SoFi

FICA tax is a kind of payroll tax that helps fund social benefits programs, namely Social Security and Medicare. FICA stands for the Federal Insurance Contributions Act.

When you earn money from a job, you typically owe FICA tax as well as income taxes. There are few exceptions to paying FICA tax. Read on to learn more about how FICA tax works and where that money goes.

What Is FICA Tax?

If you’re just starting out in your career or filing taxes for the first time, payroll taxes might be new to you.

FICA, or Federal Insurance Contributions Act, withholding is a type of tax that helps fund Social Security benefits programs, including old-age, survivors, and disability insurance, as well as Medicare, the federal health insurance program for people 65 years of age and older. These funds pay for lost income as well as for health coverage for those in need.

Typically, FICA tax is assessed at 15.3% of earnings, and it makes a major contribution to revenue for the U.S. Federal government, currently tracking at 35% of that influx of funds.

How FICA Tax Works

If you work for an employer, they take care of income tax withholding as well as withholding for FICA tax. These taxes are deducted from your paycheck automatically.

If you’re self-employed, however, you’ll be in charge of paying these taxes yourself. And because you don’t have automatic withholding, you may need to pay quarterly taxes throughout the year.

Total FICA taxes for both Social Security and Medicare equal 15.3%. This is a flat rate tax, and the FICA tax rate 2024 and FICA tax rate 2025 have not changed. Here’s a closer look at the breakdown:

•  If you’re an employee, you’ll pay only half this amount, or 7.65%. This breaks down to 6.2% for Social Security and 1.45% for Medicare.

•  If you’re self-employed, you’ll need to pay twice that for each, or the full 15.3%. However, though you pay more, you may also be able to deduct half of the amount when you file your taxes.

Recommended: How Much Do You Have to Make to File Taxes?

FICA Tax Rates for 2024 and 2025

As you’re preparing for tax season, there are a couple important things to know about FICA tax rates.

•  First, while the amount of income tax you pay will depend on your tax bracket, all taxpayers pay FICA tax at the same rate. See the chart below.

•  Also, you don’t necessarily pay FICA taxes on all of your income. In 2024, you and your employer will only pay Social Security taxes on the first $168,600 of your earnings. In 2025, that number jumps to $176,100.

•  In both 2024 and 2025, single filers making $200,000, joint filers making $250,000, and married individuals filing separately making $125,000 owe an additional 0.9% for Medicare taxes.

FICA Tax: What an Employee Pays vs What an Employer Pays

Example FICA Tax Calculations

In 2025, say your pretax income is $100,000. If you’re employed, your employer will pay $7,650, and you’ll be on the hook for the same amount. If you’re self-employed, you’ll need to pay $15,300, though you may be able to deduct $7,650 from your taxes.

Say you’re a single filer making $201,000 per year. You’ll only owe Social Security taxes of 6.2% on your first $176,100. That’s $10,918.20. You won’t owe Social Security tax on the remaining $23,901. That said, there’s no wage base limit for Medicare tax. In other words, all of your wages are subject to this tax. In this case you would owe 1.45% plus the 0.9% surtax, so 2.35% or $4,723.50.

Recommended: Tracking Your Budgeting and Spending

Pros and Cons of FICA Tax

While FICA taxes take a bite out of your take-home pay, they also provide important benefits for older Americans.

Pros of FICA Tax

Here are the upsides of FICA tax:

•   Social Security benefits are designed to provide a stable source of monthly income for those who are retired, disabled, or relied on the income of someone who has died.

•   Medicare provides important health care benefits to those 65 and older, including hospital insurance, medical insurance, and prescription drug coverage.

•   Your contributions help pay benefits for current retirees and other beneficiaries. Future workers will help pay for yours. Any surplus money taken in by the federal government through these taxes is deposited in the Social Security trust fund, which is designed to secure benefits for future generations.

Cons of FICA Tax

The downsides of FICA tax include:

•   This tax takes a bite out of one’s take-home pay

•   Social Security is forecast to become insolvent by 2035, unless adjustments are made to the benefits provided or the taxes that fund the program.

Why Do I Have to Pay FICA Tax?

Simply put, FICA tax is mandated by federal law. FICA tax is mandatory for nearly everyone who earns income. Some exemptions do apply, including for members of certain religious organizations, some government employees, foreigners in the U.S. with temporary visas, and self-employed individuals who earn less than $400 per year.

Recommended: Credit Score Monitoring

How to Reduce FICA Taxes

FICA tax is typically calculated using your gross income, and so the only way to pay less is to earn less or to adjust the withholding status on your W4 form, which may alter the amount.

However, it is worth noting that FICA tax is only paid on earned income. Unearned income is not subject to this tax and may include such investment income as:

•   Taxable interest

•   Ordinary dividends

•   Capital gain distributions

To avoid tax filing mistakes, it may be helpful to speak with a tax professional.

The Takeaway

If you earn income from a job, you’ll likely owe FICA tax. But the good news is these taxes go toward providing you with benefits that help you later in life. In the meantime, if you’re employed, your employer will help you out, paying for half of your FICA taxes. If you’re self-employed, you’ll have to pay the full amount yourself. But you can catch a break by deducting half the amount you pay, which can benefit your personal finances.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Is FICA the same as Social Security tax?

FICA, or Federal Insurance Contributions Act, tax includes more than just Social Security tax. It includes two components: Social Security tax and Medicare tax.

Why am I paying FICA tax?

You pay FICA tax in order to support social benefits programs, including Social Security and Medicare. These help those who have lost income due to retirement, disability, or death and can provide health coverage.

Do I get my FICA tax back?

The money you pay in FICA tax won’t be handed back to you when you’re older. However, you will likely be able to participate in Social Security and Medicare, which these taxes support.

How much is the FICA tax?

In total, the FICA tax is 15.3%. If you’re employed, your employer will pay half of that, and you’ll only have to pay 6.2% in Social Security taxes and 1.45% in Medicare taxes. However, if you’re self-employed, you’ll need to pay the full amount yourself but may be able to take half the amount as a deduction when filing your taxes.

Who is exempt from FICA taxes?

Most people have to pay FICA taxes. There are several groups that may be exempt including members of certain religious organizations, some government workers, nonresident aliens, and self-employed individuals who earn less than $400 per year.

At what age is Social Security no longer taxed?

Social Security benefits may be taxable no matter what age you are if your income exceeds a certain level.

photo credit iStock/Solovyova
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.

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.

SORL-Q125-019

Long-term capital gains tax is the amount of money assessed on gains you reap when you sell an asset you have held for more than a year.

In the U.S., the federal and state governments tax different kinds of income in different ways. The money you make at work, for instance, is taxed at income tax rates. The money you make from investing is taxed at capital gains rates. How much capital gains you pay depends on how long you’ve held the investment, your income, and your filing status. With long-term capital gains tax, you’ll pay a 0%, 15%, or 20% tax.

What Is Capital Gains Tax?

Whether you’re filing taxes for the first time or have been doing so for years, capital gains tax might still be new to you. Here’s a quick primer.

•  Capital gains tax is a type of tax designed primarily as a way for governments to generate revenue by taxing the money you make when you invest.

•  These fees are taxes on investment income, which helps create a comprehensive tax system in which wealth generated through investing is taxed in addition to wealth generated by labor.

Capital gains tax may also be seen as a mechanism that promotes wealth equality because wealthy individuals often accrue more investment returns.

Recommended: What Is Income Tax Withholding and How Does It Work?

What’s Considered a Capital Gain?

A capital gain occurs when you buy an investment and sell it for more than you paid for it. The gain is the difference between the purchase price and the sale price. For example, if you buy a stock for $30 and sell it for $50, you’ve generated a capital gain of $20. You’ll only owe taxes on this gain.

You can also have a capital loss. Say you buy another stock for $30 and sell it for $15. In this case, you’ve generated a loss of $15, which is not subject to tax at all. In fact, you can use capital losses to offset your gains. Offset your $20 gain from the example above with your $15 loss, and you’ll have a net gain of $5. You may only owe taxes on that amount.

There are several common assets that may be subject to capital gains taxes including:

•  Stocks, bonds, and index funds

•  Commodities

•  Real estate investments (though you may qualify for certain exemptions on the sale of your primary residence.)

•  Business interests

•  Collectibles

Short-Term vs. Long-Term Capital Gains

There are two types of capital gains: short-term and long-term gains. You owe short-term capital gains tax on investments you’ve held for one year or less and sold for a profit. Short-term capital gains are taxed at the same rates as your ordinary income based on your tax bracket.

Depending on how much money you make (say, considerably more than the average salary in the U.S.), these rates can be relatively high.

You owe long-term capital gains tax on the profit you’ve made from the sale of investments you’ve owned for a year or more. The government taxes these at a preferential rate to encourage long-term investing.

Recommended: Credit Score Monitoring

What Is the Long-Term Capital Gains Tax Rate?

The long-term capital gains tax rate is 0%, 15%, or 20%, and it depends on your income and your filing status. The following rates are for long-term capital gains made in 2024.

Worth noting: The long-term capital gains tax 2025 shares the same rates, but the qualifying incomes in the brackets are slightly higher to reflect the impact of inflation.

How Capital Gains Taxes Work

To better understand how tax on long-term capital gains works, here’s an example:

•  Say you bought $5,000 worth of shares in a mutual fund.

•  You sell them 10 years later for $10,000, which means you have a $5,000 taxable gain.

•  If you make $70,000 per year and file a single tax return, your long-term capital gains tax rate will be 15%.

•  That means you’ll owe 0.15 x $5,000, or $750 in long-term capital gains tax on the amount your fund rose in value during the time you held it.

By knowing the amount you’ll need to pay, you can better prepare for and track your budget and outflow of funds at tax time.

Recommended: How Much Do You Have to Make to File Taxes?

Capital Gains Tax Strategies

There are several ways you can reduce capital gains taxes or otherwise use them to your advantage.

•  Hold your investments as long as you can: Hang on to investments for more than a year whenever possible to qualify for preferential long-term rates.

•  Use tax-advantaged accounts: When you can, invest inside of tax-advantaged accounts, such as 401(k)s and traditional and Roth IRAs. Money inside these accounts grows tax-deferred or tax-free. That means you don’t have to pay any capital gains when you sell investments in the account.

With 401(k)s and traditional IRAs, you’ll pay income tax on the withdrawals you make in retirement. But with Roth accounts, your withdrawals are tax-free.

•  Take advantage of the home exclusion: If you’re selling your primary residence at a profit, you may qualify to exclude up to $250,000 in capital gains if you’re a single filer, and $500,000 if you’re married and filing jointly. In general, to be eligible for this exclusion, you must have owned and used your home as your primary residence for a period that totals at least two years out of the five years prior to that date on which you sell the home.

•  Consider tax-loss harvesting: You’ve already learned that you can use capital losses to offset capital gains. Doing so strategically is known as tax-loss harvesting, and it may be a strategy worth considering as you prepare for tax season.

For example, you may sell certain investments at a loss when you know you are going to incur a large capital gains tax bill. Also, if your capital losses are greater than your gain, you may be able to offset up to $3,000 worth of income. If you’re unable to use your losses in a given year, you can roll them over to the next.

Strategies like tax-loss harvesting can be complicated, and it may be worth speaking with a tax professional to avoid making any tax filing mistakes.

Do You Pay State Taxes on Capital Gains?

In addition to federal capital gains tax, you may owe state tax as well. Not all states charge capital gains, but many (currently more than 40) do. Visit your state government website to find out if yours is one of those that does and what the current rates are.

The Takeaway

When you sell an investment you’ve held for more than a year, you may owe long-term capital gains tax. The rate you pay can vary with filing status and income, ranging from 0% to 15% to 20%. With a deeper understanding of how these taxes work, you can appropriately pay these taxes and possibly offset some of the amount. This can help you manage your money more effectively.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How much tax do I pay on long-term capital gains?

Depending on your income and filing status, you’ll pay 0%, 15%, or 20% in federal long-term capital gains taxes. You may also owe state capital gains taxes, depending on where you live.

What qualifies as long-term capital gains?

Long-term gains are money you have made from the sale of assets you’ve owned for longer than a year. It may apply to investments, real estate, and collectibles, among other assets.

How do I avoid paying capital gains tax?

You don’t have to pay capital gains taxes on the sale of investments inside of tax-advantaged accounts, such as 401(k)s and IRAs. You may also avoid paying capital gains tax if you offset your gains with capital losses.

What is a long-term capital gain example?

An example of a long-term capital gain might be the sale of a rental property that an investor has owned for 10 years. Say that investor bought the property for $200,000 and sold it for $325,000. That investment would have a capital gain of $125,000. Because the asset was held for more than a year, it qualifies as a long-term gain.

photo credit: iStock/LordHenriVoton
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.

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.

SORL-Q125-018

OASDI tax on a paycheck is one of two taxes the IRS collects under the Federal Insurance Contributions Act (FICA). It stands for old-age, survivors, and disability insurance, and it’s designed to replace income lost due to retirement, disability, or death. Some people refer to it as Social Security tax. The other tax provides for Medicare. For most workers, these taxes are unavoidable.

What Is OASDI Tax?

OASDI is short for old-age, survivors, and disability insurance (you may hear it referred to as Social Security tax). It’s one of the types of taxes that many people in the U.S. pay. The OASDI program uses tax dollars to provide financial support to qualified people who are:

•   Retired

•   Disabled

•   Dependents of retired or disabled workers

•   Survivors of insured workers

As of December 2024, approximately 70 million Americans received benefits funded through the OASDI tax. The majority, 51.8 million, were retired workers who received an average benefit of $1,975 monthly.

Recommended: How Much Do You Have to Make to File Taxes?

Why Does OASDI Tax Appear on My Paycheck?

If you see OASDI on your pay stubs, it’s another way to indicate Social Security taxes, as noted above. Your employer might list it as FICA Social Security tax or FICA SS tax on your pay stub instead of OASDI tax.4

Your pay stub may show two totals for OASDI tax paid.

•   Current period. This is the amount of OASDI tax that was taken out of your paycheck for the current pay period.

•   Year-to–date. This amount is how much OASDI tax you’ve paid for the year, up to the current pay period.

You and your employer both pay Social Security tax, but your pay stub may only show your contributions.

How Does OASDI Tax Work?

OASDI tax is collected from workers to fund Social Security benefit programs for eligible people. The tax is assessed at a flat rate.

•   You pay 6.2% for Social Security tax.

•   Your employer pays 6.2%, for a combined 12.4% in OASDI tax.

OASDI tax is one part of FICA taxes; Medicare tax is the other. The current Medicare tax rate is 2.9%, which is split evenly, with 1.45% paid by the employee and the same amount contributed by the employer.

FICA tax deductions are automatic; you don’t have to remember to make those contributions or opt into them. Social Security and Medicare taxes paid are not eligible for a tax deduction. The rate is not dependent on your income tax withholding either. Every worker who’s required to pay OASDI tax pays the same percentage of their earnings.

(Tip: If you want to keep track of where your income goes besides taxes, a money tracker app can help you see your spending and saving. Check with your bank to see what tools they may offer.)

As you’re preparing for tax season, you should get a W-2 from your employer that shows all the taxes you paid throughout the year.

Is OASDI federal tax only? Yes, there’s no state tax equivalent.

Recommended: What Tax Bracket Am I In?

OASDI Tax for Self-Employed People

Being self-employed doesn’t let you off the hook for OASDI tax (nor for Medicare tax). The self-employed tax rate is 15.3%, which is split between 12.4% for OASDI and 2.9% for Medicare tax. Knowing that this amount needs to be paid can help you manage your online budget planning more effectively.

You’ll calculate self-employment tax using Schedule SE, Self-Employment Tax, when you file your Form 1040. You can deduct the employer-equivalent portion of self-employment tax when you calculate your adjusted gross income.

OASDI Limit 2024

The OASDI tax isn’t unlimited; the program caps the amount of earnings subject to taxation each year. Once you hit the wage base limit for the year, any additional earnings over that amount are not subject to the OASDI tax.

For 2024, the OASDI wage base limit was $168,600. That means the most workers would have paid in Social Security tax was $10,453.20. Self-employed individuals paid a maximum of $20,906.40.

OASDI Limit 2025

The OASDI tax limit for 2025 is $176,100. So the maximum tax employees will pay to Social Security is $10,918.20. If you’re self-employed, you’ll contribute no more than $21,836.40.

The wage base limit only applies to OASDI tax. There’s no limit on taxable earnings for the Medicare tax.

In fact, high-income earners may be subject to an additional Medicare tax of 0.9%. This tax applies to Medicare wages, self-employment income, and railroad retirement compensation that exceeds these amounts:

•   $250,000 (for married couples filing jointly)

•   $125,000 (for married couples filing separately)

•   $200,000 (for everyone else)

The additional Medicare tax funds the premium tax credit and other provisions of the Affordable Care Act (ACA).

Recommended: Credit Score Monitoring

Is OASDI Tax Mandatory?

OASDI tax is mandatory for most people, whether they work for an employer or are self-employed. Some exceptions exist for people who are:

•   Nonresidents and nonimmigrant aliens who hold A, D, F, G, or H visas

•   Members of certain religious groups who have a conscientious objection to receiving benefits from a private or public insurance plan

•   Self-employed and earn less than $400 annually

Generally, it’s difficult to avoid paying Social Security and Medicare taxes.

Is Social Security Tax the Same as the OASDI Tax?

Social Security tax usually means the same thing as OASDI tax. It’s money that comes out of your paycheck to fund benefit programs for elderly, retired, and disabled workers and their dependents or survivors.

If you’re looking at your pay stubs and see Social Security tax listed but no deduction for OASDI tax, you’re still paying it. Your employer just uses a different name for it. This may be a point you learn when you are paying taxes for the first time and delving into where your income goes.

OASDI Taxes for Nonresident U.S. Citizens

Living outside the U.S. doesn’t exempt you from federal tax obligations, including OASDI tax, as long as you maintain citizenship. You’ll still owe Social Security and Medicare tax if you work for an American employer, including for:

•   The federal government

•   Any individual who is a U.S. resident

•   A partnership where at least two-thirds of partners are U.S. residents

•   A trust whose trustees are all U.S. residents

•   A corporation organized under the laws of the United States, a U.S. state, or a U.S. territory

You’ll also pay OASDI tax if you work in a country that has a bilateral social security agreement with the U.S., and the agreement states that your earnings are subject to Social Security and Medicare taxes.

Recommended: Everything You Need to Know About Taxes on Investment Property

Does the OASDI Tax Cover Retirement Expenses?

OASDI tax is paid back to Americans in the form of Social Security benefits. Social Security represents around 31% of income for people aged 65 or older who use that money to cover retirement expenses, at least in part.

Keep in mind that paying into Social Security through OASDI tax is not the same as having retirement plan contributions deducted from your paychecks.

•   When you pay OASDI tax, the money goes into a pool that’s used to fund payments for people who are collecting benefits now.

•   Retirement plan contributions, meanwhile, go into a tax-advantaged account that only you can make withdrawals from according to the plan’s guidelines.

OASDI Tax Tips

OASDI tax is unavoidable for most people, whether you earn an average salary, entry-level pay, or are among the 1%. Here are a few tips for navigating the Social Security tax deductions you see noted on your paystubs.

•   Stay aware. The OASDI tax rate has largely held steady for decades, but the tax code is always subject to change. Staying clued in to changes to OASDI tax rates and wage base limits can help you estimate how much you’ll pay each year.

•   Check for accuracy. Errors can happen, and it’s possible your employer might report the wrong amount of OASDI tax on your paystubs or W-2s. (And you could get it wrong if you’re doing the calculations for self-employed tax; it’s one of several common tax filing mistakes). Reviewing your tax documents before you file can help you spot errors so you can request a correction.

•   Review your Social Security statements. The Social Security Administration provides statements showing your OASDI and Medicare taxes paid and your earnings history. You can use yours to estimate how much you might collect in Social Security benefits when you retire.

The Takeaway

OASDI tax on a paycheck indicates that you’re paying money into Social Security programs. You’ll pay this tax whether you work for an employer or yourself, with some exceptions. This information is helpful to know if you’re watching your budget and wondering where some of the money you earned went or thinking about how you’ll afford retirement.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Why is OASDI taken out of my paycheck?

OASDI tax is taken out of your paycheck to fund Social Security programs for those who have income loss due to retirement, disability, or death.

Is it mandatory to pay OASDi tax?

Certain types of taxes are unavoidable, and OASDI tax is typically one of them. While there are some exceptions to paying Social Security tax, only a minority of taxpayers qualify.

Can I get OASDI tax back?

You can benefit from the OASDI taxes you’ve paid when you collect benefits from Social Security. That includes Social Security retirement and disability benefits. It’s also possible that you could overpay OASDI tax for a particular time period. In that case, you may be able to get the overage paid back to you, either from your employer or by filing Form 843 with the Internal Revenue Service (IRS).

What is the difference between OASDI and Social Security?

OASDI tax and Social Security tax are the same thing; they are just different terms. Along with Medicare tax, OASDI tax is part of what you pay for FICA taxes.

Can I opt out of OASDI tax?

You could request an exemption from paying OASDI tax on religious grounds. You’ll need to be able to prove that you belong to a religious organization that conscientiously objects to receiving benefits from private or public insurance plans.

At what age is Social Security no longer taxed?

Social Security is taxable at any age, though whether it’s subject to tax depends on your income. Your benefits may be taxable if the total of one-half of your benefits plus all other income you receive exceeds the base amount for your filing status. The base amount is:

•   $25,000 for single filers, heads of household, and qualifying surviving spouses

•   $25,000 married couples who file separately and don’t live together

•   $32,000 married couples filing jointly

•   $0 for married couples who file separately but still live together.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

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.

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.

SORL-Q125-017

According to the latest figures from the Bureau of Labor Services, the average salary for a construction worker is $49,280, or $23.69 per hour. Construction workers are a crucial part of the labor force across the country, and the industry is expected to grow through the end of the decade. Without a formal education requirement, construction work can be a viable option for anyone uninterested in getting a college degree right after high school.

That said, construction labor can be grueling. The job is physically demanding and at times dangerous. You’ll need to consider your physical limitations before pursuing a career in construction work.

Knowing what your income will look like may be the most important consideration of all. We’ll break down the average construction worker starting salary, as well as their typical responsibilities and required skills, below.

What Do Construction Workers Do?

Construction crews work on building sites for new homes, multi-family units, commercial buildings, roads, and bridges. Following detailed plans, construction workers are responsible for taking apart old structures and erecting new ones.

Depending on the job site, construction workers may operate heavy machinery, use hand tools, and perform plumbing and electrical tasks.

Construction work requires significant strength, endurance, and tolerance for extreme temperatures. The industry also has one of the highest rates of injuries on the job, so construction laborers must be familiar with safety protocols.

Construction Worker Job Responsibility Examples

What kinds of things might you be responsible for as a construction worker on a job site? Here are some examples:

•   Removing debris

•   Loading and unloading materials

•   Assembling bracing, scaffolding, and other temporary structures to help with the construction

•   Operating heavy machinery and using hand tools when building and taking apart structures

•   Digging trenches, compacting earth, and backfilling holes

•   Directing traffic

•   Driving work trucks (may require a CDL, or commercial drivers license)

•   Measuring and cutting materials

•   Conducting minor plumbing, electrical, and carpentry work

Construction Worker Skills

Though you don’t need a secondary education to be a construction worker, you’ll need to learn specific skills. You might learn some of these on the job:

•   Ability to use tools and operate machinery

•   Plumbing, electrical, carpentry, masonry, concrete, roofing, drywall, and/or demolition know-how

•   Knowledge of various safety protocols

•   Basic math and measurement

•   Hand-eye coordination

•   Physical strength and energy

In addition, construction workers must be able to problem-solve on the fly and must embrace teamwork. This is not a job for introverts!

How Much Do Starting Construction Workers Make?

Construction worker entry-level salaries vary by state, but you can expect pay to be on the lower end when just starting out. The bottom 10% of earners in the industry bring home about $31,510 per year.

If you’re entering the construction industry with a degree, you will likely make more starting out. With an education, you might go straight into construction management. The bottom 10% of construction managers earn $64,480 a year. The average annual salary is $104,900.

Recommended: 25 High-Paying Trade Jobs in Demand

Recommended: Is $100,000 a Good Salary?

What Is the Average Salary for a Construction Worker?

The average salary for a construction worker in 2022 was $49,280, but rates vary significantly across the country. The average hourly rate for a construction worker is $23.69 per hour. Total income is about the same whether you get a salary vs. hourly pay.

As you’d expect, areas with a higher cost of living (think California, New York, and Hawaii) generally have more competitive pay than areas with a lower cost of living (states like Alabama, Mississippi, and Arkansas). But no matter where you live, a budget planner app can help you keep tabs on your spending and saving.

How much do construction workers make in California? $61,710, on average. In New York, the mean salary is even higher, at $63,830 a year. But it’s Massachusetts where construction workers make the most money on average: $67,780.

Check out the following table for additional state insights:

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

Pros and Cons of Construction Worker Salary

Being a construction worker has some advantages, but there are also drawbacks to consider:

Pros

•   Higher-than-average salary: The average salary for someone without a college degree is just over $37,000. Construction workers earn more than $9,000 a year over that, without any formal education — and without any student loan debt.

•   Job growth: The job market is projected to grow by 7% from 2023 to 2033, meaning there should be ample opportunities available.

•   Flexibility: Construction jobs are available across the country. If you want to relocate somewhere else, you shouldn’t have trouble finding a job.

Recommended: Should We Raise the Minimum Wage?

Cons

•   Difficult work: Construction labor can be physically demanding. It may lead to injury and illness, and you can leave job sites tired and sore each day.

•   Less money: Construction workers make significantly less money than construction managers. (A money tracker can help you take control of your finances.) If you’re able to get a bachelor’s degree in construction management, you may earn more money over your lifetime.

•   Long-term career options: As you age, you may become less equipped to keep up with the physical demands of the job. This could force an early retirement, right when you should be in your earning prime. You may instead need to look for a work-from-home job for retirees to ensure you have enough income until you’re eligible for Social Security benefits and other retirement income.

Recommended: Should We Raise the Minimum Wage?

The Takeaway

Construction workers can make decent money over the course of their careers, and you won’t have to take out a student loan to get a degree to land a job. However, the work can be exhausting and lead to injury. Weigh all the pros and cons carefully before starting a career as a construction worker.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How much do most construction workers make?

How much money a construction worker makes depends on where they live and their level of experience. However, the average construction laborer brings in $49,280 a year.

Who is the highest paid construction worker?

Massachusetts has the highest paid construction workers, with an average salary of $67,780.

What job pays the best in construction?

Pipeline transportation of natural gas is the highest paying job in construction, with laborers earning $94,640 a year on average. Other high-paying construction jobs include electric power generation, transmission, and distribution; construction support services; construction work for medical and surgical hospitals; and rail transport construction.

Photo credit: iStock/damircudic

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.

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

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.

SORL-Q125-060

A foreign currency bank account, also known as a multicurrency account, can facilitate transactions made in foreign currencies; that is, not in U.S. dollars. This can be a significant benefit for businesses. They may use multicurrency (or foreign currency) bank accounts for international transactions as well as to support operations overseas. This can offer a major convenience because of the flexibility with different currencies.

But these multicurrency accounts aren’t just for businesses. Some individuals may also want to fund a bank account with foreign currency in certain situations. Read on for a closer look at what a foreign currency account is, how to open a multicurrency account, and the pros and cons of this type of bank account.

What Is a Multicurrency Account?

A multicurrency account is a type of bank account that’s designed to hold money denominated in foreign currencies. It may also be referred to as a foreign currency account or borderless account. It is a simpler way to deal with regular deposits of foreign currencies.

The types of currencies accepted for deposit or used for withdrawals can be determined by the bank. Some of the currencies your bank may process include:

•   Australian dollars (AUD)

•   Canadian dollars (CAD)

•   Euros (EUR)

•   Great Britain pound sterling (GBP)

•   Japanese yen (JPY).

As mentioned, foreign currency accounts can be opened for business or personal reasons. Businesses that operate globally may require these accounts in order to send payments to vendors or receive payments from international clients.

You might open a foreign currency account for yourself, as an individual, in a few different circumstances. Perhaps you live or are working abroad. Or maybe you regularly make payments overseas or need to send money to friends and family internationally.

How Does a Multicurrency Account Work?

With a multicurrency account, you are able to deposit, hold, and send money in different currencies, just as the name implies. Depending on the financial institution, you may be able to earn interest on deposits, as well.

In addition, these accounts may allow you to convert funds back and forth into foreign currencies as needed without paying the usual fees associated with these operations.

A multicurrency bank account that’s set up as a savings account might follow typical savings account rules. For example, the bank may limit you to six withdrawals from the account per month (though these regulations have been loosened since the COVID-19 pandemic; check with your financial institution). If that limit applies and you exceed it, the bank may impose an excess withdrawal fee. Keep in mind that any fees assessed for a foreign currency account may be processed in U.S. dollars.

Multicurrency accounts at Federal Deposit Insurance Corporation (FDIC) member banks enjoy FDIC protection, up to the established limit. The FDIC insures banking customers up to $250,000 per depositor, per financial institution, per ownership category. This may well reassure you about the safety of your funds.

One thing to note is that foreign currency bank accounts aren’t used for forex trading. If you’re interested in trading foreign currency as an investment, you’d need to open a separate brokerage account for that. There are a number of online brokerages that offer the option to trade forex alongside other investments, such as stocks and exchange-traded funds (ETFs).

Typical Requirements to Apply for a Foreign Currency Bank Account

If you’re interested in opening a foreign currency account, it’s important to know what documents you’ll need. That way, you can gather the necessary materials and speed through the application process. The specifics can vary from bank to bank but generally, you must:

•   Be of minimum age to open an account, typically 18 or 19

•   Have a valid, government-issued form of identification

•   Provide identifying information, including your name, address, date of birth and Social Security number

•   Meet minimum deposit requirements

•   Provide proof of income and employment

The requirements to open a foreign currency account aren’t that different from those for a foreigner opening an account in the U.S. Whether you can apply for a foreign currency bank account online or not will depend on the bank. Some financial institutions allow you to complete the application online, while others require you to open an account over the phone or in-person at a branch. Check with yours to learn the exact protocol.

You may also need to already have at least one other account open with the bank before you can apply for a multicurrency account. If the bank imposes this requirement, you may also need to maintain a specific minimum balance in that account to qualify.

Pros of Foreign Currency Account

If you’re curious about multicurrency accounts, it may well be because you are tangled in some red tape as you try to bank in, say, both U.S. dollars and euros. A foreign currency bank account can help meet certain money management needs, like toggling back and forth between two kinds of currency.

Here, the pros of multicurrency accounts.

•   When you deposit funds into your account, you can hold it as multiple currencies, including leftover foreign currency from travel, in one place. You don’t have to exchange foreign currency before you can use it.

•   You typically avoid foreign transaction fees you might otherwise incur.

•   Being able to switch among different currencies could allow you to leverage the most favorable exchange rates.

•   You may be able to earn interest on your balances.

•   If the institution where your account is has FDIC insurance, you are covered up to $250,000 per depositor, per insured bank, for each account ownership category, in the rare event of a bank failure.

•   Multicurrency bank accounts can be used for personal or business purposes.

•   Sending payments or money in foreign currencies can be more convenient.

A foreign currency account could also come in handy if you travel. You can use a linked debit card to make purchases or withdraw cash in each country you visit, without having to get traveler’s checks from your bank.

Cons of Foreign Currency Account

While a multicurrency bank account might be appropriate in some situations, there are a few drawbacks to consider. Specifically:

•   Your financial institution might charge you account and minimum balance fees the same as you might pay for any other bank account.

•   Interest rates and annual percentage yields (APYs) may be low.

•   Initial deposit requirements or minimum balance requirements may be on the higher end.

•   Changing currency rates can affect the value of the money in your account.

Another drawback of foreign currency accounts is that not all banks offer them. And some banks may only offer these accounts for businesses, not individuals.

Multicurrency Account Fees

Foreign currency accounts can have fees, just as any other type of bank account may. Depending on the bank, some of the fees you might pay include:

•   Monthly maintenance fees

•   Excess withdrawal fees (for savings accounts)

•   Overdraft or non-sufficient funds (NSF) fees

•   Foreign transaction fees

•   Currency conversion fees

When comparing multicurrency bank accounts, take time to review the details thoroughly. It’s important to understand which currencies you can hold, which fees you might pay, and whether you’re required to maintain a minimum balance in the account.

Once you’ve scoped those details out, see if the benefits of this kind of account will outweigh the fees. It could wind up being a good way to simplify your banking life if your financial life requires frequent foreign transactions.

The Takeaway

Foreign currency accounts can simplify money management if you regularly send or receive money in currencies other than U.S. dollars. Opening one of these multicurrency bank accounts is not that different from opening any other type of account. It can be a major convenience if your daily life involves receiving and/or sending funds overseas — and a good way to take control of your international financial life.

FAQ

What is the purpose of a multicurrency account?

A multicurrency or foreign currency bank account allows you to receive, hold, and send funds in more than one currency. This can be convenient for businesses and individuals who frequently make international transactions and would like to have an account that recognizes multiple currencies.

What types of banks offer multicurrency accounts?

Many but not all banks offer multicurrency accounts. Some of the U.S. banks that offer foreign currency accounts at press time include Citi and HSBC. Some financial technology companies like Wise and Revolut offer digital multicurrency accounts. For businesses, Wells Fargo and PNC offer foreign currency accounts. You can contact your current bank to find out if multicurrency accounts are available.

How does a multicurrency account work?

A multicurrency bank account allows you to deposit, keep, and send funds in more than one currency. You can decide if you keep the funds in different currencies or convert them. This kind of account can help you conduct international transactions without necessarily paying all the usual fees involved.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

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.
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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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.

SOBNK-Q125-052