

Group life insurance is often not something you go out and buy. Typically, it’s a policy that’s offered to you as a benefit by an employer, a trade union, or other organization. If it’s not free, it is usually offered at a low cost (deducted from your payroll), and a higher amount may be available at an affordable rate. Since an employer or entity is buying the coverage for many people at once, there are savings that are passed along to you.

That said, the amount of coverage is likely to be low, perhaps between $20,000 and $50,000, or one or two times your annual salary. Medical exams are usually not required, and the group life insurance will probably be a term rather than permanent policy,

A couple of additional points to note:

•   There may be a waiting period before you are eligible for the insurance. For instance, your employer might stipulate that you have to be a member of the team for a number of months before you can access this benefit.

•   If you leave your job or the group providing coverage, your policy is likely to expire. You may have the option to convert it to an individual plan at a higher premium, if you desire.

Deciding Which Life Insurance Is Best for You

So many factors go into creating that “Eureka!” moment in which you land on the right life insurance policy for you. Your age, health, budget, and particular needs play into that decision.

If you need life insurance only for a certain amount of time, you may want to select a term life insurance policy that dovetails with your needs. Covering a child’s college and postgraduate years is a common scenario. Another is taking out a policy that lasts until your mortgage is paid off, to know your partner would be protected.

A term life insurance policy may also be a good fit for someone who has a limited budget but needs a substantial amount of coverage. Since term policies have a specific coverage window, they are often the more affordable option.

For someone who needs coverage for life and wants a cash accumulation feature, a permanent policy such as whole life insurance might be worth considering. Not only will this policy stay in place for life (as long as the premiums are paid), but the cash value element allows use of the funds to pay premiums or any other purpose.

Permanent life insurance lets you know that, whenever you pass on, funds will be there for your dependents. It can be a great option if you have, say, a loved one who can’t live independently, and you want to know they will have financial coverage. Whole life insurance is typically more expensive than term life insurance, but the premium remains the same for the insured’s life.

In terms of when to buy life insurance, here are a few points to keep in mind:

•   It’s best to apply when you’re young and healthy so you can receive the best rate available.

•   Typically, major life events signal people to buy life insurance. These are moments when you realize someone else is depending on you (and, not to sound crass, your income). It could be when you marry or have a child. It could be when you realize a relative will need long-term caregiving.

•   Even if you are older or have underlying health conditions, there are options available to you. They may not give as high an amount of coverage as other life insurance policies, but they can offer a moderate benefit amount and give you a degree of peace of mind.

💡 Quick Tip: With life insurance, one size does not fit all. Policies can and should be tailored to fit your specific needs.

The Takeaway

Picking out the right life insurance policy can seem complicated, but in truth, the number of choices just reflects how easy it can be to get the right coverage for your needs. There’s truly something for everyone, regardless of your age or budget. Whether you opt for term, permanent, group, or guaranteed issue, you can get the peace of mind and protection that all insurance plans bring.

SoFi has partnered with Ladder to offer competitive term life insurance policies that are quick to set up and easy to understand. Apply in just minutes and get an instant decision. As your circumstances change, you can update or cancel your policy with no fees and no hassles.

Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
Ladder offers coverage to people who are between the ages of 20 and 60 as of their nearest birthday. Your current age plus the term length cannot exceed 70 years.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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.

SOPT0124008

Phlebotomists who have a few years of experience under their belt can make around $38,530 per year or $18.53 an hour, according to the latest data from the Bureau of Labor Statistics (BLS).

In addition to a stable salary, the profession offers flexibility, versatility, and opportunities for advancement. However, before you can start work, you’ll need to earn a certificate from a postsecondary phlebotomy program.

Here’s a look at the earning potential of phlebotomists and the pros and cons of this career.

What Are Phlebotomists?

An essential supporting member of the healthcare community, phlebotomists are responsible for drawing blood for donations, medical exams, procedures, or research. They also help support patients who may be anxious about the blood draw or who struggle with an adverse reaction post-draw.

Other job duties often include:

•   Verifying a patient’s identity

•   Collect and labeling blood or other samples

•   Entering sample information into a database

•   Assembling, disposing of, and maintaining medical instruments

•   Cleaning and sanitizing the work area and equipment

•   Shipping or transporting blood or samples

Because phlebotomy requires a good bedside manner, it may not be the best fit for antisocial people.


💡 Quick Tip: We love a good spreadsheet, but not everyone feels the same. An online budget planner can give you the same insight into your budgeting and spending at a glance, without the extra effort.

How Much Do Starting Phlebotomists Make?

Those new to the field can expect to earn less than the average — the lowest 10% of phlebotomist earners bring home less than $30,250, according to the BLS.

However, the earning potential of an entry-level phlebotomist typically goes up as they gain work experience and skills. BLS data shows that the top 10% of phlebotomist earners earn more than $51,610.

No matter where you are in your career, having a budget can be an important tool for tracking spending and savings goals. A money tracker app can give you real-time insights so you can continue making progress on your financial goals.

What Is the Average Salary for a Phlebotomist?

Where someone lives can play a role in how much income they earn as a phlebotomist. As the following table shows, phlebotomists in some states earn a much higher salary than others. For example, in Oregon, a typical salary is $45,769 a year; in Florida, it’s $27,444.

What Is the Average Phlebotomist Salary by State?

Recommended: Is a $100,000 a Year Salary Good?

Phlebotomist Job Considerations for Pay and Benefits

When researching how much money a phlebotomist makes, it’s important to factor in potential benefits.

While the median annual wage for phlebotomists is $38,530, their total compensation package can be much higher if they qualify for benefits like health insurance or a 401(k) match. Because it’s common to hold a full-time role as a phlebotomist at a hospital or lab, it’s possible to find a role that offers a standard suite of employee benefits, like paid vacation and dental coverage.

Looking to get the most competitive pay? Consider focusing your job-search efforts on work settings that tend to pay more. Let’s take a look at the median annual salary for phlebotomists in a few different workplaces:

•   Outpatient care centers: $42,750

•   Medical and diagnostic laboratories: $41,580

•   Hospitals: $37,400

•   Offices of physicians: $36,970

•   All other ambulatory healthcare services: $36,190

Recommended: Salary vs. Hourly Pay

Pros and Cons of Phlebotomist Salary

Like any career path, phlebotomy has its share of advantages and disadvantages.

💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.

The Takeaway

To recap: How much does a phlebotomist make a month? Phlebotomists can expect to earn about $3,211 per month, which translates to $38,530 per year. But their earning potential can rise as they gain experience and skills, or if they work in a more lucrative setting, like an outpatient care center.

If you have a steady hand and a good bedside manner, then a career in phlebotomy may be a good fit for you.

FAQ

What is the highest-paying phlebotomist job?

Typically, phlebotomists who work in outpatient care centers make the most out of their peers. The median salary for phlebotomists in outpatient care centers was $42,750 as of 2022, per the BLS.

Do phlebotomists make $100k a year?

Typically, phlebotomists don’t earn a $100,000 salary. The median annual wage for phlebotomists is $38,530, and only the highest 10% of earners make around $51,610.

How much do phlebotomists make starting out?

When first starting their careers, phlebotomists should expect to make lower than the median annual wage for this role. The lowest 10% of earners in this role earn less than $30,250. However, their income may rise as they gain more experience.

Photo credit: iStock/SDI Productions

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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.

SORL1023008

Nursing can be a well-paying profession. According to the Bureau of Labor Statistics (BLS), the median salary for a registered nurse (RN) is $81,220 per year or $39.05 per hour.

In fact, nursing can be a rewarding career path in more ways than one. Not only can these healthcare professionals provide for themselves financially, they also care for people during times of need.

To better understand what it’s like working as a nurse and what the earning potential is, keep reading.

What Are Nurses?

An RN provides patients with care and support, and they offer education on health issues and conditions. Responsibilities can vary by workplace and specialty. For example, a geriatric nurse works with elderly patients and provides a different type of care than an oncology nurse, who supports patients with cancer.

Generally speaking, an RN’s tasks often include the following:

•   Evaluate the condition of patients.

•   Set up care plans for patients.

•   Consult and collaborate with doctors and other healthcare providers.

•   Operate and monitor medical equipment.

•   Document patients’ medical backgrounds and symptoms.

•   Administer medications and treatments.

•   Assist in conducting diagnostic tests and analyzing the results.

•   Educate patients and their families on managing illnesses or injuries.

•   Provide instructions for post-treatment care at home.

Nurses often work on a team made up of other nurses, physicians, and healthcare specialists. Some nurses may even supervise other RNs, nursing assistants, or home health aids. Because of how much collaboration and patient interaction is involved in nursing, this role may not be a great fit for introverts.


💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.

How Much Do Starting Nurses Make?

On average, entry-level nurses earn around $80,321 a year or $39 per hour, according to ZipRecruiter. But keep in mind that amount represents a middle ground; incomes for nurses fresh out of school can run the gamut from $36,000 to $136,000.

Recommended: What Is Competitive Pay?

What Is the Average Salary for a Nurse?

Unlike some other healthcare professionals, nurses may be paid hourly or earn an annual salary. They can also make extra by working overtime, overnight, or on holidays. As mentioned, nurses who are paid by the hour earn a median rate of $39.05 or $81,220 per year.

It’s worth noting that where a nurse chooses to work can significantly affect how much they earn. When it comes to settings that pay the most money, the government comes out on top. Let’s take a look at the median annual wage for nurses across a variety of settings, per the BLS:

•   Government: $92,310

•   Hospitals: $82,250

•   Ambulatory healthcare services: $78,670

•   Nursing and residential care facilities: $75,410

•   Educational services: $65,450

Nurses also have the option to take travel assignments, which can be an attractive option for professionals seeking flexibility, short-term assignments, and competitive pay. Travel nurses can expect to earn anywhere from $81,000 to $128,00 a year.

To help manage that high level of income, consider digital tools like a money tracker app. In addition to being convenient, it can help take the guesswork out of budgeting and setting financial goals.

What Is the Average Salary by State for a Nurse?

The state a nurse chooses to work in can greatly influence how much they earn, as illustrated by the following table:

Recommended: Is $100,000 a Good Salary?

Nurse Job Considerations for Pay and Benefits

Whether they’re paid by the hour or per year, a nurse can make a good living. And there are ways to supplement that income or create a flexible working schedule that supports a work-life balance. For instance, nurses can choose to work part-time, as many hospitals are short-staffed and need the extra help and expertise. There’s also travel nursing, which allows these healthcare professionals to pick up short-term assignments.

But if a full-time role with benefits is what you’re after, you may have little trouble finding one that fits. The BLS projects that between now and 2032, the number of RN jobs available in the field will grow 6%. And those on-staff positions can come with benefits like health insurance, retirement contribution matches, and tuition reimbursement.

Pros and Cons of Nurse Salary

Like any career path, working as an RN comes with a unique set of pros and cons that are worth keeping top of mind:

💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

While the hours can be long and the work physically demanding, nurses have the potential to earn a lot of money. As they gain years of experience or enter more lucrative industries, these professionals can potentially earn a six-figure salary. Bottom line: If you’re passionate about health care and helping others, you may find that a career in nursing is professionally and financially rewarding.

FAQ

What is the highest-paid RN job?

The type of nursing role an RN takes can affect how much they earn. Those looking to earn high incomes may want to pursue government nursing, which earns a median salary of $92,310. This is much higher than the $81,220 median salary for all RNs.

How much money does a RN make in California?

In the state of California, an RN can expect to earn an average of $78,490 per year, or an hourly rate of $37.74, per ZipRecruiter.

What state pays nurses the lowest?

Of all the 50 states, Florida pays its nurses the least, according to ZipRecruiter. Nurses there earn an average of $56,707 a year, and their average hourly wage is $27.26.

Photo credit: iStock/FG Trade

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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.

SORL1023026

You can file a tax extension in a few different ways, such as online or by mail. This process can help people who may need more time to finalize their return, whether they are missing documents, dealing with a personal emergency, or have other reasons for being behind schedule.

While a six-month extension can be a good safety net, it’s important to learn the facts. For instance, an extension doesn’t mean you have more time to pay any taxes you may owe.

Read on to learn the facts and important considerations to know when filing a tax extension.

What Is a Tax Extension?

A tax extension extends the deadline for filing your federal tax return by six months. All you have to do to get an extension is request one by April 15, 2024. Here are important points to know:

•   A tax extension does not give you extra time to pay any taxes owed. If you can’t afford to pay your full tax bill, it’s a good idea to pay as much as you can by Tax Day and then apply for an individual payment plan on IRS.gov or call the IRS (Internal Revenue Service) at 800-829-1040 to discuss payment options.

•   The agency may waive the late-payment penalty in a few cases, but it will not waive interest charges on unpaid tax bills. The interest rate is the federal short-term rate plus three percentage points. In early 2024, for individuals, the rate was 8%, compounded daily.

•   The late-payment penalty, aka failure-to-pay penalty (you filed for an extension on time but still owe taxes), is much less severe than the failure-to-file penalty (you didn’t file your tax return by the due date and did not request an extension). The failure-to-file penalty is usually 5% of the tax owed for each month or part of a month that your return is late, up to 25% of the total owed.

Either way, a penalty plus interest on taxes owed past the deadline might be a good incentive for many taxpayers to try to cough up most of their bill on time.

How Do Tax Extensions Work?

There are three ways to request an automatic extension of time to file your return:

1.    File IRS Form 4868 electronically using your personal computer or through a tax professional who uses e-file. You’ll be asked to provide your prior year’s adjusted gross income for verification purposes. (If you do not know your prior year’s AGI and do not have a copy of that tax return, you can find the information by signing in to your IRS online account.)

2.    Mail a paper Form 4868. (The IRS says, though, not to mail in Form 4868 if you file electronically unless you’re making a payment with a check or money order.)

3.    Pay all or part of your estimated income tax due, and indicate that the payment is for an extension, using Direct Pay or the Electronic Federal Tax Payment System. You can also pay taxes with a credit card or debit card.

Special rules about filing extensions may apply to those serving in a combat zone or a qualified hazardous duty area or living outside the United States.

Recommended: Tax Season 2024 Help Center

Reasons to File for a Tax Extension

Many high earners routinely seek tax extensions because their business dealings and investments can take longer to sort out.
Other people might seek a tax extension for different reasons, such as:

•   Needing extra time to track down missing tax documents, especially if you’re dealing with an extenuating circumstance (for instance, the closure of a place of employment shortly before tax documents were due to be issued).

•   A major unplanned life event interrupts your plans and makes it hard to get things together on time.

•   You’re still figuring out how to do taxes as a freelancer and want to take all the deductions you can.

•   You’re going to take the home office tax deduction as a self-employed person and want to carefully crunch the numbers because you’re skipping the simplified deduction of up to $1,500.

•   General life busyness led to the deadline sneaking up on you.

•   Maybe you’re filing taxes for the first time and you simply procrastinated.

•   You have a primary and second home and are still unsure whether to itemize and take the mortgage interest deduction.

Filing for a Tax Extension Online

Remember, you don’t need to file Form 4868 if you make a payment using IRS electronic payment options or by phone and indicate that you want an extension.

If you do need to file Form 4868, you can do so electronically by accessing the IRS e-file with your tax software or by using a tax professional who uses e-file.

IRS e-file options include Free File, which lets you prepare and file your federal income tax online using guided tax preparation at an IRS partner site (for filers with AGI of $73,000 or less) or Free File fillable forms (for any income level).

Filing for a Tax Extension by Mail

You can simply download and print Form 4868 from IRS.gov, fill it out, and mail it in, along with a check for estimated income taxes owed.

The form itself includes information about where to send the document, depending on where you live.

Recommended: Steps to Prepare for Tax Season

Can I File for a Tax Extension If I Owe Money?

Yes, you can still file for a tax return extension if you owe the government money — but the money itself is still due on the original due date.

Unfortunately, there’s no way to file for an extension of taxes owed. Rather, your best bet is to pay as much of your estimated taxes as you can when you file for the extension, and then apply for a payment plan online or call the IRS to learn about your options for complete repayment.

Can Someone Be Denied a Tax Extension?

Yes, but it’s uncommon. If your tax extension was denied, it was probably because of a mistake in your personal information on Form 4868.

You can resubmit your request and make sure to enter your current address, name, and Social Security number correctly.

How to Know If You Owe Taxes

While self-employed individuals must estimate their taxes and pay on a quarterly basis, those who file using
W-2 wage reports may not do this kind of taxation math.

There are several easy ways to find out if you owe Uncle Sam.

•   You may receive a notice in the mail from the IRS, but ensure that it’s official correspondence and not a note from a scammer. The IRS will never email, text, or reach out to individuals via social media.

•   “Your Online Account” on IRS.gov allows you to see how much you owe in taxes. This user profile also allows you to pay any owed taxes directly.

•   You can always call the IRS at 800-829-1040 to confirm any amount of back taxes you might owe.

The Takeaway

Is it hard to file a tax extension? Not really. What may prove difficult is paying all taxes owed by the filing deadline (aka Tax Day) or paying a balance still owed plus a penalty and interest after the April date to file taxes.

It’s important to have a handle on your tax status and tax bill as April 15th arrives. It’s also wise to have a good banking partner and accounts that allow easy payment of any money you owe or refunds you receive.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with 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 do I know if I’ve been approved for a tax extension?

Extension requests are rarely denied, but news of a denial would come by email. In the event of an error in an address or name, a taxpayer will be given a few days to remedy the error and file a tax extension again. Usually, you can get an automatic extension of time to file your tax return by filing Form 4868 electronically. You’ll receive an electronic acknowledgment of your request.

Is there a fee to file for a tax extension?

No. Filing for a tax extension is free.

Is the process for filing a tax extension easy?

Yes. You simply submit Form 4868 electronically or by mail before the filing deadline, or make a tax payment through approved methods and indicate you want an extension of time to file your federal return.

What happens if I file my taxes late and without an extension?

If you don’t pay your tax balance by the filing deadline and you did not file for an extension, you’ll get hit with a failure-to-file penalty (in most cases) and interest. Interest also compounds daily on any unpaid tax from the due date of the return until the date of payment in full.

Photo credit: iStock/Delmaine Donson

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As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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.

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