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Many people consider relocating when they retire to reduce their cost of living and make their savings last longer. When weighing the pros and cons of moving to another state, it’s important to consider the total tax burden there, including state and local taxes on retirement income, property tax, even sales tax. Some areas with a lower tax burden have a higher overall cost of living, which can cancel out any savings.

Below we look at the best states to retire in for taxes and how to tell if moving will be worth it.

Most Tax-Friendly States for Retirement

A number of states exempt Social Security income from state taxes. A smaller number offer a tax break on other retirement income, such as IRAs and 401(k) plans, private pensions, interest, dividends, and capital gains.

These are the 10 tax-friendly states for retirees, according to Kiplinger:

1.   Mississippi

2.   Tennessee

3.   Wyoming

4.   Nevada

5.   Florida

6.   South Dakota

7.   Iowa

8.   Pennsylvania

9.   Alaska

10.   Texas

But before you complete that change of address card, you’ll want to look at the bigger picture.

Factors to Consider When Choosing the Best State to Retire In

When choosing where to retire, it’s wise to first consider issues like safety, access to healthcare, distance to friends and family, or living near other people of retirement age.

Make a list of features that are important to you in a retirement locale, and consider whether any of them could indirectly impact your cost of living, such as being close to friends and family.

Then look at the total cost of living in an area: housing, food, transportation, cultural activities, and other expenses. These retirement expenses generally have a bigger impact on one’s lifestyle than taxes.

Finally, to determine whether a state is tax-friendly for retirees, look at the following:

Does the State Tax Social Security?

Generally, Social Security income is subject to federal tax. But some states also tax Social Security above a certain income threshold, while other states offer tax exemptions for individuals in lower tax brackets.

For the 2025 tax year, the states that tax some or all Social Security benefits are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.

Does the State Tax Pensions?

Many states tax income from pensions, but 15 states do not. These states are: Alabama, Alaska, Florida, Hawaii, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.

And these 13 states do not tax income from 401(k) plans: Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Alaska, Florida, Nevada, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax.

Other Taxes That Affect Retirees

When choosing the best state for you to retire in, it’s a good idea to look into sales tax and property taxes too. States that don’t charge sales tax are Alaska, Delaware, Montana, New Hampshire, and Oregon. On the other hand, New Hampshire has very high property taxes, reducing the benefit of no sales tax.

Recommended: When to Start Saving for Retirement

States to Avoid When Retiring

Choosing the best state to retire in sometimes means making compromises. If safety and healthcare access are top priorities, for instance, you may not get your ideal weather. But for many retirees, a high cost of living is a deal-breaker.

Here are the 10 states with the highest annual cost of living, according to a 2025 analysis conducted by GOBankingRates:

1.   Hawaii: $144,436

2.   Massachusetts: $112,752

3.   California: $111,901

4.   Alaska: $95,673

5.   New York: $95,286

6.   Maryland: $89,104

7.   New Jersey: $88,563

8.   Vermont: $88,408

9.   Washington: $88,254

10.   New Hampshire: $87,017

Recommended: Avoid These 12 Retirement Mistakes

The Best States to Retire in 2026

As noted above, the best state to retire in will depend on an individual or couple’s budget, lifestyle, and values. But recent trends may help point you in the right direction.

These are the top 10 states that retirees are moving to, according to United Van Lines’ 2024 National Movers Study:

1.   West Virginia

2.   Delaware

3.   South Carolina

4.   Washington, D.C.

5.   North Carolina

6.   Alabama

7.   Rhode Island

8.   Oregon

9.   Arkansas

10.   Arizona

If cost of living is your sole concern, the following are the 10 least expensive states, according to Bankrate:

1.   West Virginia

2.   Pennsylvania

3.   Delaware

4.   Wyoming

5.   Ohio

6.   Wisconsin

7.   Nevada

8.   Indiana

9.   Idaho

10.   Georgia

States with the Lowest Tax Burden

An area’s total tax burden is the sum of all property taxes, sales taxes, excise taxes (which affect the price of goods), and individual income taxes. Below are the states with the lowest total tax burden for retirees. (On a budget? Tools like an online budget planner can help you monitor spending and make progress toward your financial goals.)

States With the Most Millionaires

One way to measure the overall desirability of an area is the number of millionaires who live there. After all, millionaires can afford to live in states that have high-quality healthcare, nice weather, and diverse cultural offerings. These are not the cheapest states in terms of cost of living or taxes, but their popularity may help non-millionaires reevaluate their must-haves vs. nice-to-haves.

Does It Make Financial Sense to Relocate in Retirement?

For workers who already live in a state with moderate taxes, are near family, and have a lifestyle they enjoy and can afford, there may not be any compelling reason to move. But for those looking to make a change or lower their retirement expenses, it may make financial sense to relocate.

Just remember that housing, food, transportation, and other expenses usually have a bigger impact on one’s retirement lifestyle than taxes.

Pros and Cons of Relocating for Tax Benefits

Lower taxes alone may not be enough to motivate someone to pick up and move house. Other factors should also support the decision.

Pros of Relocating for Tax Benefits

•  Potentially lower cost of living

•  Discovering a community of like-minded retirees

•  Possibly ticking off other boxes on your list

Cons of Relocating for Tax Benefits

•  Other living costs may cancel out the tax benefits

•  Moving costs are high, and the stress can be tough

•  Need to find another home

The Takeaway

The best state to retire in for tax purposes depends on an individual’s budget, lifestyle, and values. Some states with lower taxes for retirees can have higher housing and transportation costs, canceling out any tax benefit. A financial advisor can help you decide if saving on taxes is worth the expense and trouble of relocating.

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

What are the 3 states that don’t tax retirement income?

Nine states don’t tax retirement plan income because they have no state income taxes at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Those states, along with Illinois, Iowa, Mississippi, and Pennsylvania, don’t tax distributions from 401(k) plans, IRAs, or pensions. Alabama and Hawaii don’t tax pensions, but do tax distributions from 401(k) plans and IRAs.

Which state is the best state to live in for tax purposes?

Alaska has the lowest overall tax rates.

Which states do not tax your 401k when you retire?

Alaska, Florida, Illinois, Iowa, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax 401(k) plans when you retire.

Photo credit: iStock/Jeremy Poland

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.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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-Q425-061

Dividends are payments that investors can receive from stocks, exchange-traded funds (ETFs), and mutual funds. These earnings count as income and may be taxable, depending on your income and filing status.

We’ll investigate dividend tax rates and the difference between ordinary and qualified dividends.

Defining Ordinary and Qualified Dividends

The IRS divides stock dividends into two categories: ordinary and qualified. The federal tax rate is different for each category. A qualified dividend is one that qualifies for a lower tax rate based on the concept of capital gains. An ordinary dividend, meanwhile, is one that doesn’t qualify for a lower rate.

When a company declares a dividend payment, your dividend is ordinary if you’ve held their stock for less than 61 days over a 121-day period. If, however, you make the stock purchase on or before the date that it’s declared, and then hold it for at least 61 days, it is considered qualified.

The timing also matters. Let’s say that you own stock in Company A, and they announce that a dividend will be paid on December 1. The day before, November 30, is called the ex-dividend date, or ex-date. If you bought your shares of stock 60 days or fewer before November 30, then your dividend is ordinary. But if you bought the stock more than 60 days before November 30, your dividend is qualified.

“Not all investment types generate the same type of taxation,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. “When deploying a tax-efficient investment strategy, it’s crucial to know how an investment is going to be taxed.”

Qualified Dividend Documentation

When it’s tax time, you’ll receive a 1099-DIV. This is the form that financial institutions use to report dividends to the IRS and relevant taxpayers. Box 1a shows the total ordinary dividends you received during this tax period. Box 1b shows your qualified dividends. The form will also show any federal or state income tax that was withheld. You can use this information plus the federal dividend tax rate to determine what you owe.

Financial institutions must issue a 1099-DIV to shareholders who receive more than $10 in dividends and other distributions for the year.

Tax Information for Ordinary and Qualified Dividends

The ordinary dividend tax rate is the same as an individual’s income tax bracket for the year.

The qualified dividend tax rate for 2025 is calculated using capital gains tax rates. This may be 0% depending on your taxable income and filing status. Here are the latest figures from the IRS for the 2025 tax year:

•   Less than $48,350 for single or married filing separately.

•   Less than $64,750 for head of household.

•   Less than $96,701 for married filing jointly or qualifying widow(er).

The qualified dividend tax rate rises to 15% for the next tax brackets:

•   $48,351 through $533,400 for single filers.

•   $48,351 through $300,000 for married filing separately.

•   $64,751 through $566,700 for head of household.

•   $96,701 through $600,050 for married filing jointly or qualifying widow(er).

Once your household income exceeds the 15% bracket, you’ll pay a 20% tax rate on any qualified dividends. There may also be a 3.8% net investment income tax. Consult your accountant or financial advisor regarding your situation.

Recommended: What Are the Tax Benefits of Marriage?

Dividend Tax Rate 2024

The thresholds can change by year. For example, the dividend tax rate for 2024 was as follows

•   0% dividend tax rate:

◦   Single filers, up to $47,025

◦   Married filing jointly, up to $94,050

•   15% dividend tax rate:

◦   Single filers, $47,026 through $518,900

◦   Married filing jointly, $94,051 through $583,750

•   20% dividend tax rate:

◦   Single filers, $518,900+

◦   Married filing jointly, $583,750+

Dividend Tax Rate 2026

Looking ahead, we’ve got some insights into the 2026 tax year, which you’ll file in 2027. A married couple filing jointly won’t pay taxes on qualified dividends until their income is above $98,900. Above that amount, the tax rate will be 15%. The tax raise will go up to 20% when a couple earns more than $613,700.

Individual filers won’t pay 15% until their income is greater than $49,450. They’ll pay 20% when income exceeds $545,500.

Whether you’re paying a tax bill or getting a refund this year, it helps to have your financial house in order. With a money tracker app, you can set budgets, manage bill paying, and monitor your credit.

Recommended: Guide to Filing Your Taxes for the First Time

Why Are the Two Types of Dividends Taxed Differently?

Qualified dividends are more favorably taxed as an incentive to investors to hold onto stocks for a longer period of time. This is based on the concept of capital gains.

Additional Qualified Dividend Requirements

Besides the holding period described above, the dividend must have been paid by a corporation in the U.S. or a qualifying foreign one. Plus, the payment can’t be a dividend in name only. For example, payments given by tax-exempt agencies don’t qualify.

If a payment doesn’t satisfy all three requirements, then it can’t be a qualified dividend. It may be an ordinary dividend or another type of income.

The Takeaway

There are two broad types of dividends: ordinary and qualified. Qualified dividends are taxed at a lower rate than ordinary dividends. For a dividend to be qualified, an investor must hold the stock for at least 61 days during a particular time frame. A 1099-DIV will break out dividends into qualified and ordinary for the taxpayer’s information. There are three tax rates for qualified dividends. The lowest tax brackets pay nothing. The next brackets pay 15%, and the highest brackets pay 20%. Ordinary dividends are taxed as regular income.

To seamlessly track your finances, consider a spending app, which allows you to handle tasks like budgeting, paying bills, and more.

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

What is the tax rate on dividends in 2025 and 2026?

The ordinary dividend tax rate is based on your tax bracket. With a qualified dividend tax rate, it depends on your filing status and your income. The lowest tax brackets pay nothing, the middle brackets pay 15%, and the highest brackets pay 20%.

How do I calculate my qualified dividends?

Investors receive form 1099-DIV from their financial institution, which provides the amount of ordinary and qualified dividend income received during the year. The IRS also provides a worksheet.

Why are my qualified dividends being taxed?

Dividends are a type of income, and investors who receive them typically pay taxes on them. It’s true that individuals who make less than $48,350 in 2025 pay no tax on qualified dividends. However, taxpayers in higher brackets must pay 15% or 20%.

Photo credit: iStock/AsiaVision

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.

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.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SORL-Q425-065

Applying for no-interest student loans can significantly reduce the cost of earning a degree, making higher education more accessible without the long-term burden of accumulating interest. These unique funding options — typically offered by nonprofit organizations, state programs, and select institutions — allow eligible students to borrow responsibly while keeping repayment affordable and predictable.

While these loans are relatively rare, and amounts tend to lower than other types of student loans, no-interest student loans do exist and may be worth looking into for the potential savings. Read on to learn how interest-free student loans work and where to find them.

What Is a No-Interest Student Loan?

Interest-free student loans are loans that do not accrue interest. Unlike grants and scholarships, the loan amount must be repaid, but because there are no interest charges, the amount repaid by the borrower remains the same as the original amount borrowed. Traditional student loans, whether federal or private, all come with interest rates that are either fixed or variable.

The interest rates on federal student loans are fixed and are set annually by Congress. For the 2025-2026 school year, the interest rate on Direct Subsidized or Unsubsidized Loans for undergraduates is 6.39%, the rate on Direct Unsubsidized Loans for graduate and professional students is 7.94%, and the rate on Direct PLUS Loans for graduate students, professional students, and parents is 8.94%.

While federal student loan rates are the same for every borrower, private student loan rates range based on the lender, the type of interest rate (fixed or variable), and the borrower’s credit score. Interest on private student loans can run anywhere from 3.19% to 17.95%, according to Education Data Initiative.

Whatever the interest rate on a student loan, you will end up paying more than you borrow. No-interest student loans can be an attractive alternative. Here are some places to look for interest-free loans:

•   Schools: Some colleges and universities offer no-interest loans for current students to cover emergency expenses.

•   States: You may be able to find an interest-free student loan through your state’s education agency. For example, Massachusetts offers students who demonstrate financial need and attend a qualifying school in Massachusetts a no-interest loan for up to $4,000 each academic year.

•   Nonprofit organizations: Some foundations and nonprofits offer no-interest student loans. These loans can be set up in different ways. In some cases, you can get a small loan amount; in others, the organization will pay your remaining cost of attendance. Some are awarded based on merit, while others are awarded based on financial need.

Applying for Interest-Free Student Loans

The application process for most interest-free loans resembles the application process for grants or scholarships more closely than a traditional loan application.

It’s a good idea to fill out the Free Application for Federal Student Aid (FAFSA®), even if you want to focus on loans without interest. The FAFSA determines your eligibility for federal aid, including grants, scholarships, and federal student loans. Some interest-free loans use the FAFSA to determine financial need.

And while federal loans do accrue interest, they typically have lower rates than private student loans. Federal student loans also come with benefits, such as income-based repayment and forgiveness programs, that private student loans and no-interest loans may not offer.

Interest-free student loans are often local and state-based, rather than national. They may require proof of residency in a certain state. Some may also have an essay requirement, academic requirements, and might even require an interview.

The process is usually more intense than regular student loans because funds are limited. Some state agencies and philanthropic organizations use the term “scholarship loan” to refer to interest-free loans. Scholarship loans may also be repaid through public service.

Keep in mind though that those organizations are still separate from the government, and do not offer the same repayment plans as the loans offered through the U.S. Department of Education.

Recommended: Student Loan Interest Deduction

Subsidized Loans: No Interest Until After Graduation

Interest-free loans are relatively rare, so it’s possible that students will still need to rely on federal student aid. There are two types of federal Direct Loans available to undergraduate students: subsidized and unsubsidized.

Subsidized loans are available to undergraduates who demonstrate financial need. The U.S. Department of Education pays the interest accruing on the loans while you’re in school, during your six-month grace period, and when your loans are in deferment.

On the other hand, unsubsidized loans are available to undergraduate and graduate students, and they don’t require that students demonstrate need in order to qualify. Interest accrues while you’re in school and during grace periods, deferment, or forbearance — and you’re responsible for paying the interest.

Federal student loans also offer a few different payment plans, including income-driven repayment plans, so that borrowers can find the option that works best for them. There are also borrower protections like deferment or forbearance that can act as a safety net for those who find themselves facing financial difficulties down the road.

The Takeaway

No-interest student loans, sometimes called scholarship loans or interest-free loans, are loans that do not accrue interest at all. While not common, there are some nonprofits, state agencies, schools, corporations, and religious organizations that offer interest-free loans to students.

In case you’re not able to find or qualify for a no-interest loan, it’s a good idea to fill out the FAFSA to access other forms of financial aid, including grants, scholarships, and federal student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What is a zero-interest student loan?

A zero-interest student loan is a loan where you borrow money for your education but aren’t charged any interest — so you only repay the principal amount you borrowed.

Who can qualify for zero-interest student loans?

Typically, these loans go to low-income students, residents of certain states, or borrowers who meet specific financial-need criteria or eligibility requirements set by nonprofit or state programs.

Where can students find zero-interest loan programs?

Many are offered through state-funded programs — for example, state-administered no-interest loan initiatives — or through nonprofit organizations dedicated to making higher education more affordable.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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SOISL-Q425-052

The amount you’ll end up paying in income taxes doesn’t have to remain a mystery until you complete your federal return.

With a fundamental understanding of how taxes work and some basic information about your household, you may be able to estimate what your tax liability or refund will be. And with that knowledge, you can better plan your finances for 2026 and 2027.

Read on for a look at what your 2026 taxes might look like, and how your income, filing status, and other factors can impact your bottom line.

What Is an Income Tax Calculator?

A federal tax calculator for 2026 can help you estimate the federal tax you may owe on the income you earn this year. It isn’t meant to replace the tax service or software you usually use to complete your return. But it could help you plan ahead and make informed choices as you prepare for a potential tax bill, or refund, when you file in 2027.

Historical Tax Rates, Compared

Most people think taxes are too high now, but they could be — and have been — much higher. In 2026, the top tax rate is 37% for individuals whose taxable income is over $640,600 ($768,700 for married couples filing jointly). But in 1944, the highest rate — for anyone who made over $200,000 — was 94%. It wasn’t until 1987 that the top rate dropped below 40%.

The current rates, dictated by the Tax Cuts and Jobs Act of 2017, were made permanent in 2025. The tax code, officially called the Internal Revenue Code, is interpreted and implemented by the U.S. Treasury Department and the Internal Revenue Service (IRS), but tax laws are written by Congress.

How Is the Tax Rate Decided?

There are seven federal income tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The more taxable income you have, the more you can expect to pay.

That’s because in the U.S., income tax rates are graduated, which means each of these progressively higher tax rates is assigned to a specific income range, rather than a household’s entire taxable income. Each time your taxable income reaches a new level, you’ll pay a higher rate, but only on the portion that’s in that range.

The ranges, or brackets, differ depending on a taxpayer’s filing status (single, married filing jointly, married filing separately, or head of household), as seen in the table below.

Income Tax Rates and Brackets for 2026 Tax Year

If you’re a single filer with $60,000 in taxable income in 2026, for example, you won’t pay your highest tax rate (22%) on that entire amount. You’ll pay 10% on up to $12,400 of your taxable income; 12% on the amount between $12,401 to $50,400 ($38,000); and 22% on the amount between $50,401 and your taxable income of $60,000 ($9,600).

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

How to Calculate Federal Taxes in 2026-2027

Determining your income tax each year is, of course, much more complicated than simply applying the various tax rates to the money you’ve earned.

Depending on the complexity of your return, it may take several calculations to come up with the final amount you owe — or what you’ve overpaid and can expect to be refunded. Whether you’re filing taxes for the first time or you’ve been paying income taxes for years, here’s a quick summary of the basic steps that may go into figuring out your federal taxes in 2026-27:

1. Calculate Your Gross Income

This is the total of all the money you made for the year. Think income from your job, including tips; business income; dividend and interest income; etc.

2. Determine Your Adjusted Gross Income (AGI)

Once you know your gross income, you can subtract certain adjustments, such as alimony payments, student loan interest, health insurance premiums (if you’re self-employed), some retirement contributions, and more to determine your AGI.

3. Subtract Applicable Deductions

A tax deduction is an amount you can subtract from your AGI to further reduce your income and lower your tax. You can either choose to list, or itemize, all the tax deductions that apply to you, or you can take the standard deduction. Most taxpayers go with the standard deduction, which for tax year 2026 is:

•   $16,100 for single filers and married individuals filing separately;

•   $24,150 for heads of households; and

•   $32,200 for married couples who file jointly.

However, you may want to run the numbers to see if it makes sense to go with itemized deductions. Some common deductions that must be itemized but could help further reduce your tax burden include mortgage interest, charitable contributions, and medical and dental expenses. But there are many more options to choose from.

4. Apply the Appropriate Tax Rates from the Table

Once you’ve calculated your taxable income, you can apply the 2026 tax rates. Remember, your entire taxable income won’t be taxed at the same rate; the tax rate goes up at various levels, or brackets.

5. Use Any Applicable Tax Credits

Unlike tax deductions, which reduce how much of your income is subject to taxes, tax credits directly reduce dollar-for-dollar the amount of tax you owe. When you’re preparing for tax season, your tax professional or tax software can help you find your applicable tax credits.

Some common credits include the Child Tax Credit, education credits, the Saver’s Credit for retirement savings contributions, and the premium tax credit that helps eligible individuals and families cover the premiums for their health insurance purchased through the federal marketplace.

6. Don’t Forget What You’ve Already Paid

Keep in mind that you’ve likely had money withheld from your paychecks throughout the year to put toward your federal income tax. Or, if you’re self-employed, you may have been making quarterly estimated tax payments. Once you know what you owe (after applying tax credits), you can subtract what you’ve already paid to get a final tax amount. If the number is positive, you can expect to owe the IRS. If it’s negative, and your calculations are correct, you can expect to get a refund.

How Much Does the Average American Pay in Taxes?

A Tax Foundation analysis of the most recent available data from the IRS (2022) found that the average tax rate for all U.S. taxpayers was 14.5%, and the average amount of income taxes paid was $13,890. The highest-earning Americans paid an effective average tax rate of 26%, while the bottom 50% paid 3.74% of their income to the IRS.

Of course, there are other types of taxes you may also have to pay, including sales tax, property tax, state and local taxes, estate tax, and more. And this means taxes can eat up a hefty portion of your hard-earned money.

Need help managing your finances? A money tracker can help you keep tabs on where your money is coming and going.

Example Tax Scenarios

Your federal income tax bill each year will depend on several factors, including your gross income, your filing status, the deductions and credits you can use to lower the amount you owe, and what you’ve already paid during the year. Here are two basic examples of how taxes might be calculated in 2026 for a single filer with a salary of $80,000 and a married couple with a gross household income of $120,000.

Joe, the Single Filer

Joe has a salary of $80,000 in 2026, so his gross income is $80,000.

He decides to go with the standard deduction in 2026, which is $16,100 for a single filer. This brings his taxable income to $63,900.

Joe then uses the applicable tax brackets.

•   The first layer of Joe’s taxable income, up to $12,400, is taxed at 10%, which comes to $1,240.

•   The next layer of Joe’s taxable income, from $12,401 to $50,400, is taxed at 12%, which comes to $4,560.

•   The next layer of Joe’s taxable income, from $50,401 to $63,900 is taxed at 22%, which comes to $2,970.

Joe would have a total federal income tax of $8,770.

Joe finds a couple of credits he can apply that take another $1,000 off of his tax bill. And he figures out that he will have paid $6,000 in federal income tax withholding for the year.

Joe estimates that he’ll owe $1,770 when he files his taxes 2027, and he’s building that into his budget so that he’s prepared when it’s time to pay. (Tip: An online budget planner can take the guesswork out of budgeting.)

Mary and Sam, Married Filing Jointly

Mary and Sam’s combined salaries in 2026 equal $120,000, so their gross income is $120,000.

They don’t have any kids yet, and they haven’t yet purchased a house. So, they decide to use the standard deduction in 2026, which is $32,200. This brings their taxable income to $87,800.

According to the applicable tax brackets:

•   The first layer of their taxable income, up to $24,800, is taxed at 10%, which comes to $2,480.

•   The next layer of their taxable income, from $24,801 to $87,800, is taxed at 12%, which comes to $7,560.

Mary and Sam would have a total federal income tax of $10,040.

Mary and Sam think they’re eligible for $2,000 in tax credits that they can take off their tax bill. And between them they will have paid $10,000 in federal withholding in 2026.

Mary and Sam estimate that they’ll get a refund of $1,960 when they file their 2026 tax return, and they plan to put that refund toward a down payment on a house in 2027.

Recommended: What Tax Bracket Am I In?

How Federal Taxes Impact You

The U.S. tax system is the federal government’s single largest source of revenue, and compliance with federal tax laws is mandatory. The money taxes bring in is meant to finance various public services, including veterans’ benefits, Social Security, health programs, national defense, education, transportation, and more.

That said, there’s a popular quote from an old Morgan Stanley ad that says: “You must pay taxes. But there’s no law that says you gotta leave a tip.”

For high earners, especially, taxes may be one of the most significant expenses they encounter each year and over their lifetime. But all taxpayers can benefit from understanding how taxes work and from the type of proactive planning that can help them legally hold on to more of their money. Staying on top of any changes can also help you avoid common tax filing mistakes, as many deductions, credits, and income thresholds are adjusted annually for inflation.

The Takeaway

If you have an idea of how much you’ll bring in from various income streams this year, and you’re aware of some of the basic deductions and credits that might reduce the amount you’ll owe, you can use the 2026 brackets to calculate a pretty good tax estimate.

Whether you expect to pay when you file your return or you think you’ll get a refund, calculating your tax bill in advance can help you budget appropriately. And you may even find some additional savings in 2026 and beyond.

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

What will the tax brackets be for 2026?

The IRS has already published the 2026 tax rate table for single filers, married couples filing jointly, married couples filing separately, and heads of household. Each bracket has been adjusted slightly to reflect inflation.

How can you calculate estimated tax payments for 2026?

To calculate your estimated tax, you must figure your expected adjusted gross income, taxable income, deductions, and credits for the year.

Will tax returns be bigger in 2026?

Some taxpayers may qualify for a larger refund on their 2026 return (due in April 2027), thanks to inflation-related adjustments to the tax brackets and standard deduction amounts. Changes to the tax laws could also impact 2027 returns (due in April 2028), but it’s harder to predict what tax bills will look like at that time.

How much is the standard deduction for 2026?

The standard deduction amount depends on your filing status. In 2026, the standard deduction will be $16,100 for single filers and married individuals filing separately; $24,150 for heads of households; and $32,200 for married couples who file jointly.

What is the tax offset for 2026?

A taxpayer’s offset amount can vary depending on the type of debt that is owed.

What is the filing deadline for 2026 federal tax returns?

Federal income tax returns for 2026 are due on Thursday, April 15, 2027.

Photo credit: iStock/Anastasiia Makarevich

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.

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.

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

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

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

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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A tax refund can come as welcome news when it’s time to file your return. But how much can you expect to get back each year? A tax refund calculator can help you figure that out.

Learn how a tax refund calculator works, plus what details impact whether or not you’re overpaying the federal government.

What Is a Tax Refund Calculator?

A federal tax refund calculator looks at your gross income for the year — that’s the amount you earned before any tax withholdings from your paycheck. Then it factors in deductions, including standard or itemized deductions, eligible retirement account contributions, HSA contributions, and any applicable tax credits.

Next, it applies the appropriate tax bracket to your final taxable income to determine how much you owe for the year. Finally, it will subtract any tax payments you made throughout the year, such as those through paychecks or estimated tax payments, from your owed amount. If you overpaid, you’ll be repaid the difference in the form of a tax refund.

How to Track Your Tax Refund

As you prepare for tax season, it helps to understand how long it will take to receive your refund after you file taxes. That way you can account for the funds in your online budget planner for the right time frame, rather than incorrectly assuming when you’ll have that extra cash in the bank.

You can check your federal refund through the IRS website. The information is available more quickly when you e-file your tax return. You can start tracking within 24 hours for a current tax year return or up to four days after e-filing a previous year’s return. If you file a paper return, it can take as long as four weeks to see your refund status.

When you visit the IRS website, be prepared to provide a few basic pieces of personal information: your Social Security number or individual taxpayer ID number; filing status; and the exact refund amount from your return. One of the most common tax filing mistakes is to input the wrong Social Security number, so check your return and refund request carefully before submitting.

How to Calculate Federal Tax Refunds in 2026-2027

Your actual refund amount may vary every year based on changes in your income, eligible deductions, and IRS changes to income tax rates and brackets. So only use a 2025 tax refund calculator for that year’s return, then look for a tax refund calculator for 2026 for this year.

The actual calculation depends on the complexity of your income. For instance, it’s much simpler if you only have W2 income that you’ve already paid taxes on. It can get a little more complicated if you also have things like taxable investment income and self-employment income.

Start with the IRS tax refund calculator to estimate the correct federal income tax withholding. Then you can determine whether or not you’ll get a refund based on how much you’ve already paid throughout the year.

Recommended: 13 Steps to Prepare for Tax Season

How Is the Tax Refund Determined?

The size of your tax refund is determined by the amount of taxes already withheld and the actual tax you owe. If you’ve overpaid throughout the year, the government issues a refund. This applies to several types of taxes, including income taxes and capital gains tax.

On the IRS tax refund calculator for 2025-2026, you’ll need to provide information such as:

•   Tax filing status

•   Eligible tax deductions or credits

•   Sources of income

•   Salary or wages

•   Tax withholdings

•   Estimated tax payments

Once you enter in all of the information, you’ll see your expected tax withholding, how much you will likely owe in taxes, and your projected refund.

Average American Tax Refund

Here is the average federal tax refund by year, using IRS data from late April each year.

More than 102 million tax refunds were processed by October 2025, for a grand total of $311.6 billion. The vast majority is refunded via direct deposit.

The average tax refund varies by location. Here’s a comparison of what the average taxpayer in each state received as a refund in 2022, the latest data available.

Example Tax Refund Scenarios

There are several scenarios in which your withholding total is more than you actually end up owing on your tax return. This is usually due to tax deductions and credits. Here are some examples:

•   Tax credits: There are several tax credits that can lower the amount you owe, including the child tax credit and the earned income tax credit. For instance, in 2026, the child tax credit allows eligible taxpayers to deduct up to $2,200 per child who is 16 years or younger. Up to $1,700 can be taken as a refund. So for a family with two kids, that could add as much as $3,400 to your refund (if not already accounted for in your withholding).

•   Tax deductions: Nearly 90% of taxpayers take the standard deduction instead of itemizing eligible deductions. In 2026, the standard deduction is $16,100 for single taxpayers, and $32,200 for those who are married and filing jointly. That can greatly reduce the amount of taxable income you have — and could even drop you into a lower tax bracket.

Another example of a refund is paying taxes when you don’t actually earn enough to owe. There’s a minimum for how much you have to make to file taxes for each filing status.

Recommended: 10 Personal Finance Basics

How Tax Refunds Impact You

It’s usually good news to find out you’re getting a tax refund instead of owing more on your federal return, especially if you’re filing taxes for the first time or recently increased your income. However, it’s also important to consider that when you get a refund every year, you’re essentially overpaying your taxes. Instead of getting a large lump sum after filing, you could adjust your withholding to enjoy a larger paycheck each month.

When you do get a tax refund, resist the urge to immediately spend it and instead make a strategic plan for the extra funds. One potential money move to make is to pay off high-interest debt like credit card balances. A credit monitoring service can show you your current credit score and what actions can improve it. If you have a lot of outstanding revolving credit, using your tax refund to pay off a chunk could boost your score.

The Takeaway

A tax refund calculator can be a helpful tool in figuring out if you can expect any money back after filing your taxes. But keep in mind that you’ll need a smart financial plan anytime you get a windfall amount of cash.

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

When can I expect my tax refund 2026 IRS?

Most federal tax refunds are sent within 21 calendar days of filing your return. The fastest way to get your refund is to e-file and choose direct deposit.

Will tax refunds be bigger in 2026?

You could get a bigger tax refund in 2026 if your income doesn’t increase. That’s because deductions and tax bracket incomes increase each year in order to account for inflation.

Are we getting a Child Tax Credit in 2026?

Yes, the Child Tax Credit is still in place for 2026.

Why is my refund so low in 2026?

There are a few different reasons why your refund could be low in 2026. You may not have withheld enough, or some of your deduction and credit eligibility may have changed. If you earned more for the year, you may owe more taxes on that income, resulting in a lower refund.

How long is it taking to get tax refunds in 2026 with a child?

The typical refund timeline for the IRS is 21 days or less, regardless of whether you have a child dependent.

What is the tax offset for 2026?

If you owe any money to the federal government but have a tax refund, they may withhold that money as an offset to put toward the existing debt. This can include things like past-due child support, federal agency nontax debt, and even state income tax debt.

Photo credit: iStock/urbazon

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.

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.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SORL-Q425-054