SoFi

Spending is on the rise — and so is consumer debt. Americans carry, on average, three credit cards and have $6,501 in credit card debt. Overall, U.S. credit card debt is $129 billion higher than it was one year ago.

That amount of debt can be a challenge to pay down along with regular monthly household expenses. Some people may choose to refinance their high-interest credit card debt in an effort to secure a lower interest rate or a lower monthly payment. Refinancing credit card debt can be one way to make progress toward eliminating it completely.

What Is Credit Card Debt?

If you’re putting more purchases on credit cards than you can pay off in a monthly billing cycle, you have credit card debt.

Interest will accrue on the balance that carries over to the next billing cycle. If you don’t pay at least the minimum amount due, you’ll likely also be charged a late fee. Since credit cards use compound interest, you’ll be charged interest on accrued interest and fees. That can add up quickly and make it more difficult to get out of debt.

Carrying a balance on more than one credit card can make the debt even more difficult to manage. If your goal is to be free of credit card debt, refinancing can be one way to achieve that.

💡 Quick Tip: Credit card interest rates average 20%-25%, versus 12% for a personal loan. And with loan repayment terms of 2 to 7 years, you’ll pay down your debt faster. With a SoFi personal loan for credit card debt, who needs credit card rate caps?

What Are Some Benefits of Refinancing Credit Card Debt?

Credit cards are revolving debt and typically have variable annual percentage rates (APRs).

Refinancing credit card debt with an installment loan that has a fixed interest rate, such as a personal loan, will mean you’ll have a fixed end date to your debt and will have the same APR for the entire term of the loan.

If you’re refinancing multiple credit card balances into one new loan or line of credit, you’ll have fewer bills to pay each month. That could potentially make monthly budgeting a simpler task.

Recommended: What Is a Good APR for a Credit Card?

How Might Debt Refinancing Affect Your Credit Score?

Something to keep in mind when your goal is to pay down debt is that it’s a long game.

That being said, in the short term your credit score can decrease slightly when you apply for new credit and the lender looks at your credit report. During the formal application process, the lender will perform a hard inquiry into your credit report, which may result in a slight temporary drop of your credit score.

If you’re comparing multiple lenders, and they offer prequalification, they’ll do a soft inquiry into your credit report, which won’t affect your credit score.

Building your credit — or rebuilding it — through refinancing credit card debt can be possible if you make on-time, regular payments on the new loan. Reducing your credit utilization can be another positive result of refinancing credit card debt. Both of these can potentially increase your credit score.

It’s important not to overuse the credit cards you refinanced into a new loan, however, or you might accumulate even more debt than you started with.

Will Canceling My Unused Credit Cards Affect my Credit Score?

After you’ve refinanced your existing credit card debt into a new loan, you might be tempted to cancel those credit cards. But that strategy could negatively affect your credit score.

Whether it’s a good idea to cancel a credit card really depends on the card. If you’ve had the credit card for a long time, closing it would shorten your credit history, which could result in a credit score drop. But if it’s a card you genuinely don’t have a reason to keep, such as a retail card for a store you no longer shop at or a card that has a high annual fee that can’t be justified with your current spending habits, closing the account might be the right step for you.

If you plan to keep a credit card open, it may be a good idea to use it for a small, recurring charge so the card issuer doesn’t close it for inactivity. Setting up autopay can make this a convenient way to ensure the card stays open but is paid in full each month.

What Are Some Options for Refinancing Credit Card Debt?

Your overall creditworthiness will be a determining factor in finding available refinancing options. Lenders will look at your credit report and credit score, paying attention to how you’ve handled credit in the past and how much total debt you have in relation to your income.

Balance Transfer Credit Card

If you can qualify for a low- or no-interest credit card, you could use it to transfer a balance from another credit card. You’ll typically be charged a balance transfer fee equal to a percentage of the balance you’re transferring. The promotional rate on these types of cards is temporary, sometimes lasting up to 18 months or so, but can be as short as 6 months.

If you pay the transferred balance in full within the promotional period, you may not pay any interest at all, or a minimal amount. However, if you still have an outstanding balance on the card when the promotional period is over, the APR will revert to the card’s standard rate for balance transfers.

Home Equity Loan

A potential source of refinancing funds might be your home, if you have equity in it. Funds from a home equity loan can be used for just about anything, even things unrelated to your home. You can calculate how much equity you have in your home by subtracting the amount you owe on your mortgage from the current market value of your home.

In addition to the amount of equity you have in your home, lenders will typically also look at your income and your credit history to determine how much you might qualify for. It’s common for lenders to limit a home equity loan to no more than 80% to 85% of the equity you have in your home. There are typically closing costs with a home equity loan including appraisal fee, title search, origination fee, or other fees, and can be between 2% and 5% of the loan amount.

A home equity loan is a second mortgage secured by your home. If you fail to repay the loan, the lender can foreclose on your home.

Debt Consolidation Loan

Some lenders offer loans specifically for debt consolidation. These are actually personal loans, the funds from which can be used to pay off your existing credit card debt. Then, you’ll be responsible for repaying the debt consolidation loan. There may be fees charged on this type of loan, so be sure to look over the loan agreement carefully before signing it.

For a credit card consolidation loan to be as effective as possible at reducing your debt, it will ideally have a lower APR than you’re paying on your credit cards. In this way, you would be paying less in interest over the life of the loan. If a lower monthly payment is your goal, you may opt for a longer-term loan, but may pay a higher interest rate.

Recommended: How to Get a Debt Consolidation Loan with Bad Credit

The Takeaway

If your credit card debt is piling up and you’re finding it challenging to pay it down, you may be considering refinancing. Some credit card refinancing options include balance transfer credit cards with a promotional APR, a home equity loan, or a debt consolidation loan.

Whether or not you agree that credit card interest rates should be capped, one thing is undeniable: Credit cards are keeping people in debt because the math is stacked against you. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. SoFi offers lower fixed rates and same-day funding for qualified applicants. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

---

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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.

SOPL-Q224-1883155-V1

Read more

The average American carries about $6,455 in credit card debt as of early 2025, and that figure is up by $200 year over year, according to TransUnion®, one of the major credit bureaus.

If you’re struggling with credit debt, whether it’s higher or lower than that average figure, one method to consider is taking out a personal loan (ideally with a lower rate than you’re paying on your credit cards) and using the funds to pay off your credit card debt. If you’re currently paying off multiple cards, this approach also simplifies repayment by giving you just one bill to keep track of and pay each month.

Still, there are pros and cons to consider if you’re thinking about getting a personal loan to pay off credit cards. Read on to learn more.

How Using a Personal Loan to Pay Off Credit Card Debt Works

Personal loans are a type of unsecured loan. There are a number of uses of personal loans, including paying off credit card debt. Loan amounts can vary by lender and will be paid to the borrower in one lump sum after the loan is approved. The borrower then pays back the loan — with interest — in monthly installments that are set by the loan terms. Some details to consider:

•   Many unsecured personal loans come with a fixed interest rate (which means it won’t change over the life of the loan), though there are different types of personal loans.

•   An applicant’s interest rate is determined by a set of factors, including their financial history, credit score, income, and other debt.

•   Typically, the higher an applicant’s credit score, the better their interest rate will be, as the lender may view them as a less risky borrower. Lenders may offer individuals with low credit scores a higher interest rate, presuming they are more likely to default on their loans.

•   When using a personal loan to pay off credit card debt, the loan proceeds are used to pay off the cards’ outstanding balances, consolidating the debts into one loan. This is why it’s also sometimes referred to as a debt consolidation loan. Ideally, the new loan will have a lower interest rate than the credit cards. By consolidating credit card debt into a personal loan, a borrower’s monthly payments can be more manageable and cost less in interest.

•   Using an unsecured personal loan to pay off credit cards also has the benefit of ending the cycle of credit card debt without resorting to a balance transfer card. Balance transfer credit cards can offer an attractive introductory rate that’s lower or sometimes even 0%. But if the balance isn’t paid off before the promotional offer is up, the cardholder could end up paying an even higher interest rate than they started with. Plus, balance transfer cards often charge a balance transfer fee, which could ultimately increase the total debt someone owes.

💡 Quick Tip: Everyone’s talking about capping credit card interest rates. But it’s easy to swap high-interest debt for a lower-interest personal loan. SoFi credit card consolidation loans are so popular because they’re cheaper, safer, and more transparent.

Understanding Credit Card Debt vs. Personal Loan Debt

At the end of the day, both credit card debt and personal loan debt are both simply money owed. However, personal loan debt is generally less costly than credit card debt. This is due to the interest rates typically charged by credit cards compared to those of personal loans. Also, some people can get trapped by paying the minimum amount on their credit card, which leads to escalating debt as the high interest rate kicks in.

The average credit card interest rate was 24.20% in early 2024. Meanwhile, the average personal loan interest rate was about half that. Given this difference in average interest rates, it can cost you much more over time to carry credit card debt, which is why taking out a personal loan to pay off credit cards can be an option worth exploring.

Keep in mind, however, that the rate you pay on both credit cards and personal loans is dependent on your credit history and other financial factors.

Recommended: Balance Transfer Credit Cards vs Personal Loans

Pros and Cons of Using Loans for Credit Card Debt

While on the surface it may seem like taking out a personal loan to pay off credit card debt could be the best solution, there are some potential drawbacks to consider as well. Here’s a look at the pros and cons:

Pros	Cons
Potential to secure a lower interest rate: Personal loans may charge a lower interest rate than high-interest credit cards. Consider the average interest rate for personal loans was recently 12.30%, while credit cards charged 24.20% on average.	Lower rates aren’t guaranteed: If you have poor credit, you may not qualify for a personal loan with a lower rate than you’re already paying. In fact, it’s possible lenders would offer you a loan with a higher rate than what you’re paying now.
Streamlining payments: When you consolidate credit card debt under a personal loan, there is only one loan payment to keep track of each month, making it less likely a payment will be missed because a bill slips through the cracks.	Loan fees: Lenders may charge any number of fees, such as loan origination fees, when a person takes out a loan. Be mindful of the impact these fees can have. It’s possible they will be costly enough that it doesn’t make sense to take out a new loan.
Pay off debt sooner: A lower interest rate means there could be more money to direct to paying down existing debt, potentially allowing the debtor to get out from under it much sooner.	More debt: Taking out a personal loan to pay off existing debt is more likely to be successful when the borrower is careful not to run up a new balance on their credit cards. If they do, they’ll potentially be saddled with more debt than they had to begin with.
Could positively impact credit: It’s possible that taking out a personal loan could build a borrower’s credit profile by increasing their credit mix and lowering their credit utilization by helping them pay down debt.	Credit score dip: If a borrower closes their now-paid-off credit cards after taking out a personal loan, it could negatively impact their credit by shortening their length of credit history.

How Frequently Can You Use Personal Loans to Pay Off Credit Card Debt?

Taking out a personal loan to pay off credit cards generally isn’t a habit you want to get into. Ideally, it will serve as a one-time solution to dig you out of your credit card debt.

Applying for a personal loan will result in a hard inquiry, which can temporarily lower your credit score by a few or several points. If you apply for new loans too often, this could not only drag down your credit score but also raise a red flag for lenders.

Additionally, if you find yourself repeatedly re-amassing credit card debt, this is a signal that it’s time to assess your financial habits and rein in your spending. Although a personal loan to pay off credit cards can certainly serve as a lifeline to get your financial life back in order, it’s not a habit to get into as it still involves taking out new debt.

5 Steps to Successfully Pay Off Credit Cards with a Personal Loan

The steps for paying off a credit card with an unsecured personal loan aren’t particularly complicated, but having a plan in place is important. Here’s what you can expect.

Getting the Whole Picture

It can be scary, but getting the hard numbers — how much debt is owed overall, how much is owed on each specific card, and what the respective interest rates are — can give you a sense of what personal loan amount might be helpful to pay off credit cards. You can also use an online personal loan calculator to see how things stack up in detail.

Choosing a Personal Loan to Pay off Credit Card Debt

These days, you can do most — or all — personal loan research online. A personal loan with an interest rate lower than the credit card’s current rate is an important thing to look for. Just be sure you are looking at the loan’s annual percentage rate, which tallies the interest rate and other charges (such as origination fees) to give you a truer picture of the cost of the loan.

Paying Off the Debt

Once an applicant has chosen, applied for, and qualified for a personal loan, they’ll likely want to immediately take that money and pay off their credit card debt in full.

Be aware that the process of receiving a personal loan may differ. Some lenders will pay off the borrower’s credit card companies directly, while others will send the borrower a lump sum that they’ll then use to pay off the credit cards themself.

Hiding Those Credit Cards

One potential risk of using a personal loan to pay off credit cards is that it can make it easier to accumulate more debt. The purpose of using a personal loan to pay off credit card debt is to keep from repeating the cycle. Consider taking steps like hiding credit cards in a drawer and trying to use them as little as possible.

Paying Off Your Personal Loan

A benefit of using a personal loan for debt consolidation is that there is only one monthly payment to worry about instead of several. Not missing any of those loan payments is important — setting up autopay or a monthly reminder/alert can be helpful.

Creating a Budget for Successful Debt Payoff

Before embarking on paying off credit card debt, a good first step is making a budget, which can help you better manage their spending. You might even find ways to free up more money to put toward that outstanding debt.

If you have more than one type of debt — for instance, a personal loan, student loan, and maybe a car loan — you may want to think strategically about how to tackle them. Some finance experts recommend taking on the debt with the highest interest rate first, a strategy known as the avalanche method. As those high interest rate debts are paid off, there is typically more money in the budget to pay down other debts.

Another approach, known as the snowball method, is to pay off the debts with the smallest balances first. This method offers a psychological boost through small wins early on, and over time can allow room in the budget to make larger payments on other outstanding debts.

Of course, for either of these strategies, keeping current on payments for all debts is essential.

Where Can You Get a Personal Loan to Pay off Credit Cards?

If you’ve decided to get a personal loan to pay off credit cards, you’ll next need to decide where you can get one. There are a few different options for personal loans: online lenders, credit unions, and banks.

Online Lenders

There are a number of online lenders that offer personal loans. Many offer fast decisions on loans, and you can often get funding quickly as well.

While securing the lowest rates often necessitates a high credit score, there are online lenders that offer personal loans for those with lower credit scores. Rates can vary widely from lender to lender, so it’s important to shop around to find the most competitive offer available to you. Be aware that lenders also may charge origination fees.

Credit Unions

Another option for getting a personal loan to pay off credit cards is through a credit union. You’ll need to be a member in order to get a loan from a credit union, which means meeting membership criteria. This could include working in a certain industry, living in a specific area, or having a family member who is already a member. Others may simply require a one-time donation to a particular organization.

Because credit unions are member-owned nonprofits, they tend to return their profits to members through lower rates and fees. Additionally, credit unions may be more likely to lend to those with less-than-stellar credit because of their community focus and potential consideration of additional aspects of your finances beyond just your credit score.

Banks

Especially if you already have an account at a bank that offers personal loans, this could be an option to explore. Banks may even offer discounts to those with existing accounts. However, you’ll generally need to have solid credit to get approved for a personal loan through a bank, and some may require you to be an existing customer.

You may be able to secure a larger loan through a bank than you would with other lenders.

Recommended: How to Lower Your Credit Card Debt Without Ruining Your Credit Score

Avoiding the Debt Cycle After Consolidation

Once you’ve paid off your credit card debt, you don’t want to fall back into the same habits that got you in trouble in the first place. Some guidelines:

•   Budget carefully. Try a few different types of budgets until you settle on one that really works for you. Plenty of banks also offer tech tools to help you track the money that’s coming in and going out.

•   Speaking of money going out: Watch your spending carefully. Check in with your money regularly, review your spending habits at least monthly, and scale back as needed.

•   Build an emergency fund (even funneling $25 per paycheck is a smart start) so you can cover unexpected expenses like a big medical bill vs. using your credit card.

•   Avoid credit card spending as much as possible. Use your debit card whenever possible to keep spending in check and avoid interest charges.

The Takeaway

High-interest credit card debt can be a huge financial burden. If you’re only able to make minimum payments on your credit cards, your debt will continue to increase, and you can find yourself in a vicious debt cycle. Personal loans are one potential way to end that cycle, allowing you to pay off debt in one fell swoop and hopefully replace it with a single, more manageable loan.

Whether or not you agree that credit card interest rates should be capped, one thing is undeniable: Credit cards are keeping people in debt because the math is stacked against you. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. SoFi offers lower fixed rates and same-day funding for qualified applicants. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Can you use a personal loan to pay off credit cards?

Yes, it is possible to use a personal loan to pay off credit cards. The process involves applying for a personal loan (ideally one with a lower interest rate than you are paying on your credit cards) then using the loan proceeds to pay off your existing credit card debt. Then, you will begin making payments to repay the personal loan.

How is your credit score impacted if you use a personal loan to pay off credit cards?

When you apply for a personal loan, the lender will conduct what’s known as a hard inquiry. This can temporarily lower your credit score. However, taking out a personal loan to pay off credit cards could ultimately have a positive impact on your credit if you make on-time payments, if the loan improves your credit mix, and if the loan helps you pay off your outstanding debt faster.

What options are available to pay off your credit card?

Options for paying off credit card debt include: Taking out a personal loan (ideally with a lower interest rate than you’re paying on your credit cards) and using it to pay off your balances; using a 0% balance transfer credit card; and exploring a debt payoff strategy like the snowball or avalanche method. Other ideas: Consult with a credit counselor, or enroll in a debt management plan.

---

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.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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

SOPL-Q225-037

Read more

Mobile deposit is a fast, easy, and convenient way to deposit a check without going to the bank. You just snap a photo of your check with your smartphone and upload it to your bank’s app.

But you may have questions about this feature, even if you are already using it. For instance, how do you endorse a check for mobile deposit? How long will the check take to clear? Keep reading to find out the answer to these questions and more.

What Is Mobile Deposit and What Do You Need to Use It?

Here’s the meaning of a mobile deposit: It is a process that allows you to deposit a check into your account using your phone’s or your tablet’s camera. Typically, you open your bank’s mobile app and type in the amount of the check and take a photo of both the front and the back of the check. Before you do this, be sure to endorse the check.

Some details about mobile deposit you may want to note:

•   Banks generally let you use this feature 24 hours a day, although some banks may only make a same-day deposit up until a certain hour.

•   How long do mobile deposits take to clear? Typically, within a few days. Sometimes, a portion of the total deposited may be available initially before the remainder is fully available, depending on the rules of your bank. (Note that for most mobile check deposits with SoFi, a portion of the amount deposited will be available the business day following the business day of the deposit.)

For example, say you make a mobile deposit worth $1,000. Your bank may make $250 available initially and the remaining $750 available in a couple more business days. Each bank may have its own funds availability policy, though there are some federal regulations on how long a bank can place a hold on a deposited check. Ask your financial institution about their policies.

•   Some banks may have one-day or monthly dollar limits on mobile deposits. Others may have limits on the size of checks that they are willing to cash over mobile deposit. It can be a good idea to check with your financial institution about maximum deposit limits and other details.

How to Use Mobile Deposit in 5 Simple Steps

In terms of how mobile deposit works, it can be quite simple for the customer. Here’s a closer look.

1. Verify If Your Bank Offers Mobile Depositing

Many banks offer mobile depositing. But if you’re new to this feature or have a new bank account, make sure mobile deposit is available.

2. Check Your Daily and Monthly Deposit Limits

Some banks will have limits about mobile deposit. Perhaps your bank only allows up to $2,000 or $5,000 a day or a certain amount per month via mobile deposit. You want to know that before you attempt to deposit a check that’s over the limit. (SoFi’s daily and monthly mobile check deposit limits vary by member.)

3. Properly Endorse the Back of Your Check

How do you endorse a check for mobile deposit? That depends on your bank. Some may be fine with you signing your name on the back. Others may request that you add language such as “For Electronic Deposit at [bank name].” Familiarize yourself with your financial institution’s guidelines so you avoid any delays with your mobile deposit.

4. Take Clear Photos of the Front and Back of Your Check

Next, you’ll follow the instructions to deposit the check. They typically go something like this:

•   Log into your bank’s mobile banking app and navigate to the mobile deposit feature.

•   Select the account (say, your checking account) you want to deposit the check into.

•   Enter the amount of the check.

•   Take a photo of the endorsed check, front and back.

•   Review the details (your bank’s app may show the details, such as the check amount and account it’s heading towards and ask if everything looks correct).

•   Submit your check.

Recommended: Guide to Signing Over a Check

5. Submit the Deposit and Get a Confirmation

Just as with a check deposited at a bank’s ATM or branch, the money may not be immediately available for use. Checks typically take a bit of time to clear. Here’s how mobile deposit works:

•   When you snap that photo, a financial institution will generally produce a copy of the check as a stand-in for the physical copy. Using this facsimile, a bank will work to collect the money from the check writer’s account.

•   Even before the bank is able to retrieve the money from the check’s source, the money may show as deposited into your checking or savings account and pending. Though the technology is incredibly swift, the money itself isn’t actually moving that fast.

•   Money often becomes available in one day, but it could typically take up to several business days, depending on the bank’s policies, the bank the funds are drawn from, and other variables.

This lag time can create problems — you might spend or transfer the funds before the money has fully cleared.

What Should You Do With a Check After Making a Mobile Deposit?

It’s wise to hold onto the physical copy of your check for a few days or until you receive notification that it’s been accepted. If you need to, mark it so you know that you’ve already deposited the check. Once you know it’s cleared, shred or destroy the check so that no one can obtain the information.

Understanding Mobile Deposit Limits

Mobile deposit limits can vary by bank and by customer. For instance, at some banks, limits depend on the customer’s tier, such as one limit for standard accounts and often a higher one for premium or private client accounts. In many cases, the limits for a standard account can be between a couple and several thousand dollars.

It’s wise to check with your financial institution about your particular limits to be sure you manage this aspect of your banking well.

How Secure Is Mobile Check Deposit?

Just like mobile banking in general, mobile deposit is typically very safe. However, there are a few steps you can take to enhance that security.

•   Verify that you are using your bank’s app; fraudulent apps do exist and are a way that scammers try to commit bank fraud.

•   Avoid doing any banking via a public wifi connection.

•   When making a mobile check deposit, double-check that you have entered the check amount properly. Otherwise, there might be issues processing the deposit.

•   Be sure you’ve endorsed the check for mobile deposit properly.

•   Follow best practices for the security of your banking app. Never share passwords or other login information.

•   Keep checks secure and private, and make sure to shred them when they’ve been deposited and the funds have cleared.

Benefits of Mobile Deposit

Now that you know how the mobile deposit process works, here’s a guide to the benefits of mobile deposits.

Save Yourself a Trip to the ATM

This is a major benefit of mobile banking. Having to take a trip to a bank branch or find an ATM to deposit a check can be a real hassle. With this kind of deposit (and online banking in general), you don’t need to budge from wherever you are to get that check into your bank account.

Deposit Money Later in the Day

For lots of working people, getting to the bank before it closes at 5:00 pm on a weekday is difficult to do. With mobile banking, checks can be deposited at any time of day, any day of the week. You can be at your laptop working or in your pjs, watching a streaming series, and quickly get that money deposited.

Deposits Are Credited Quickly

Because of the extended hours offered by mobile deposits, it may be possible to deposit a check and see the money available in your account faster than if you had to wait until you make it to a branch location. If you deposit the check during mobile deposit hours and the amount is, say, $275 or under, it is possible to see your funds soon after. But, as mentioned above, it’s always wise to make sure the check has fully cleared before transferring or spending it. Remember, it’s not the same as depositing cash into your account.

Deposit a Check From Anywhere

Sometimes, you’re simply not anywhere near a branch or appropriate ATM but need to deposit a check. One of mobile banking’s biggest benefits is being able to deposit a check from anywhere in the world, whether you’re on vacation, attending a business meeting out of town, or otherwise not at your home base.

Deposits Are Secure

In terms of security, typically mobile banking is very safe. Depositing your checks through your mobile app can be as secure as any other digital banking process. Most banks and credit unions use enhanced security processes and encryption to protect their customers.

Also, if you are worried that your phone might be stolen and the image of your check could potentially fall into the wrong hands, don’t be. The image of a check that is deposited via mobile banking isn’t stored on your phone.

A Few Downsides to Mobile Deposit

Now that you’ve heard about the benefits of mobile banking when it comes to depositing checks, let’s acknowledge that there are also a few downsides. A couple to consider:

•   If you want to cash your check and get those physical bills in hand, you will not be able to do so via mobile deposit. The funds must go into your account.

•   Your mobile deposit might wind up bouncing, just as a check can bounce when deposited via other means. Don’t assume that just because it’s deposited, you can go and spend it.

•   There are mobile deposit frauds that occur, often in which a person or organization you don’t know well sends you a check and asks for you to deposit it and then send a portion back to them. Consider verifying a check before you deposit it, and keep your guard up!

Recommended: How Mobile Wallets Work

The Takeaway

Mobile deposit is a feature that allows you to deposit a check from virtually anywhere and at any time, using an app on your smartphone. There are many advantages to mobile banking, such as saving you time and energy vs. taking the check to a bricks-and-mortar branch or an ATM. It’s one of the ways that mobile banking can help make managing your personal finances more convenient.

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

Can someone mobile deposit money into my account?

In order to make a mobile deposit to your account, you need to be logged into your account on your device. For this reason, it is unlikely someone could make a mobile deposit to your account.

Can I mobile deposit a check that’s not in my name?

There are some financial institutions that will permit a mobile deposit of someone else’s check (which you may hear referred to as a third-party check or a check that’s been signed over to you), but others prohibit this.

How long does it take for a mobile deposit to go through?

Mobile deposits typically become available within one or a couple of business days, but a portion can be available sooner. Factors that can impact availability include whether the deposit is made prior to the bank’s cutoff time or on a weekday vs. a weekend or holiday.

Are mobile deposits instant?

Mobile deposits are not instantaneous. The check may take from one day to several days to clear, although the fact that you deposited the check may pop up on your banking app very quickly. Also, it’s important to pay attention to cutoff times. If you use mobile deposit at, say, 11pm, that may be after the bank’s cutoff time, and the check won’t start processing until the next business day.

What is the average mobile deposit limit for most banks?

The average mobile deposit limit is commonly around $2,000 to $5,000 per day, but that can vary by bank and by banking customer. It’s wise to check with your financial institution for details.

What should I write on my check after a mobile deposit?

You don’t necessarily have to write anything on a check after making a mobile deposit, but some banks suggest that you write “mobile deposit” and the date on the check to help you keep track of and reconcile your finances.

Why would a mobile check deposit be rejected?

Mobile check deposits may be rejected for such reasons as a blurry image, improper endorsement, and the amount entered in the app not matching what’s on the check. In addition, if the check is a third-party check, money order, in a foreign currency, or in an amount exceeding the limit, it may not be accepted.

Can you deposit any type of check with mobile deposit?

Not all kinds of checks can be accepted with mobile deposit. For instance, money orders, third-party checks, and checks in a foreign currency may not be accepted.

---

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

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

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

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

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

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

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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.

SOBNK-Q425-034

Read more

If you are self-employed or receive income other than a salary or employment wages, you could be responsible for making estimated tax payments.

You might think of these estimated taxes as an advance payment against your expected tax liability for a given year. The IRS requires certain people and businesses to make quarterly estimated tax payments (that is, four times each year).

Not sure if you are required to make estimated tax payments or how much you should pay? Here’s a closer look at this topic, which will cover:

•   What are estimated tax payments?

•   Who needs to make estimated tax payments?

•   What are the pros and cons of estimated tax payments?

•   How do you know how much you owe in estimated taxes?

What Are Estimated Tax Payments?

Estimated tax payments are payments you make to the IRS on income that is not subject to federal withholding. Ordinarily, your employer withholds taxes from your paychecks. Under this system, you pay taxes as you go, and you might get money back (or owe) when you file your tax return, based on how much you paid throughout the year.

So what is an estimated tax payment designed to do? Estimated tax payments are meant to help you keep pace with what you owe so that you don’t end up with a huge tax bill when you file your return. They’re essentially an estimate of how much you might pay in taxes if you were subject to regular withholding, say, by an employer.

Estimated tax payments can apply to different types of income, including:

•   Self-employment income

•   Income from freelancing or gig work (aka a side hustle)

•   Interest and dividends

•   Rental income

•   Unemployment compensation

•   Alimony

•   Capital gains

•   Prizes and awards

If you receive any of those types of income during the year, it’s important to know when you might be on the hook for estimated taxes. That way, you can avoid being caught off-guard during tax season.

How Do Estimated Tax Payments Work?

Estimated tax payments allow the IRS to collect income tax, as well as self-employment taxes from individuals who are required to make these payments. When you pay estimated taxes, you’re making an educated guess about how much money you’ll owe in taxes for the year.

The IRS keeps track of estimated tax payments as you make them. You’ll also report those payments on your income tax return when you file. The amount you paid in is then used to determine whether you need to pay any additional tax owed, based on your filing status and income, and the deductions or credits you might be eligible for.

Failing to pay estimated taxes on time can trigger tax penalties. You might also pay a penalty for underpaying if the IRS determines that you should have paid a different amount.

Who Needs to Pay Estimated Tax Payments?

Now that you know what an estimated tax payment is, take a closer look at who needs to make them. The IRS establishes some rules about who is liable for estimated tax payments. Generally, you’ll need to pay estimated taxes if:

•   You expect to owe $1,000 or more in taxes when you file your income tax return, after subtracting any withholding you’ve already paid and any refundable credits you’re eligible for.

•   You expect your withholding and refundable credits to be less than the smaller of either 90% of the tax to be shown on your current year tax return or 100% of the tax shown on your prior year return.

•   The tax threshold drops to $500 for corporations.

Examples of individuals and business entities that may be subject to estimated tax payments include:

•   Freelancers

•   Sole proprietors

•   Business partners

•   S-corporations

•   Investors

•   Property owners who collect rental income

•   Ex-spouses who receive alimony payments

•   Contest or sweepstakes winners

Now, who doesn’t have to make estimated tax payments? You may be able to avoid estimated tax payments if your employer is withholding taxes from your pay regularly and you don’t have significant other forms of income (such as a side hustle). The amount the employer withholds is determined by the elections you make on your Form W-4, which you should have filled out when you were hired.

You can also avoid estimated taxes for the current tax year if all three are true:

•   You had no tax liability for the previous tax year

•   You were a U.S. citizen or resident alien for the entire year

•   Your prior tax year spanned a 12-month period

Pros and Cons of Estimated Taxes

Paying taxes can be challenging, and some people may dread preparing for tax season each year. Like anything else, there are some advantages and disadvantages associated with estimated tax payments.

Here are the pros:

•   Making estimated tax payments allows you to spread your tax liability out over the year, versus trying to pay it all at once when you file.

•   Overpaying estimated taxes could result in a larger refund when you file your return, which could be put to good use (such as paying down debt).

•   Estimated tax payments can help you create a realistic budget if you’re setting aside money for taxes on a regular basis.

And now, the cons:

•   Underpaying estimated taxes could result in penalties when you file.

•   Calculating estimated tax payments and scheduling those payments can be time-consuming.

•   Miscalculating estimated tax payments could result in owing more money to the IRS.

Recommended: What Happens If I Miss the Tax Filing Deadline?

Figuring Out How Much Estimated Taxes You Owe

There are a few things you’ll need to know to calculate how much to pay for estimated taxes. Specifically, you’ll need to know your:

•   Expected adjusted gross income (AGI)

•   Taxable income

•   Taxes

•   Deductions

•   Credits

You can use IRS Form 1040 ES to figure your estimated tax. There are also online tax calculators that can do the math for you.

•   If you’re calculating estimated tax payments for the first time, it may be helpful to use your prior year’s tax return as a guide. That can give you an idea of what you typically pay in taxes, based on your income, assuming it’s the same year to year.

•   When calculating estimated tax payments, it’s always better to pay more than less. If you overpay, the IRS can give the difference back to you as a tax refund when you file your return.

•   If you underpay, on the other hand, you might end up having to fork over more money in taxes and penalties.

Paying Your Estimated Taxes

As mentioned, you’ll need to make estimated tax payments four times each year. The due dates are quarterly but they’re not spaced apart in equal increments.

Here’s how the estimated tax payment calendar works for 2026:

Payment	Due Date
First Payment	April 15, 2026
Second Payment	June 15, 2026
Third Payment	September 15, 2026
Fourth Payment	January 15, 2027

Here’s how to pay:

•   You’ll make estimated tax payments directly to the IRS. You can do that online through your IRS account, through the IRS2Go app, or using IRS Direct Pay.

•   You can use a credit card, debit card, or bank account to pay. Note that you might be charged a processing fee to make payments with a credit or debit card.

•   Certain IRS retail locations can also accept cash payments in person.

Keep in mind that if you live in a state that collects income tax, you’ll also need to make estimated tax payments to your state tax agency. State (and any local) quarterly estimated taxes follow the same calendar as federal tax payments. You can check with your state tax agency to determine if estimated tax is required and how to make those payments.

The Takeaway

If you freelance, run a business, or earn interest, dividends, or rental income from investments, you might have to make estimated tax payments. Doing so will help you avoid owing a large payment on Tax Day and possibly incurring penalties. The good news is that once you get into the habit of calculating those payments, tax planning becomes less stressful.

Another way to make your financial life less stressful: Find the right banking partner.

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

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.30% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What happens if I don’t pay estimated taxes?

Failing to pay estimated taxes when you owe them can result in tax penalties. Interest can also accrue on the amount that was due. You can’t eliminate those penalties or interest by overpaying at the next quarterly due date or making one large payment to the IRS at the end of the year. You can appeal the penalty, but you’ll still be responsible for paying any estimated tax due.

What if you haven’t paid enough in estimated tax payments?

Underpaying estimated taxes can result in a tax penalty. The IRS calculates the penalty based on the amount of the underpayment, the period when the underpayment was due and not paid, and the applicable interest rate. You’d have to pay the penalty, along with any additional tax owed, when you file your annual income tax return.

How often do you pay estimated taxes?

The IRS collects estimated taxes quarterly, with the first payment for the current tax year due in April. The remaining payments are due in June, September, and the following January. You could, however, choose to make payments in smaller increments throughout the year as long as you do so by the quarterly deadline.

---

About the author

---

Photo credit: iStock/pixdeluxe

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

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

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

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

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

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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.
SOBK0224006
CN-Q425-3236452-129

Read more

If you’re looking to reduce the amount of income tax you’ll need to pay, there are numerous strategies to consider. Familiar moves include contributing to tax-deferred retirement and health-spending accounts, deducting certain taxes and interest, and making charitable donations. More complex maneuvers include timing investments to offset gains with losses.

Because each person’s situation is unique, be sure to check with your tax accountant to find out how a potential strategy might work for you. Note that some of the strategies included in this guide have income limits.

Keep reading to see how many of these 25 tactics you can implement.

25 Ways to Lower Your Taxable Income

As you look through this list of 25 ideas on how to pay less in taxes, you’ll note that some are broad, advising how to reduce either W-2 taxable income or self-employment income. Meanwhile, others are more targeted — for instance, applying only to the self-employed. Keep track of ideas that pertain to your situation so you can explore them further.

1. Contribute to a Retirement Account

Many IRA contributions are tax deductible. If you’re covered by a plan at work, you can contribute up to $23,500 to a 401(k) plan in 2025 ($24,500 in 2026), and an additional $7,500 if you’re over 50 ($8,000 in 2026). You can also contribute $7,000 to an IRA ($7,500 in 2026), or $8,000 total if you’re over 50 ($8,600 in 2026). However, your deduction may be limited depending on income and other factors.

Self-employed individuals can contribute between 25% and 100% of net earnings from self-employment, up to $70,000 for 2025 (up to $72,000 for 2026). Plans available to the self-employed include the Simplified Employee Pension (SEP) plan, solo 401(k), and Savings Incentive Match Plan for Employees (SIMPLE IRA).

2. Open a Health Savings Account

A health savings account (HSA) allows you to deposit money on a pre-tax basis. Contribution limits depend on your health plan, age, and other factors, but most individuals can contribute $4,300 for 2025 and $4,400 for 2026.

Funds can be used to pay for qualified medical expenses or rolled over year to year. You must have a high deductible health plan (HDHP) to contribute to an HSA.

3. Check for Flexible Spending Accounts at Work

In lieu of an HSA, you can contribute up to $3,300 in pre-tax dollars to a flexible spending account (FSA). In 2026, the contribution threshold rises to $3,400. FSAs allow people with a health plan at work to deposit money and then use it to pay for qualifying health care costs. Unlike HSAs, FSAs don’t require an HDHP to qualify. The downside: Only a small portion of funds may be rolled over to the following year.

4. Business Tax Deductions

The IRS guidelines around business deductions change frequently, so it’s wise to watch out for their announcements throughout the year. Some business expenses apply only to self-employed people.

5. Home Office Deduction

When a self-employed person regularly uses a specific area of their home for business purposes, they may qualify to deduct costs associated with that part of the house. The home office deduction can be calculated in two ways (regular or simplified) up to the current gross income limitation. For more information, search for “IRS publication 587.”

When you’re in business for yourself, every moment counts. Online tools can help take the guesswork out of tracking your spending, setting up budgets, analyzing spending habits, and more.

6. Rent Out Your Home for Business Meetings

If you’re self-employed, you can also rent out your home for business events and meetings, collect the income — and not have to pay income taxes on that rental income. To learn specifics, visit https://www.irs.gov/pub/irs-drop/rp-13-13.pdf.

7. Write Off Business Travel Expenses

Travel expenses, as defined by the IRS, are the “ordinary and necessary expenses of traveling away from home for your business, profession, or job. You can’t deduct expenses that are lavish or extravagant, or that are for personal purposes.” For IRS guidance for both W-2 employees and the self-employed, go to https://www.irs.gov/taxtopics/tc511.

8. Deduct Half of Your Self-Employment Taxes

When calculating your adjusted gross income (AGI) as a self-employed person, using Form 1040 or Form 1040-SR, you can deduct half the amount of your self-employment tax. In 2025 and 2026, the self-employment tax rate is 12.4% for Social Security and 2.9% for Medicare, based on your net earnings.

9. Get a Credit for Higher Education

This tax credit can go up to $2,500 based on tuition costs along with what you paid in certain fees and for course materials. As a first step, income tax owed is reduced dollar for dollar up to your limit. Then, if your tax credit is more than what you owe, you may be able to get up to $1,000 in a refund.

10. Itemize State Sales Tax

Currently, you can deduct a total of $40,000 for itemized state and local income taxes, sales taxes, and property taxes when you use Form 1040 or 1040-SR. If married but filing separately, the total is $20,000 per person. The IRS provides a calculator that you can use to figure out your deduction at https://apps.irs.gov/app/stdc/.

11. Make Charitable Donations

A taxpayer can typically deduct up to 60% of their AGI to qualified charities. However, thanks to a 2025 law, standard deduction filers can deduct up to $1,000 (or up to $2,000 for married couples filing jointly) for cash donations starting in the 2026 tax year.

12. Adjust Your Basis for Capital Gains Tax

If you sell an asset, including but not limited to investments, a capital gains tax is levied on the difference between the purchase price and what it sells for. The adjusted basis also takes into account the costs of capital improvements made, minus decreases such as casualty losses. For more on the topic when selling a home, search for “IRS publication 523.”

Recommended: Should I Sell My House Now or Wait?

13. Avoid Capital Gains Tax by Donating Stock

You may be able to avoid paying capital gains tax if you transfer the ownership of your appreciated stock (held for more than one year). This is something that needs to be handled in exactly the right way; your tax accountant can help.

14. Invest in Qualified Opportunity Funds

If you invest in property through a Qualified Opportunity Fund, the IRS states that you can temporarily defer paying taxes on the gains. Taxes can be deferred (not reduced or canceled) up until December 31, 2026, or until an inclusion event occurs earlier than that date. This is a complex strategy and, again, you may want to get professional advice.

15. Claim Deductions for Military Members

You may be able to deduct moving expenses if you’re a member of the military on active duty who relocated because of a military order and permanent change of location. In this case, you can potentially deduct your unreimbursed moving expenses as well as those for your spouse and dependents. You can calculate relevant expenses on “IRS form 3903, Moving Expenses.”

16. Enroll in an Employee Stock Purchasing Program

In an employee stock purchase plan (ESPP), an employee who works at a company that offers this program can buy company stock at a discount. The company takes out money through payroll deductions and, on the designated purchase date, buys stock for participating employees. Note that only qualified plans have potential tax benefits.

17. Deduct the Student Loan Interest You’ve Paid

You may qualify to deduct student loan interest. Annual deduction amounts are the lesser between the amount of interest paid and $2,500. This deduction is lowered and eliminated when your modified adjusted gross income (MAGI) reaches a certain limit based on your filing status.

18. Sell Your Losing Stocks to Claim Capital Loss Carryover

If you sell stock at less than the purchase price, you’ve experienced a capital loss. You can use that loss to offset any capital gains that year. If you’ve lost more than you’ve gained, this can reduce your taxable income, which could reduce what you owe up to $3,000 for individuals and married couples, and $1,500 for someone married who filed separately.

Recommended: Tax Loss Carryforward

19. Deduct Mortgage Interest

You can deduct the money you paid on mortgage interest on the first $750,000 (or $375,000 if married, filing separately) of mortgage debt you owe. Higher limits exist ($1,000,000/$500,000) if the debt was taken on before December 16, 2017.

20. Deduct Medical Expenses

Under certain circumstances, you can deduct medical and dental expenses for yourself, your spouse, and dependents. You’ll need to itemize on your tax return and can only deduct qualifying expenses that exceed 7.5% of your AGI.

21. Delay IRA Withdrawal Upon Retirement

You can delay IRA withdrawals so that you don’t have more taxable income when you’re a high earner.

22. Ask Your Employer to Defer Income

You pay income tax in the year the income is received. Although there are reasons why employers typically can’t postpone providing paychecks, they may be able to delay a bonus to the following year as long as this is standard practice for them. If self-employed, you can delay sending your end-of-year invoices to bump December payments to the following calendar year.

23. Open a 529 Plan for Education

A 529 plan allows you to save for future educational expenses. Although the contributions themselves aren’t deductible, interest that accrues in the account is tax-free, federally, as well as being tax-free in many states. In other words, when the money is withdrawn to pay college expenses, it is not taxed.

24. Buy Tax-Exempt Bonds

Interest you receive on muni bonds, for example, is not federally taxed (although there may be state and/or local taxes). These are typically very safe investments, although the interest rates may not be what you want.

25. Time Your Investment Gains or Losses

Known as tax loss harvesting, this strategy takes planning because you’ll want to ensure that any investment gains can be offset, as much as possible, by tax losses. So you may decide, as just one example, to hold on to a stock that’s lost significant value — selling it at a time when it can offset a stock sale with a sizable gain.

The Takeaway

High earners looking to reduce taxable income have many avenues to explore — some you’ve likely heard of, with others perhaps new to you. For instance, investors may be able to take advantage of tax loss harvesting, tax loss carryover, or tax efficient investing. Consult your tax accountant about your specific situation. And to take advantage of tax reduction opportunities, it’s important to keep careful track of your financial transactions.

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.

See exactly how your money comes and goes at a glance.

FAQ

How can I lower my taxable income?

If you’re wondering how to reduce your taxable income, there are numerous strategies that might work for your situation. A good place to start: Contribute to a retirement account, open a health savings account, and learn which taxes and interest you can deduct. Talk to your tax accountant about specific questions you may have.

What are the tax loopholes for the rich?

If you’re looking to reduce your taxable income, consider making charitable donations and investigating investment strategies that offset gains with losses.

Do 401(k) contributions reduce taxable income?

Said another way, are IRA contributions tax deductible? Retirements typically offer some tax benefits with specifics varying based on the type of retirement account. Traditional IRAs have different rules, for example, than Roth IRAs.

---

Photo credit: iStock/Petar Chernaev

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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-Q425-078

Read more