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Feb

2024

Can You Refinance Student Loans Without a Degree?

By Kayla McCormack | Debt Payoff, Student Loans, student_loan | No Comments

If you’ve dropped out of college but are still carrying student loan debt, you have a number of repayment options, depending on your income and credit profile. Some private lenders may allow you to refinance your federal student loan, but others definitely will not.

College dropout rates indicate that up to 32.9% of undergraduates do not complete their degree program, according to EducationData.org. If anyone hopes that not graduating gets them off the hook for paying back a student loan, the answer is a resounding no. The U.S. Department of Education’s Federal Student Aid (FSA) department spells it out on its website for those repaying federal student loans:

“Your federal student loans can’t be canceled or forgiven because you didn’t get the education or job you expected or you didn’t complete your education (unless you couldn’t complete your education because your school closed).”

Why is that? Lenders believe that not having a degree can pose difficulties in getting a high-earning job. College dropouts make an average of 32.6% less income than bachelor’s degree holders. And some data show that college dropouts are four times as likely to default on their loans compared to graduating counterparts.

Take control of your student loans.
Ditch student loan debt for good.

Can You Refinance Student Loans Without a Degree?

Student loan refinancing allows you to pay off federal student loans with a private one carrying different terms. For some borrowers, this new loan might come with a lower interest rate or lower monthly payment than their existing debt, particularly if they have a strong credit and employment history.

However, many private lenders won’t allow you to refinance your student loans if you haven’t graduated. SoFi and some other lenders require that you have at least an associate degree from a Title IV accredited school in order to be eligible for refinancing.

Title IV schools are eligible to process federal student aid under the Higher Education Act. You can verify whether the institution you attended is a Title IV school on the federal student aid website.

Even though some of the most popular lenders require you to have a degree, that doesn’t mean you can’t refinance student loans if you did not graduate. There are some financial institutions that may offer refinancing to borrowers who dropped out.

💡 Quick Tip: Some student loan refinance lenders offer no fees, saving borrowers money.

Federal Student Loan Consolidation Without a Degree

There are other solutions to easing your burden. If you have more than one federal student loan, not having a degree doesn’t stop you from being able to combine them through a Direct Consolidation Loan. Doing so can be beneficial because it allows you to make just one payment every month instead of many, potentially with multiple loan servicers. That can make things simpler for you and make it more likely that you’ll remember to pay your loans on time.

Another reason to consolidate is that you could qualify for a lower monthly payment by extending the term of the loan (though you’d pay more interest over the life of the loan). Also, by consolidating, loans that wouldn’t otherwise qualify might become eligible for income-driven repayment plans or the Public Service Loan Forgiveness program.

Should I Consolidate Student Loans

Consolidation isn’t for everyone, however. As we mentioned above, extending the term of the loan means interest will have more time to stack up. Plus, if you’ve already been making payments under an income-driven repayment plan or toward Public Service Loan Forgiveness, you could lose credit for those payments and have to start over.

You can apply for a Direct Consolidation Loan as soon as you leave school or are enrolled less than half-time. You’d submit an application through StudentLoans.gov. If your loans are still in the grace period, you can ask for the consolidation to be delayed so that it’s closer to the end of that period. If you receive the loan, you’ll need to start repaying it 60 days after it’s paid out.

💡 Quick Tip: Federal parent PLUS loans might be a good candidate for refinancing to a lower rate.

Repayment Options for Federal Student Loans

Federal student loan repayment was put on pause in March 2020 due to Covid-19 hardships. The pause ended in October 2023. If you are focused on dealing with your federal student loans, it’s vital to know that the Department of Education has focused on strengthening its income-driven repayment options.

Any Direct Loan borrowers can apply to the Saving on a Valuable Education (SAVE) Plan, introduced in 2023. (SAVE replaces the REPAYE program.) Your monthly payments will be 10% of discretionary income, possibly lowering to 5% in 2024 when SAVE has been fully implemented. You can learn more about SAVE, and apply through its portal, on the FSA site.

For those really struggling to make any payments, the “On-Ramp Program” is in effect through Sept. 30, 2024. This prevents the worst consequences of missed, late, or partial payments, including negative credit reporting for delinquent payments for 12 months. However, payments are still due, and interest will continue to accrue.

You can also apply for forbearance or deferment, temporarily pausing your payments and providing more predictability when you must resume repaying. Keep in mind that forbearance and deferment have financial pros and cons.

Refinancing Your Student Loans

Now or in the future, you may be able to apply for student loan refinancing. You can check your rates with several lenders (using a soft credit check, if possible) to compare rates and terms and see what you might prequalify for.

If you decide to complete a full application, the lender may ask for information like your Social Security Number, outstanding loans and repayment history, income, and employment history. They typically complete a credit check to find out your FICO® Score and look for any red flags, like a history of missed payments, student loan default, eviction, or bankruptcy.

Those who don’t initially qualify for refinancing, or get a favorable rate, can try reapplying with a cosigner — someone who guarantees to repay the loan if the primary borrower can’t.

If you feel you need a cosigner, one with strong credit history and a solid income and employment history (among other financial factors) could help you qualify. If you do use a cosigner, remember that if you default, any missed payments on your end may damage their credit.

It’s important to bear in mind with refinancing that, if approved, you would lose out on several options. These include:

• Access to temporary loan payment relief through approved periods (deferment or forbearance) when you do not have to make payments because of financial hardship, continuing your education, or military service.

• No interest accumulation on subsidized student loans during periods when payments are deferred.

• Access to repayment plans based on your income that provide loan forgiveness once you have been in repayment for 20 or 25 years.

Taking Control of Your Student Loans

Not completing your college degree or stopping and starting over an extended period is far from uncommon. However, It can be frustrating to carry a student loan balance for a degree you don’t have.

Unfortunately, SoFi does not offer student loan refinancing to borrowers who don’t have at least an associate degree, but some lenders do. Plus there are other options, such as applying for income-driven repayment and exploring other federal programs to help with loans.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Can I get a loan without a degree?

Yes, it’s possible to get student loans without a degree — if you are currently enrolled in school. The federal student loan program offers student loans to qualifying borrowers who are attending eligible institutions. Students may also look into private student loans.

Can you refinance student loans without a job?

Refinancing student loans without a job may be more challenging than if you are able to show a record of stable employment. However, lenders evaluate a variety of factors when making lending decisions including employment history, income, credit score, among other factors. The lender is trying to evaluate whether you are able to repay the loan. If you are able to show other sources of income — outside of a traditional job — it may be possible to refinance your student loans.

Do you need to graduate to refinance student loans?

In many cases, yes, you do need to graduate before you can refinance student loans. Many private lenders won’t allow you to refinance your student loans if you haven’t graduated. Though, there are some lenders that are willing to refinance student loans for borrowers who did not graduate.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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

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.

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Feb

2024

The Fastest Ways to Get Your Tax Refund

By Kylie Ora Lobell | Budgeting & Goals, Family Finances, money, Money & Life | Comments Off

Learning that you are eligible for a tax refund can be a welcome surprise. Or maybe it’s something you’ve been hoping (or even waiting for) for months.

If you have any pressing expenses — maybe you’re behind on a few bills or have been putting off going to the dentist because of the cost — you may be wondering how you might be able to get that money into your hands ASAP.

Fortunately, there are a few simple things any taxpayer can do to help ensure that their refund comes quickly.

This includes e-filing with the IRS (rather than physically mailing in your return) and setting up direct deposit, so there’s no waiting for that refund check to come through the mail.

Read on to learn more about getting your tax refund sooner, including:

• How to plan your tax return filing

• How to file electronically

• How to set up direct deposit

• How to track your refund

Quickest Ways to Get Your Tax Refund

Here are some key steps you may want to take as tax season gets underway, starting well before Tax Day in April. They’ll help ensure that you get your refund ASAP.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 3.80% APY, with no minimum balance required.

1. Start Planning Your Tax Return Filing in January

In general, the fastest way to get your tax refund is to file your taxes early, and you certainly don’t want to miss that tax-filing deadline.

This means that, starting in January, you may want to begin collecting all the necessary information for filling out your tax forms, such as your W-2 and any 1099s. You’ll also likely need to decide whether you are going to file on your own (perhaps using tax software) or hire a tax preparation service or accountant to help.

2. Get Your Return in ASAP

The further into tax season that you file, the more likely the IRS is to be inundated with returns. That can slow processing times, which can delay your refund.

If you followed Step 1, above, then you’ll have your documentation organized. All of the forms you need should be issued by January 31.

If you prefer working with a professional tax preparer, it’s wise to book them in advance, since they’ll likely be very busy with other clients. If you plan to use tax software, buy it early and learn how to use it. You’ll be ready to be one of the first filers out of the starting gate.

3. File Your Tax Return Electronically

One of the fastest ways to get your refund can be to choose electronic filing instead of sending your return by mail.

That way, your refund can begin moving through the system immediately, rather than having to wind its way through snail mail and hands-on processing.

A paper tax return can take about six to eight weeks to process, but with electronic filing, or e-filing, taxpayers can typically expect to receive their refund within 21 days. Your tax preparer will usually offer ways for you to file electronically.

Taxpayers can also use tax preparation software such as TurboTax, TaxSlayer, TaxAct, or H&R Block. You can use these programs to file your taxes yourself, or you might go to a professional who knows how to use this type of software. Either way, electronic filing is probably an option.

4. Get Help Filing Your Return Quickly

But what if you don’t have funds for tax help and are feeling overwhelmed by the process and therefore don’t file right away? Fortunately, help is available. The Internal Revenue Service (IRS) offers a few options for
e-filing which can help you get this task completed.

If taxpayers make an adjusted gross income (AGI) of $79,000 or less per year, then they can use IRS Free
File to turn in their tax forms.

For taxpayers whose AGI is greater than $79,000, they can use the IRS’s Free File Fillable Forms service, which lets you simply input your data onto your tax forms so you can e-file (if you choose this option, you’ll need to know how to prepare your own tax return).

The IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs also provide help and e-file for taxpayers who qualify.

Most states also offer free e-filing options for state returns.

The IRS has a helpful tool on their website where taxpayers can find an authorized IRS e-file Provider
Locator . All taxpayers have to do is input their zip code and choose what kind of provider they need.

5. Set Up Direct Deposit

How else to get your refund fast? The speediest way to get your tax refund is to have it electronically deposited into your financial account. This is known as direct deposit, and the service is free. It’s also possible to break up your refund and have it deposited into one, two, or even three accounts.

You can set up direct deposit simply by selecting it as your refund method through your tax software and then inputting your account number and routing number (which you can find on your personal checks or through your financial institution).

Or, you can tell your tax preparer that you want direct deposit.

It’s also possible to select direct deposit if you’re filing by paper and sending your return through the mail (you may want to double check to make sure you didn’t make any errors inputting your financial account information). But remember, paper returns tend to move through processing more slowly.

💡 Quick Tip: As opposed to a physical check that can take time to clear, you don’t have to wait days to access a direct deposit. Usually, you can use the money the day it is sent. What’s more, you don’t have to remember to go to the bank or use your app to deposit your check.

6. Open a Bank Account If You Don’t Have One

If you just read the step above and thought you can’t use direct deposit because you don’t have a bank account, this could be the moment to set one up. Perhaps you haven’t gotten around to opening a checking or savings account. Now is a great moment to open one. Many online banks can guide you through the application and opening process online, from your home, in a minimal amount of time. This can be an excellent move as you prepare for tax season.

If you were previously turned down for a bank account, you might want to look into what are known as second chance accounts. Offered by some banks and credit unions, these may not have all the features of conventional accounts, but they can give you a good landing pad for your tax refund via direct deposit.

Recommended: What Are the Different Types of Taxes?

When Can I Expect My Tax Refund?

As long as taxpayers have e-filed by the deadline and chosen direct deposit, then the refund should hit their account within three weeks. According to the IRS, nine out of 10 refunds arrive in less than 21 days. However, if you file a paper return, the timing will more likely be six to eight weeks.

And, remember, if you file later in the tax season, you might face processing delays. That’s because the volume of returns working their way through the IRS rises significantly. So being an early bird can be among the quickest ways to get your refund.

Recommended: What Is Income Tax Withholding?

Finding Out Where Your Refund Is

Once everything is filed, taxpayers can check their tax refund status on the IRS’s Where’s My Refund? page. This requires inputting your Social Security number, filing status, and the exact amount of the refund, which can be found on the tax forms that were submitted.

Can I Track the Status of My Tax Refund?

Taxpayers can check “Where’s My Refund?” starting 24 hours after e-filing.

The site is updated daily, usually at night. The IRS cautions that you may experience delays in getting your refund if you file by mail, or you are responding to a notice from the IRS.

If it’s been more than 21 days and you still haven’t received your refund, you can call the IRS at (800) 829-1040 for help. You may also want to contact the IRS if “Where’s My Refund?” instructs you to do so.

Can You Get Your Tax Refund Back the Same Day?

Unfortunately, there is currently no way to get a tax refund back the same day. The speediest timing tends to be closer to eight days from e-filing to direct deposit of a refund.

However, if taxpayers are in a bind, some tax preparation services offer 0% interest tax-refund loans. Tax-refund loans, also called “refund advances,” allow you to access your refund early, but you may want to keep in mind that tax preparers typically charge fees for filing tax returns.

If you are paying a tax preparer just to get the advance, you’ll essentially be paying a company in order to access your refund. Consider these points:

• Some providers may charge an additional fee for the advance service.

• These short-term loans range from $200 to $4,000. In some cases, there may be a minimum amount your refund must meet in order to qualify for a refund advance (how much can vary from one company to another).

• You may only get part of your expected refund in advance.

• Some companies may offer to give you a prepaid card with the loan amount on it within 24 hours.

• Once your tax refund is issued, the tax preparer will typically deduct the loan amount from your refund.

Also be aware that you may be offered this kind of quick cash from other non-bank lenders with significant fees. Proceed with caution.

If you’d rather not pay any fees, however, you may also want to look into other options.

• If you have bills that are due, it may be worth calling up your providers or credit card companies to see if they can extend their due date while you are waiting for your refund.

• You might open a 0% interest credit card, such as a balance transfer one, and charge an urgent expense on that card and then pay it off as soon as the refund comes in.

What’s the Best Way to Spend Your Tax Refund?

Finally! Your tax refund has arrived. You may wonder about the best way to use the funds. Yes, it can be tempting to splurge on a weekend away or those new boots you’ve had your eye on, but consider this financially-savvy advice first:

• If you are carrying any high-interest debt, one smart move might be to put your tax refund towards minimizing the debt or, if possible, wiping it out all together. Doing this can help you avoid spending more money on interest charges. It may also help boost your credit score, which may help you qualify for loans and credit cards with lower interest rates in the future.

• Or you might consider using your tax refund to jump-start one of your current savings goals, such as building up an emergency fund, a downpayment on a home, or buying a new car.

For an emergency fund or savings goals you hope to accomplish within the next few years, you may want to put your refund in a high-yield savings account. These options typically offer a higher return than a traditional savings account but allow you easy access to your money when you need it.

• Your tax refund can also help you start saving for the longer term, such as retirement or paying for a child’s education. Using a tax refund to buy investments can help you create additional wealth over time to help fund these far-future goals.

The Takeaway

To get your tax refund as quickly as possible, it’s a good idea to file early, and, if possible, avoid the mail. That means filing electronically (using the IRS’s free service or tax software, or hiring a tax pro) and signing up for direct deposit when you file.

It’s also wise to keep track of your refund on the IRS site and reach out to the agency if you haven’t received your refund within three weeks.

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.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

How can I receive my tax refund sooner?

To receive your tax refund as soon as possible (which typically means within three weeks of filing), file electronically and request that the refund be paid by direct deposit.

Is direct deposit faster than mail for tax refunds?

Direct deposit will typically save time versus a check sent by mail in terms of tax refunds. If you file your return electronically too, you’ll likely have the shortest possible time from finishing your return to receiving funds that are due to you.

When should you start planning to file your tax return?

Tax season begins in January, with the forms you need having to be sent by January 31. It’s wise to start getting organized as soon as possible in the New Year to get your return done. If you work with a professional tax preparer, you might want to book them even earlier since January through April will be their busy season.

SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 during a 30-day Evaluation Period (as defined below).

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 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, 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 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY 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, 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 members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

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

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.

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

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Feb

2024

What Is the Internal Revenue Service (IRS)?

What Is the IRS? What Do They Do?

By Jacqueline DeMarco | Family Finances, Life & Career, money | Comments Off

One adulting rite of passage is getting familiar with the Internal Revenue Service (IRS), the government organization that manages the American tax system. When doing so, you learn to file your taxes, figure out what you might owe, or see whether a refund could be heading your way. Perhaps you need to pay estimated taxes quarterly.

The IRS doesn’t just collect money, though. It also helps enforce tax laws and provides resources for taxpayers so they can meet their tax responsibilities.

Read on to learn more detail about this, including:

• What is the IRS? What is the IRS responsible for?

• When do you need to interact with the IRS?

• What are some ways to contact the IRS?

• What are some tax-filing tips?

What Is the Internal Revenue Service (IRS)?

Who is the IRS? As briefly noted earlier, the IRS is the government organization that manages the American tax system and enforces internal revenue laws.

The IRS also provides American taxpayers with the resources and services they need to understand their tax responsibilities. It also works with taxpayers to make sure they are complying with tax laws and meet their tax obligations. It can be hard to understand your taxes, but the IRS does provide many online resources that can help educate consumers.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 3.80% APY, with no minimum balance required.

What Is the IRS Responsible For?

So, what does the IRS do? These are some responsibilities they help American citizens with:

• Applying for Employee Identification Numbers (EINs)

• Understanding and executing tax preparation

• Providing tax forms

• Making tax payments

• Requesting tax refunds.

Recommended: 41 Things to Do With a Tax Refund

History of the IRS

The IRS dates back to 1862 when, during the Civil War, President Lincoln and Congress worked together to create the position of commissioner of Internal Revenue. This was done to introduce income tax that could help pay for war expenses. That particular income tax was repealed just 10 years later, revived in 1894, and was then ruled unconstitutional just a year later.

Over the years, changes were made to the tax system. In the 1950s, the IRS was reorganized (formerly known as the Bureau of Internal Revenue). Almost five decades later, the Restructuring and Reform Act of 1998 modernized the IRS, and, to a large extent, it became what we know today.

Recommended: Are Overdraft Fees Tax-Deductible?

When Might You Need to Interact With the IRS?

Interacting with the IRS is a regular occurrence for American taxpayers. These are some examples of times when people need to engage with the IRS.

Filing Taxes

One of the main functions of the IRS is providing a system for Americans to file their taxes. This can now be done online and is free to do. (It’s wise to avoid missing the tax-filing deadline so you won’t be liable for any penalties.)

Making Tax Payments

It’s also possible to make a variety of payments through the IRS, depending on the different types of taxes you may owe. This can be done in full, or the taxpayer can make partial payments as a part of an approved payment plan. The IRS can charge interest and penalties until the full balance is paid.

Making Tax Corrections

If someone needs to make corrections on a return they already filed, they can do so with the help of the IRS. They can do this by filing an amended return. They can use Form 1040-X, which is an amended U.S. Individual Income Tax Return.

Tips for Contacting the IRS

If someone needs help with their taxes, they have a few options for how they can contact the IRS for support.

By Phone

Monday through Friday, it’s possible to contact the IRS by phone. (Any residents of Hawaii or Alaska will want to follow Pacific time when planning their calls. Puerto Rico phone lines are open from 8 a.m. to 8 p.m. local time.)

Need help preparing for tax season? The type of tax support someone needs can impact which phone number is best to call:

• Individuals

800-829-1040

7 a.m. to 7 p.m. local time

• Businesses

800-829-4933

7 a.m. to 7 p.m. local time

• Non-profit taxes

877-829-5500

8 a.m. to 5 p.m. local time

• Estate and gift taxes (Form 706/709)

866-699-4083

10 a.m. to 2 p.m. Eastern time

• Excise taxes

866-699-4096

8 a.m. to 6 p.m. Eastern time

• Callers who are hearing impaired

TTY/TDD 800-829-4059

In Person

It’s also possible to receive assistance in person if the taxpayer is able to visit one of the IRS Taxpayer Assistance Center Offices. The IRS has a Taxpayer Assistance Center Office Locator that makes it easy to find the closest office.

Tax-Filing Tips

Need to file taxes? These are some tax-filing tips that can make the process easier:

• Get a head start. Whenever possible, it’s best to start preparing your taxes early. That way, if an issue arises, there is time to resolve it. Filing earlier can give the filer more time to find any missing information they realize they need during the filing process.

Also, the sooner you file, the sooner you’ll get any refund you may be due, so you won’t waste time wondering, “Where is my tax refund?”

• Keep things accurate. While mistakes do happen, whenever possible, it’s best to file an entirely accurate tax return to help avoid the risk of launching an IRS audit trigger. You may want to work with a professional tax preparer or use tax software to help with this.

• Plan ahead for extensions. It’s possible to request a tax-filing extension to send in your materials the following October instead of April. However, it’s still necessary to make a good faith estimate about what is owed and pay it. Otherwise, there is a risk of penalties and interest.

If someone is worried they will need to ask for an extension, it’s best to make that plan sooner rather than later so they can make their estimated payment on time.

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The Takeaway

Taxes are an unavoidable part of life. While few people like paying taxes and most people would rather not interact with the IRS, the IRS does provide a variety of resources. These tools can help make the process of paying taxes and receiving refunds as simple as possible.

Getting ready for tax season is an important way for consumers to stay on top of their financial life. Opening a new bank account is a great way to get ready to receive a tax refund if you’re expecting one.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

How can I pay my taxes to the IRS?

The IRS gives taxpayers a variety of options for how they can pay their taxes. You can do this via a transfer from your bank account, by using a debit card or credit card, or through a digital wallet such as PayPal. You can also pay by check, money order, or cashier’s check through the mail. You may pay by cash at certain retail partners and IRS locations.

Am I able to contact the IRS?

It is possible to contact the IRS by phone (there are different support lines designed for different types of tax issues). If someone lives near one of the IRS Taxpayer Assistance Center Offices, they also have the option to receive support in person.

What are some myths about the IRS?

Most myths surrounding the IRS are about how to learn what the date of a refund will be. For example, some people believe they can call the IRS to get their refund date or can order a tax transcript to achieve this, but neither is true. Other myths include that paying taxes is voluntary and that pets qualify as dependents; those are not true either.

Photo credit: iStock/Pgiam

SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 during a 30-day Evaluation Period (as defined below).

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 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, 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 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY 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, 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 members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

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

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

SOBK0224015

Feb

2024

What Is a W-2?

By Anna Davies | Budgeting & Goals, money | Comments Off

A W-2 can be a vital component to your tax return every April. But what exactly is a W-2? It’s a form filed by an employer that shows compensation paid and amounts withheld from an employee’s paycheck. Compensation includes wages, tips, and other forms of money paid. Withholding can include taxes and other amounts deducted from an employee’s pay. If you have more than one employer, you may receive multiple W-2 forms. These forms are essential documents in filing your taxes for the previous year.

Knowing how to read your W-2 can be helpful in understanding your overall tax liability. Here, you’ll learn more about these documents, including:

• What are the parts of a W-2?

• Who receives a W-2?

• When should your W-2 arrive?

• What’s the connection between a W-2 and a W-4?

Parts of a W-2

All W-2 forms require the same information, regardless of the employer and employee. This information includes key employer information, such as business address and employer identification number (EIN). It also includes the employee’s information, such as social security number and mailing address. It’s a good idea to assess the form for any errors; if you see an error, contact your employer for a corrected form.

The W-2 has boxes that display various information. On the left side of the form, you’ll see the following:

• Box A displays the employee’s Social Security number.

• Box B shows the employer’s identification number, or EIN.

• Box C contains the employer’s name, address and zip code.

• Box D is a control number (something some employers use).

• Box E is the employee’s name.

• Box F is the employee’s address.

To the right and below the information above, you’ll see these areas:

• Box 1 reflects earnings: wages, tips and other compensation.

• Box 2 is federal income tax withheld.

• Box 3 shows Social Security tax-eligible wages.

• Box 4 contains Social Security withheld.

• Box 5 is Medicare tax-eligible wages and tips.

• Box 6 shows Medicare tax withheld.

• Box 7 is Social Security tips (meaning discretionary earnings, such as tips, that are subject to Social Security taxation).

• Box 8 is allocated tips (tips your employer assigned to you beyond those you have reported).

• Box 9 is blank, a remnant of its previous use for any advance of the Earned Income Credit, which ended in 2010.

• Box 10 reflects dependent care benefits.

• Box 11 contains nonqualified plans, meaning money put in a tax-deferred retirement plan sponsored by your employer, which can reduce your taxable income.

• Boxes 12 may be blank or may be filled in with codes A through HH, which identify miscellaneous forms of income that need to be reported to the IRS.

• Box 13 shows statutory employee, retirement plans, and third-party sick pay. These will be checked off if you are a statutory employee, meaning an individual contractor who is treated like an employee; if you participate in a qualifying retirement plan; and/or if payments were made by a third party (such as an insurance plan) for disability pay or the like.

• Box 14 reflects other deductions.

• Box 15 shows the state and the employer’s state ID.

• Box 16 contains state wages.

• Box 17 shows state income tax, if withheld.

• Box 18 reflects local tax-eligible wages, tips, etc.

• Box 19 shows any local taxes withheld.

• Box 20 contains the name of the locality.

Employees receive multiple copies of the same W-2 from each employer, to be filed with a federal tax return, a state tax return, and to be kept for the employee’s records. The IRS recommends keeping copies of W-2s for anywhere from three to seven years, depending on your situation.

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Who Receives a W-2?

Now that you know what a W-2 tax form is, you may wonder, who gets one? If you are an employee of a business, you should receive a W-2. If, however, you are a freelancer (aka an independent contractor), you should receive a Form 1099, showing freelance income subject to self-employment taxation, and not a W-2.

Recommended: How Do I Know What Tax Bracket I Am In?

When to Expect a W-2

The IRS requires employers to send out W-2s by January 31st for the prior tax year. This allows employees to prepare for tax season and get their returns in by mid-April. It might take a few days for the mail service to deliver it to you.

The Connection Between a W-2 and a W-4

The forms W-2 and W-4 may sound alike, but they work quite differently. You’ve just learned the answer to “What is a W-2 tax form?” Now, here’s what a W-4 is.

A new employee will be asked by their employer to fill out a W-4 form, which is used to assess how much tax to withhold from the employee’s wages. Withholding depends on the employee’s circumstances, including whether they have dependents and what their tax-filing status is, among other things. Employees who do not fill out a W-4 will be taxed as if they were single.

Employees won’t be asked to complete a W-4 form again unless they switch employers. But you should take the initiative to update your W-4 if your tax circumstances change, such as you get married, have a child, get divorced, or receive taxable income not subject to withholding, such as earning money from a contract or freelance job.

Each allowance an employee claims on their W-4 will minimize withholding throughout the year. An employee can also request additional amounts be withheld from their paycheck. When taxes are filed, the goal for employees is to avoid a tax bill or a large refund, both of which can indicate that your tax payments during the year were off the mark.

While “tax time” is in April each year, taxes are essentially pay-as-you-go, according to the IRS. That means that, in an ideal world, April shouldn’t bring a large tax bill or a large refund. Worth noting:

• For a single person who has only one employer, filling out a W-4 should be relatively straightforward.

• Those with multiple income streams, including rental income, investment income, or income from side gigs, may need to take some time and thought when completing their W-4 to ensure they’re withholding an appropriate amount, as well as paying quarterly estimated taxes, if necessary.

How do you know that your W-4 is accurate? You can assess that based on the refund or bill you receive at tax time. While a refund can feel like a windfall — and people often earmark it to pay off bills or fund a vacation, home improvement project, or other big-ticket purchase — the money represents an overpayment to the IRS.

While getting a big check can be exciting, it may make more sense to have that money available for budgeting purposes throughout the year. Or you could be putting it into a high-yield savings account. Similarly, a large tax bill can throw your budget off track and may subject you to penalties from the IRS for not having enough taxes withheld from your paycheck or not paying quarterly taxes.

Recommended: What Are the Different Kinds of Taxes?

Are You an Employer?

If you pay someone wages of $600 or more in a calendar year, even if that person is a relative, you’re technically an employer in the eyes of the IRS. This means that a person who employs a regular babysitter or housecleaner may need to withhold and pay certain taxes, including Medicare, federal unemployment, and social security.

This is an example of paying someone “on the books” and can be protection against fines and penalties that may come from paying an employee “under the table” or “off the books.” Having a clear understanding of what forms need to be filled out and what steps you need to take as an employer can help avoid a potentially complicated tax situation down the line.

It’s also important to issue W-2s in a timely manner. This helps your employees avoid the stress and potential penalties which can happen if you miss a tax deadline.

Having Your Paperwork in Order

Because things can change from year to year, it can be a good idea for an employee to regularly check their withholding on their W-4 annually. Another wise move is to make sure a new one is filed if there is a life change (as mentioned above), such as having a baby or getting married.

Workers should also keep an eye out for tax-related paperwork, since taxes are due regardless of whether paperwork has made its way to an employee’s mailbox. Missing tax forms can throw a wrench in the most organized person’s plans.

Checking in with an HR department can help make sure nothing falls through the cracks. Having paperwork ready and available can make filing taxes as seamless as possible when the time comes. This may also help you maximize your time if you work with a tax prep professional.

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Tips for Filling Out a W-2

If you’re an employee, you don’t need to do anything to your W-2 beyond checking that the information on it is correct.

If, however, you are an employer, you may fill the form out W-2s yourself, via a tax preparer, or by using payroll software to automate this task. You will be responsible for adding your company’s details properly, as well as information specific to each employee. For instance, when reporting an employee’s compensation, you would include only the amount that is subject to federal taxation. You would not include things like contributions to a pre-tax retirement plan, health-insurance costs, or similar benefits.

The Takeaway

While tax time may be met with eye-rolling and stress, it can also be a moment to set up financial intentions and systems for the year. This can include submitting a new W-4 to your employer, estimating quarterly taxes, and developing a strategy to ensure that your money works for you in the year ahead. Keeping on top of your finances throughout the year can make tax time more manageable, as can visiting the SoFi Tax Center for more tips.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

What happens if the W-2 that I received is wrong?

If you believe your W-2 is incorrect, contact your employer to discuss. They may be able to explain why you sense a discrepancy and, if necessary, reissue the document. If you cannot resolve things quickly and satisfactorily with your employer and believe there’s false information circulating, you may want to reach out directly to the IRS, which can be contacted at its toll-free number, 800-829-1040, or at Taxpayer Assistance Centers.

How much money do I need to make in order to get a W-2?

If you are an employee who earned $600 or more in a given year, you should receive a W-2, which is usually sent out by January 31st of the following year.

What is the difference between a 1099 and a W-2?

A W-2 is a form that shares information about an employee’s earnings and withholding. A 1099-NEC is a form that independent contractors may receive. Workers who get 1099 forms are responsible for paying their own employment taxes, unlike W-2 employees.

What should I do if I have not received my W-2 yet?

January 31st is the day by which W-2s must be sent out for the previous tax year. If you haven’t received yours by that date and the form was mailed, you may want to give it another couple of days to allow for it to arrive. Other steps to deal with this situation include checking online to see if you have a downloadable version and contacting your employer to see what the status is. If it’s late February and you still don’t have it, it can be wise to contact the IRS directly for guidance. You might be able to use an IRS Form 4852 as a substitute for a W-2, for example.

SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 during a 30-day Evaluation Period (as defined below).

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 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, 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 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY 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, 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 members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

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.

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

SOBK0224011

Feb

2024

I Make $50,000 a Year, How Much House Can I Afford?

By Alene Laney | Family Finances, Home Ownership, mortgage | Comments Off

On a salary of $50,000 per year, you can afford a house priced at around $128,000 with a monthly payment of $1,200 — that is, as long as you have relatively little debt already on your plate. However, not everyone earning $50,000 will see this number in response to a loan application. There are many more factors besides income and debt to take into account, such as:

• Your down payment

• The cost of taxes and insurance for the home you want

• The interest rate

• The type of loan you’re applying for

• Your lender’s tolerance for debt levels

Each of these factors affects how much home you can afford on any salary, including one at $50,000.

What Kind of House Can I Afford With $50K a Year?

$50,000 is a solid salary, but there’s no denying today’s real estate market is tough. You’ll need to know the full picture of home affordability to get you into the house you want, starting with your debt-to-income (DTI) ratio.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.

Understanding Debt-to-income Ratio

Your DTI ratio may be one of your biggest challenges to home affordability. Each debt that you have a monthly payment for takes away from what you could be paying on a mortgage, lowering the mortgage amount that you can qualify for.

To calculate your DTI ratio, combine your monthly debt payments such as credit card debts, student loan payments, and car payments and then divide the total by your monthly income. This will give you a percentage (or ratio) of how much you’re spending on debt each month. Lenders look for 36% or less for most home mortgage loans.

For example, on a $50,000 annual salary and a $4,166 monthly income, your maximum DTI ratio of 36% would be $1,500. This is the maximum amount of debt lenders want to see on a $50,000 salary.

💡 Quick Tip: Lowering your monthly payments with a mortgage refinance from SoFi can help you find money to pay down other debt, build your rainy-day fund, or put more into your 401(k).

How to Factor in Your Down Payment

A down payment increases how much home you’ll be able to qualify for. The more you’re able to put down, the more home you’ll be able to afford. Borrowers who put down more than 20% also avoid having to buy mortgage insurance. When you don’t have to pay mortgage insurance every month, you can qualify for a higher mortgage — but you do need to consider if putting down 20% is worth it to you. A mortgage calculator can help you see how much your down payment affects the mortgage you can qualify for.

Factors That Affect Home Affordability

In addition to the debt-to-income ratio and down payment, there are a handful of other variables that affect home affordability. These are:

• Interest rates When your interest rate is lower, you’ll either have a lower monthly mortgage payment or qualify for a higher mortgage. With higher interest rates, you’ll have a higher monthly mortgage payment and/or qualify for a lower home purchase amount.

• Credit history and score Your credit score affects what interest rate you’ll be able to get, which is a huge factor in determining your monthly mortgage payment and home affordability.

• Taxes and insurance Higher taxes, insurance, or homeowners association dues can bite into your house budget. Each of these factors has to be accounted for by your lender.

• Loan type Different loan types have varying interest rates, down payments, credit requirements, and mortgage insurance requirements which can affect how much house you can afford.

• Lender You may be able to find a lender that allows for a DTI ratio that is higher than the standard 36%. (Some lenders allow a DTI as high as 50%.)

• Location Where you buy affects how much house you can afford. This is one area that you can’t control, unless you move. If you are considering this option, take a look at the best affordable places to live in the U.S.

Recommended: The Cost of Living by State

How to Afford More House With Down Payment Assistance

If you want to be able to afford a more costly house, you may want to look into a down payment assistance (DPA) program. These programs can help you with funding for a down payment on a mortgage. You can look for DPA programs with your state or local housing authority. Preference may be given to first-time homebuyers or lower-income families, but there are programs available for a wide variety of situations and incomes.

How to Calculate How Much House You Can Afford

If you want to know how much mortgage you’ll likely be able to qualify for, you’ll want to take a look at these guidelines.

The 28/36 Rule: Lenders look for home payments to be at or below 28% of your income. Total debt payments should be less than 36% of your income. These are the front-end and back-end ratios you may hear your mortgage lender talking about.

Front-end ratio (28%): At 28% or your income, a monthly housing payment from a monthly income of $4,166 should be no more than $1,166.

Back-end ratio (36%): To calculate the back-end, or debt-to-income ratio, add your debt together and divide it by your income. This includes the new mortgage payment. With monthly income at $4,166, your debts should be no more than $1,500 ($4,166*.36).

The 35/45 Rule: The 35/45 rule is a higher debt level your lender can elect to follow. It’s riskier for them and may come at a higher interest rate for you. This rule allows you housing payment to be 35% of your monthly income and 45% of your total debt-to-income ratio. With a monthly income of $4,166, the housing allowance (35% of your income) increases to $1,458 and the total monthly debt (45% of your income) increases to $1,875.

An easier way to calculate how much home you can afford is with a home affordability calculator.

Home Affordability Examples

Making $50,000 a year gives you around $4,166 to work with each month. Using the 36% debt-to-income ratio, you can have a maximum debt payments of $1,500 ($4,166 * .36). In the examples below, taxes ($2,500), insurance ($1,000), and interest rate (6%) remain the same for a 30-year loan term.

Example #1: High-debt Borrower
Monthly credit card debt: $200
Monthly car payment: $400
Student loan payment: $200
Total debt = $800

Down payment = $20,000

Maximum DTI ratio = $4,166 * .36 = $1,500
Maximum mortgage payment = $700 ($1,500 – $800)

Home budget = $88,107

Example #2: The Super Saver
Monthly credit card debt: $0
Monthly car payment: $200
Student loan payment: $0
Total debt = $200

Down payment: $20,000

Maximum DTI ratio = $4,166 * .36 = $1,500
Maximum mortgage payment = $1,300 ($1,500 – $200)

Home budget = $171,925

Recommended: Tips to Qualify for a Mortgage

How Your Monthly Payment Affects Your Price Range

Your monthly payment directly affects the mortgage you’re able to qualify for. The more monthly debts you have, the lower the mortgage you’ll be able to qualify for. That’s why it’s so important to take care of debts as soon as you can.

That’s also why it’s important to get the best interest rate you can. Shopping around for lenders and improving your credit score can both save you money and improve home affordability. A home loan help center is a good place to start the process of looking for a mortgage.

Types of Home Loans Available to $50K Households

How much home you can afford also comes down to the different types of mortgage loans. Here are some common options:

• FHA loans If your credit isn’t ideal, you may be able to secure a Federal Housing Administration mortgage. Though FHA loans are costlier, you can still be considered with a credit score as low as 500. FHA mortgage insurance, however, makes them more expensive than their alternatives.

• USDA loans If you’re in a rural area that is covered by United States Department of Agriculture loans, you’ll want to consider whether the low interest, no-down-loan will make sense for you.

• Conventional loans Conventional financing offers the most competitive interest rates and terms for mortgage applicants who qualify.

• VA loans If you have the option of financing with a U.S. Department of Veterans Affairs loan, with few exceptions, you’ll generally want to take it. It offers some of the most competitive rates, even for zero-down-payment loans. It also comes with no minimum credit score requirement, though the final say on whether or not you can get a loan with a low credit score is up to the individual lender.

💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.1

The Takeaway

Your $50,000 salary is the first step in qualifying for the home mortgage loan you need to buy a house. To position yourself for the best possible borrowing scenario, consider paying down debt, working on your credit score, applying for down payment assistance, adding a co-borrower, or some combination of the above. With these moves, home affordability improves a great deal.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is $50K a good salary for a single person?

A $50,000 salary is good in terms of covering the cost of living in many parts of the U.S. and with proper budgeting it can even put you on the path to affording to purchase your own home.

What is a comfortable income for a single person?

A comfortable income for a single person could be at or above the median income for a single person, which is $56,929 according to data from the U.S. Census.

What is a liveable wage in 2024?

Your living wage depends on your local region, number of working household members, and children. For a single person living in Arizona, the average living wage is about $37,000. If the same person moved to California, an average of more than $44,000 would be needed, according to the Massachusetts Institute of Technology’s Living Wage Calculator.

What salary is considered rich for a single person?

A salary of $234,342 would put you in the top 5% of wage earners in the United States.

Photo credit: iStock/Tirachard

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
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.

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

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I Make $50,000 a Year, How Much House Can I Afford?

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Understanding Debt-to-income Ratio

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How to Calculate How Much House You Can Afford

Home Affordability Examples

How Your Monthly Payment Affects Your Price Range

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The Takeaway

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Is $50K a good salary for a single person?

What is a comfortable income for a single person?

What is a liveable wage in 2024?

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