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What is the monthly payment on a $1 million mortgage at recent interest rates? If we remove property taxes, property insurance, and mortgage insurance from the equation, you can expect to spend between $6,653 and $8,988 a month on principal and interest alone, depending on which loan term you choose. But that’s not the whole story. There’s more you’ll need to know about a $1 million mortgage payment.

Cost of a $1 Million Mortgage

The cost of a $1 million mortgage varies depending on which home mortgage loan you choose and a few other factors, such as interest rate and property taxes. As you may know, different types of mortgage loans have different expenses, such as mortgage insurance, which can change your monthly payment.

Monthly Payments for a $1 Million Mortgage

The monthly payment on a $1 million mortgage is influenced by a variety of factors, which include:

•   Interest rate

•   Fixed vs. variable interest rate

•   Mortgage insurance

•   Property insurance

•   Loan term

•   Type of loan

•   Property taxes

Removing all variables except a 7.00% interest rate, a $1 million mortgage payment would be between $6,653 and $8,988 per month. If you’re a first time homebuyer considering a $1 million mortgage, make sure you understand the true cost of buying and owning a home. Remember that your property taxes and some insurance costs may be dictated by your home’s location. (You may want to analyze the cost of living by state. Some of the best affordable places to live in the U.S. may surprise you.)

If these variables are new to you, a home loan help center may smooth out any confusion you may have.

Where to Get a $1 Million Mortgage

You can get a $1 million mortgage with mortgage lenders such as banks, credit unions, and online lenders. However, they’ll need to offer jumbo home loans since $1 million exceeds the conventional loan limit of $832,750 in most areas. When comparing lenders, look at both interest rates and fees. Loan origination fees, in particular, can vary greatly between lenders.

💡 Quick Tip: A major home purchase may mean a jumbo loan, but it doesn’t have to mean a jumbo down payment. Apply for a jumbo mortgage with SoFi, and you could put down as little as 10%.

What to Consider Before Applying for a $1 Million Mortgage

The monthly payment for a $1 million mortgage isn’t the only thing you should consider. Also keep in mind the total amount you’ll spend on interest for each loan term. For a 30-year loan with a 7.00% interest rate, you’ll spend $1,395,086 on interest. If you opt for a 15-year loan, you’ll spend just $617,890. This means if you can afford a 15-year loan, you’ll save $777,196.

While you’re home shopping, use a mortgage calculator to see the amount of money you’ll spend monthly and over the life of the loan. You may also want to use a home affordability calculator to incorporate your monthly debts and spending habits into the equation. While you may be able to technically afford a large monthly payment, would the expense leave room for dining out, vacations, and retirement contributions?

During the early years of your mortgage loan, more of your monthly payment typically goes toward paying off the interest on the loan, with a smaller proportion paying down the principal you owe. An amortization schedule shows how the proportions shift, and you build equity more quickly in the second half of the loan term. Here are sample schedules for 30-year and 15-year loan terms:

Amortization Schedule, 30-year, 7.00%

Amortization Schedule, 15-year, 7.00%

How to Get a $1 Million Mortgage

Anyone who has ever bought a home will tell you there are tips to qualify for a mortgage. The biggest ones include saving up for a large down payment, paying down your debts, and working on your credit score before applying for a mortgage. Paying off balances lowers your debt to income (DTI) ratio and helps you qualify for better mortgage terms. The maximum DTI is usually around 43%, but it can vary with each lender and borrower.

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

The Takeaway

If you need to borrow $1 million to buy a home, a 15-year mortgage will require around a $9,000 a month mortgage payment, whereas a 30-year mortgage requires around $6,650. Assuming a 7.00% interest rate, homebuyers can expect to spend between $617,890 and $1,395,086 on interest alone.

Keep in mind that property taxes, home insurance, and mortgage insurance may increase your monthly payment. If you’re in the market to buy a $1 million house, principal and interest will comprise a majority of your monthly costs.

When you’re ready to take the next step, consider what SoFi Home Loans have to offer. Jumbo loans are offered with competitive interest rates, no private mortgage insurance, and down payments as low as 10%.

SoFi Mortgage Loans: We make the home loan process smart and simple.

FAQ

How much is a $1,000,000 mortgage a month?

You can expect to spend around $6,653 a month with a 30-year mortgage term and $8,988 a month with a 15-year term. This assumes you have a 7.00% interest rate (and doesn’t take into account property taxes, mortgage insurance, and property insurance).

How much income is required for a $1,000,000 mortgage?

Housing costs should be at or below 30% of your income. If you were to choose a 30-year mortgage, this suggests that your income should be around $265,000 a year. Choose a 15-year mortgage, and your income should be around $360,000.

How much is a down payment on a $1,000,000 mortgage?

Because a $1,000,000 mortgage typically means a jumbo loan, you may need to make a down payment of at least 10%. That means your minimum down payment would be $111,112 on a home priced around $1,112,000.

Can I afford a $1,000,000 house with a $70K salary?

No, a $70,000 annual salary would not be enough to cover the cost of a mortgage on a $1,000,000 house. This salary assumes about $5,833 gross a month (before taxes and deductions), which is not enough to cover the minimum payment required of either loan term.

Photo credit: iStock/Paul Bradbury

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Arbitrage involves attempting to profit from price differences in the same good or product, and crypto arbitrage is no different: Market participants may be able to make money by exploiting price differences for the same cryptocurrency. Those differences may occur across different exchanges or platforms, opening up the opportunity to buy, sell, and possibly generate a return.

Note, though, that arbitrage involves substantial risk, so caution is warranted.

What Is Crypto Arbitrage?

Cryptocurrency arbitrage is a strategy in which market participants buy a cryptocurrency on one exchange, and then attempt to quickly sell it on another exchange for a higher price. Cryptocurrencies are purchased or sold on many different exchanges, and often the price of a coin or token may differ slightly on one exchange versus another.

That’s where the strategy of arbitrage comes in: Similar to using arbitrage in other capital markets, crypto arbitrage is a legal way to earn a potential profit when an asset is selling cheaper in one market and at a higher price in another. That said, crypto arbitrage comes with some potential risk factors.

Why Do Price Differences Exist Between Exchanges?

The regulations of crypto markets are nuanced and varied, and cryptocurrencies are decentralized and therefore (with the exception of stablecoins) not pegged to government or fiat currencies like the dollar. This is one of the primary reasons why the prices of different crypto can vary widely: there is no standard price for any particular coin or token.

Related to this, some crypto exchanges are bigger than others, with higher trading volume. Thus the supply and demand on one exchange could be quite different from another, affecting the price.

Finally, crypto trading fees also vary, and can add to the cost of your transactions.

How Does Crypto Arbitrage Trading Work? A Step-by-Step Look

As noted, crypto arbitrage involves trading the same cryptocurrency for different prices on different platforms or exchanges. Arbitrage comes with the risk of prices changing during the process of buying and selling cryptocurrency. However, here’s how crypto arbitrage might work in theory, assuming prices remain the same.

Step 1: Identifying Arbitrage Opportunities

In a very general sense, identifying an arbitrage opportunity in the crypto market could be as simple as noticing that some type of cryptocurrency, let’s say Crypto X, is trading for $1 on Exchange 1, but trading for $1.50 on Exchange 2.

That price discrepancy means there’s an opportunity to generate a profit by purchasing Crypto X for $1 and then selling it for $1.50.

Step 2: Executing the Purchase and/or Sale

The next step to take advantage of the price discrepancy is to actually execute the transactions. That could be a bit more intensive than it sounds, since you’re trading on two different exchanges or platforms.

But in effect, let’s say you purchase $10 worth of Crypto X on Exchange 1, and transfer it to your crypto wallet. Then, you log on to Exchange 2, make sure your wallet and holdings are connected, and then sell Crypto X for $15.

Step 3: Calculating Profits (and Losses)

When all is said and done, you should now have $15 in cash, a profit of $5 from when you first started (not taking any fees into account), and a 50% return due to your arbitrage activities. Don’t forget there’s taxes to pay, of course.

And always keep in mind that you can lose money through crypto arbitrage, too, such as if the price of the cryptocurrency purchased drops before it’s sold. There’s no guarantee that you’ll come out ahead in the crypto markets.

Common Arbitrage Strategies

There are some different ways that crypto arbitrage can be conducted with different types of cryptocurrencies.

Simple Arbitrage (Cross-Exchange Arbitrage)

This type of arbitrage is more or less what was spelled out in our example above. It involves finding a price discrepancy between exchanges, buying from one, and selling to the other to attempt to generate a profit. While this is a simple tactic that can take advantage of price discrepancies, it may expose you to risks like transfer times and costs.

Spatial Arbitrage

Spatial arbitrage is very similar to simple arbitrage, but is distinct in that there are price differences between an asset trading in different geographic locations.

Triangular Arbitrage

Triangular arbitrage takes advantage of pricing inefficiencies among different pairs of cryptocurrencies, often on the same exchange. With this strategy, someone starts with one cryptocurrency and then sells it for another cryptocurrency — one which is undervalued relative to the other.

The participant would then transact that second cryptocurrency for a third cryptocurrency which is relatively overvalued when compared with the first. Finally, they would transact that third cryptocurrency for the first crypto, completing the circuit potentially a little richer.

Weighing the Opportunity: The Pros and Cons of Crypto Arbitrage

Crypto arbitrage has some pros and cons to be aware of.

The Appeal of Crypto Arbitrage

Crypto arbitrage can be an appealing strategy for a few key reasons. Notably, it’s a market-neutral strategy, meaning that it’s theoretically possible to make money regardless of overall market conditions. So, if the stock market is taking a downturn, that doesn’t mean you couldn’t potentially generate returns through crypto arbitrage.

Additionally, the crypto trading markets go non-stop, worldwide, and there are thousands of cryptocurrencies out there. That means there’s a potentially large number of opportunities for crypto arbitrage, if you can find them.

The Risks of Crypto Arbitrage

There are also significant risks you should take into account when engaging in crypto arbitrage. Perhaps most notably, price slippage, which means that the price discrepancy that you are attempting to exploit suddenly disappears, leaving someone “holding the bag,” so to speak, after they initially purchase the cryptocurrency.

There can also be delays and congestion on platforms, which can slow down transactions and potentially lead to price slippage. There are transaction fees to take into account, as well, and it may even be possible to break the rules of a given platform, meaning that your activity is frozen or put on hold.

Tax Implications of Arbitrage

Arbitrage can trigger tax liabilities.

In the U.S., where cryptocurrency adoption has skyrocketed in recent years, the IRS has created a tax guide which categorizes cryptocurrencies as property, like stocks, bonds, and other capital assets.

Entities that engage in arbitrage are required to pay capital gains taxes on cryptocurrency when selling, trading, or disposing of their holdings. (Additionally, cryptocurrencies can be taxed as income if an individual receives the crypto as a gift, from mining, or for services rendered.)

With that in mind, you must account for any capital gains taxes on their federal income tax return, but may also be able to take deductions based on any losses. Be aware that state taxes may also need to be reported, where applicable. You should also receive a form from your brokerage or trading platform to help you calculate your tax liabilities and fill out your tax return.^[1]

As always, it may be helpful to discuss with an accountant or financial professional.

Note, too, that cryptocurrency taxation rules are evolving, so it’s best to try and keep track of the latest changes to rules and regulations.

Why Every Arbitrage Transaction May Be a Taxable Event

Given that cryptocurrency is considered “property” in the U.S. for taxation purposes, each transaction will result in either a capital gain or loss. In the case of crypto arbitrage, gains from transactions would likely be taxed as short-term gains, which applies when a digital asset is held (as a capital asset) for one year or less. Short-term gains are taxed as ordinary income, which is typically higher than the rates for digital assets held for longer than a year.^[2]

In short, that’s why each arbitrage transaction triggers a taxable event: You’re generating a capital gain or loss with each transaction.

The Importance of Meticulous Record-Keeping

New rules are making it easier to keep track of your transactions through a brokerage or trading platform, along with capital gains or losses and respective tax liabilities. But it’s still a good idea to try and keep meticulous records, to ensure that you’re paying any applicable taxes that you owe.

Until recently, keeping track of your capital gains or losses on crypto holdings was entirely up to the individual, which is why it was so important. It’s still up to you to report your transactions correctly, as it’s possible that your platform or exchange could make a mistake.

A Note on Professional Advice

Again: It could be a good idea to ask an accountant or financial professional for help or to answer any questions you may have about your tax liabilities resulting from crypto trading activity. It can be confusing, and the laws and rules are in flux, so don’t be afraid to reach out.

Crypto Arbitrage Bots and Platforms

A couple of other things that you should know about: Arbitrage bots and platforms.

What Are Crypto Arbitrage Bots?

Why manually buy or sell when you could use bots to do it for you? That’s actually an option, as there are programs on the market that can identify arbitrage opportunities, and automatically execute purchases or sales on someone’s behalf. Of course, this requires some technical know-how and a fairly high risk tolerance, but these “bots” are more or less automated software sequences that are used by some to try to generate returns.

Popular Arbitrage Platforms and Scanners

There are numerous crypto trading platforms, services, and software on the market. Some incorporate trading bots directly into their platforms, too. Some examples of these include Pionex, Bitsgap, Cryptohopper, ArbitrageScanner, and 3Commas. It’s important to do your own research to figure out if any platform might work for your specific situation and strategy.

The Takeaway

Arbitrage exists across the capital markets, in stocks, bonds, and commodities, wherever the same asset buys or sells for different prices in different places. Since cryptocurrencies are digital and aren’t based on an underlying asset (with some exceptions, such as stablecoins), it is harder to place a value upon these currencies, and they don’t have the same pricing conventions as equities and bonds, which are tied to the performance of a company, municipality, or nation.

Cryptocurrency is complicated, and arbitrage strategies can be even more complex. But the practice is legal, and has the potential to yield rewards while also exposing a participant to high risk.

SoFi Crypto is back. SoFi members can now buy, sell, and hold cryptocurrencies on a platform with the safeguards of a bank. Access 25+ cryptocurrencies, such as Bitcoin, Ethereum, and Solana, with the first national chartered bank to offer crypto trading. Now you can manage your banking, investing, borrowing, and crypto all in one place, giving you more control over your money.

FAQ

Is crypto arbitrage still profitable?

Crypto arbitrage can be profitable, but it also involves considerable risk. There’s no guarantee of a positive return.

How much money do you need to start crypto arbitrage?

It’s possible to attempt to profit from discrepancies in crypto prices with a relatively small amount of money, especially since many cryptocurrencies buy and sell for fractions of a cent. It’s important to remember that arbitrage is risky, however, so any amount of money put toward crypto arbitrage — big or small — could potentially be lost.

Is crypto arbitrage legal?

Yes, crypto arbitrage is legal in most regions so long as you’re doing it in a place where crypto trading is legal.

What is the fastest way to find crypto arbitrage opportunities?

Perhaps one of the quickest ways to find crypto arbitrage opportunities is to use a scanner or trading bot to flag those opportunities for you. Otherwise, it could take considerable time and effort to manually compare prices between exchanges and platforms.

Can you lose money with crypto arbitrage?

Yes, there is a high risk of losing money with crypto arbitrage, as prices are always in flux.

Can you make a living off of crypto arbitrage?

It theoretically may be possible to make a living off of crypto arbitrage, but it would likely be challenging to do, and it’s important to remember there are significant risks involved with crypto arbitrage, as well.

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Crypto staking is a way to use crypto holdings to generate rewards while helping to validate transactions. While “staking” may be a relatively new addition to the financial lexicon, it’s important for those interested in crypto to understand what it is, how it works, and what cryptocurrencies it can be used to obtain.

Crypto staking may feel like it’s a step beyond simply learning how to buy cryptocurrencies or how a crypto exchange works, but learning about cryptocurrency staking can broaden your knowledge of the crypto ecosystem, making you more informed about your options.

What Is Crypto Staking?

Crypto staking is the process of “locking up” crypto holdings on a blockchain network in order to try and obtain rewards. There may be time limits or requirements depending on the specific blockchain network, and rewards can vary significantly, but are typically a percentage of the coins staked.

Cryptocurrencies are built with blockchain technology, in which crypto transactions are verified, and the resulting data is stored on the blockchain. Depending on the types of cryptocurrency you’re working with and its supporting technologies, these validation processes may involve staking, using a “proof-of-stake” consensus mechanism, or mining, using a “proof-of-work” consensus mechanism. Each of these processes help crypto networks achieve consensus, or confirmation that all of the transaction data adds up to what it should.

Staking vs Mining: What’s the Difference?

Staking crypto generates rewards and helps a crypto network validate information on the blockchain, using the cryptocurrency stakers locked up on the network. Crypto mining has the same goal, but the consensus needed to verify transactions is achieved in a different way.^[2]

Effectively, mining involves using computing power to solve mathematical problems and equations to open up new blocks on a blockchain, for which miners are then rewarded. Mining requires significantly more computing power and resources, but effectively, both staking and mining are trying to achieve the same ends of validating information and producing new “blocks.”

The Role of Proof of Stake (PoS)

Achieving consensus and validating information on a blockchain requires participants. That’s what staking is: individuals who actively hold onto, or lock up their crypto holdings in their crypto wallet, may participate in these networks’ consensus-taking processes. Stakers are, in essence, approving and verifying transactions on the blockchain.

For doing so, the networks reward those individuals. The specific rewards will depend on the network.

It may be helpful to think of crypto staking as similar to depositing cash in a savings account. The depositor earns interest on their money while it’s in the bank, as a reward from the bank, who uses the money for other purposes (lending, etc.). Staking coins is, from that perspective, similar to earning interest. Although cryptocurrency holdings could potentially lose value as the market ebbs and flows, too.

How Does Crypto Staking Work?

Crypto staking is typically a passive activity, unless you actively run a blockchain validator node. When someone stakes their holdings (typically by locking them in a wallet through a crypto staking platform), the network can use those holdings to forge new blocks on the blockchain.

The more crypto you’re staking, the better the odds are that your holdings will be selected to validate information and new blocks, and a lot of that depends on the specific blockchain network you’re staking on.

Essentially, during a transaction, information is “written” into the new block, and the staker’s holdings are used to validate it. Since coins already have “baked in” data from the blockchain, they can be used as validators. Then, for allowing those holdings to be used as validators, the network rewards the staker.

How to Start Crypto Staking

To start crypto staking, a person needs to decide where and what they want to stake. Here are four simple steps to get started.

1. Choosing a Proof-of-Stake Cryptocurrency

To begin staking cryptocurrency independently, a user would have to decide which coin they want to stake and buy their cryptocurrency of choice.

Ethereum (ETH), for example, requires a minimum of 32 ETH (worth about $123,000 at the time of writing) for users to begin staking.^[3]

2. Choosing a Staking Platform

You may be able to stake crypto through an exchange network, through a staking service, or directly through the cryptocurrency itself.

3. Choosing Your Wallet and Hardware

Typically, after choosing a platform, you would then download a crypto wallet in which to store your coins for staking. That may mean going directly to the specific crypto’s main website and downloading its corresponding wallet.

To stake crypto, users need a constant, uninterrupted internet connection. A standard dedicated desktop computer will likely do the job, although a Raspberry Pi might save on electrical costs.

4. Begin Staking

Once the hardware has been selected and the crypto wallet software downloaded, a user can begin staking cryptocurrency.

For those holding the appropriate crypto in an exchange-hosted crypto wallet, the exchange typically handles all the staking on the backend.

Depending on the specific crypto, wallet, or exchange network, that may be all the action a person needs to take. But it’s a good idea to double-check to see if additional steps need to be taken.

What Are the Different Ways to Stake Crypto?

There are also a few different ways to stake crypto.

Staking on an Exchange

Perhaps one of the simplest ways to stake crypto is to do so through your given exchange. Many crypto exchanges give people the option to stake, and in those cases, depending on the exchange, they may simply need to select the option to stake, lock up their holdings, and let the rewards generate.

Delegated Staking and Staking Pools

Aside from an exchange, stakers may be able to delegate their crypto holdings to pools, which will allow them to generate rewards, too. This can’t be done for every cryptocurrency, but for those that do have delegated staking and pooling built into their networks, it can be a way to stake directly to a validator or delegate.

Running Your Own Validator Node

If you’re really feeling up for it and want to get more deeply involved on a specific blockchain network, you could look at running your own validator node, also referred to as solo staking. Note, however, that doing so likely requires some significant background knowledge, and there’s the potential of making mistakes. It could also require some hardware that could cost hundreds or thousands of dollars.

The Pros and Cons of Crypto Staking

There are some pros and cons to staking crypto.

The Benefits of Staking

Here are a few of the potential benefits of staking:

•   Less energy-intensive. PoS networks use less energy than PoW platforms. Each mining machine requires a constant supply of electricity and consumes much more power than a regular computer. But it’s possible to run validator nodes on an average computer, eating up fewer resources, to power your staking activity

•   Easier to earn rewards. Crypto staking and mining rewards can be very different. Almost anyone can stake a small amount of crypto on a crypto exchange and earn some kind of yield. To become a miner, however, often requires a much bigger commitment. First, you’d need to acquire the proper computer, which can be costly; then you’d need to learn to use it, which can be time-consuming.

•   No special equipment required. Anyone can become a validator using a regular computer, assuming they have enough money and can keep the node running constantly. By contrast, mining requires specialized hardware.

The Risks of Staking

Conversely, there are some risks of staking that individuals should know about.

•   Different security measures. PoS is relatively new compared to PoW. It’s not necessarily unsafe, but it’s also not inherently more secure than PoW, either. There are different security measures in place, and a lot of that depends on the specific network as well.

•   Potential for takeover. Crypto blockchain networks may be controlled by those who hold the majority (or 51%) of tokens. While attacking a PoW network would involve acquiring large amounts of computing power, in many cases, attacking a PoS network could only require funding (again, depending on the specific network). Smaller blockchain networks are generally more vulnerable to a PoS “51% attack,” where attackers may try to manipulate transactions to their own advantage. However, PoS networks may also provide some inherent protection against these attacks. For example, attackers attempting such an attack risk losing the entire amount that’s staked.

•   Increased centralization. The creator(s) of blockchain technology intended for blockchains to be decentralized. But in some cases, PoS networks can wind up becoming more centralized because becoming a validator can be more expensive than becoming a miner. Ethereum (ETH), for example, plans to change from PoW to PoS. To become an ETH validator would require 32 ETH (or around $123,000 as of summer 2025). Many centralized exchanges have chosen to become validators of PoS coins to share staking rewards with their customers.

How to Choose the Best Coins for Staking in 2025

Just a few years ago, the entire concept of proof-of-stake consensus was still relatively new, and options for staking coins were few and far between. But a growing number of projects are utilizing PoS and some exchanges are making it easier than ever for users to passively earn crypto by staking their coins.

With that in mind, the list of potential cryptos to stake, and the ones offering the highest potential yields, is always changing. But here are some of the cryptos out there that are viewed as more established.

•   Ethereum (ETH): Ethereum (ETH) is one of the most popular cryptocurrencies on the market — although it is not exactly a cryptocurrency itself. Staking Ethereum on your own will require a minimum of 32 ETH. Rewards vary, too.

•   EOS (EOS): EOS is similar to Ethereum in that it’s used to support decentralized blockchain systems and projects. EOS tokens are native to the EOS blockchain, and like other cryptos, can be staked to earn rewards.

•   Tezos (XTZ): Like EOS and Ethereum, Tezos (XTZ) is an open-source blockchain network with its own native currency, with a symbol of XTZ. And it, too, can be staked on certain platforms and networks.

•   Polkadot (DOT): Polkadot is a newer cryptocurrency, created in August 2020. Polkadot is both a cryptocurrency and a protocol designed to support “parachains,” which allow different blockchains created by different developers to share information securely.

•   Avalanche (AVAX): Avalanche was created in 2020, and is one of the highest yield-producing cryptos out there for staking.

It’s important to research your options to understand whether staking a certain cryptocurrency would be right for you. Also be aware, as mentioned earlier, that SoFi does not currently offer staking services. While members will soon be able to buy, sell, and hold certain cryptocurrencies, such as Ethereum, other cryptocurrencies listed above may not be offered.

Factors to Consider

As with any financial transaction, it’s always important to consider the potential risks of crypto staking. As outlined, there are multiple risks to weigh, and when it comes to staking specifically, you’ll want to think about the potential staking rewards you could earn versus how your holdings could otherwise be used to generate returns.

There can be numerous things to take into account, but when it comes to staking, consider the reliability of a given crypto network, volatility, security, and opportunity costs.

Is Crypto Staking Worth It?

Anyone can earn crypto by staking cryptocurrency. But unless someone is sitting on a huge stash of proof-of-stake coins, they’re not likely to get rich from staking.

Staking rewards, as mentioned above, are in some ways similar to earning interest on funds held in a savings account. Both are a form of passive income (with the possible exception of solo staking). They don’t require a user to do anything other than holding the right assets in the right place for a given length of time. The longer a user stakes their coins, the greater potential for generating bigger rewards.

But unlike savings accounts, there are a few variables particular to proof-of-stake coins that influence how much of a staking reward users are likely to receive. Users would do well to research these factors and more when searching for the most profitable staking coins:

•   Potential reward size

•   The size of the staking pool

•   The size of holdings locked, or required to stake

Additionally, the fiat currency value of the coin being staked must also be taken into account. Assuming this value remains steady or rises, staking could potentially be profitable. But if the price of the coin falls, profits could diminish quickly.

The Takeaway

Staking is a way to use your crypto holdings or coins to earn additional rewards. It can be helpful to think of it as along the lines of funds generating interest in a savings account over time.

Essentially, coin holders allow their crypto to be used as a part of the blockchain validation process, and are rewarded by the network for the use of their assets. While there are risks to be aware of, such as the value of the cryptocurrency itself falling, staking may open up another potential avenue for generating returns.

SoFi Crypto is back. SoFi members can now buy, sell, and hold cryptocurrencies on a platform with the safeguards of a bank. Access 25+ cryptocurrencies, such as Bitcoin, Ethereum, and Solana, with the first national chartered bank to offer crypto trading. Now you can manage your banking, investing, borrowing, and crypto all in one place, giving you more control over your money.

FAQ

How much can you earn from crypto staking?

How much you could potentially earn from crypto staking depends on the specific crypto and given return rates associated with it. Rewards can range wildly.

Is staking crypto safe?

Staking crypto comes with risk, including the risk that the cryptocurrency loses value while it’s locked, but some staking set ups may be riskier than others. As always, do some research to try and get a sense of how risky staking a specific crypto could be, as there can be some significant risks associated with certain assets.

Can you lose money by staking crypto?

It is possible to lose money by staking crypto since holdings are locked up and values can change, or there may be penalties and vulnerabilities on a given platform or within a specific blockchain network.

What is the difference between crypto staking and lending?

Staking involves earning rewards (typically in the form of cryptocurrency) by locking up your crypto holdings with a blockchain network to help it validate transactions. Lending involves lending cryptocurrency holdings to a borrower in order to earn interest. Note that crypto lending can come with the risk of the borrower not returning the borrowed holdings.

Do you have to pay taxes on staking rewards?

Yes, rewards earned from crypto staking (or crypto mining) are taxed as ordinary income. Taxpayers are required to report the fair market value of the cryptocurrency rewards in U.S. dollars at the date and time those rewards are made available to them.

The same cryptocurrency holdings may also be subject to capital gains taxes when they’re sold, exchanged for another cryptocurrency, or disposed of in another way. Capital gains and losses from those transactions must be reported to the IRS.

About the author

Samuel Becker

Sam Becker is a freelance writer and journalist based near New York City. He is a native of the Pacific Northwest, and a graduate of Washington State University, and his work has appeared in and on Fortune, CNBC, Time, and more. Read full bio.

Photo credit: iStock/FreshSplash

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One of the most common retirement plans is an IRA, or individual retirement account, which allows individuals to contribute and save money for retirement over time. The money can be withdrawn during retirement to cover living expenses and other costs.

There are several different types of IRAs. Two of the most popular types are the Roth IRA and the Traditional IRA.

Perhaps less well-known are the SEP IRA and the SIMPLE IRA. These IRAs are designed for business owners, sole proprietors, and the self-employed.

For small business owners who would like to offer their employees — and themselves — a retirement savings plan, a SEP IRA and a Simple IRA can be options to explore. According to a 2023 study by Fidelity, only 34% of small business owners offer their employees a retirement plan. This is because they believe they can’t afford to do so (48%), are too busy running their company to do it (22%), or don’t know how to start (21%). SEP or Simple IRAs are generally easy to set up and manage and have lower fees than other types of accounts.

There are a number of similarities and differences between the SEP IRA vs. the SIMPLE IRA. Exploring the pros and cons of each and comparing the two plans can help self-employed people, small business owners, and also employees make informed decisions about retirement savings.

How SEP IRAs Work

A SEP IRA, or Simplified Employee Pension IRA, is a retirement plan set up by employers, sole proprietors, and the self-employed. Although SEP IRAs can be used by any size business, they are geared towards sole proprietors and small business owners. SEP IRAs are typically easy to set up and have lower management fees than other types of retirement accounts.

Employers make contributions to the plan for their employees. They are not required to contribute to a SEP every year. This flexibility can be beneficial for businesses with fluctuating income because the employer can decide when and how much to contribute to the account.

Employers can contribute up to 25% of an employee’s annual salary or $70,000 in 2025, whichever is less. In 2026, employers can contribute up to $72,000 or 25% of an employee’s salary, whichever is less. The employer and all employees must receive the same rate of contribution.

Employees cannot make contributions to their SEP accounts.

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SEP IRA Pros and Cons

There are advantages to a SEP IRA, but there are disadvantages as well. Here are some of the main benefits and drawbacks to be aware of.

Pros

The pros of a SEP IRA include:

•   A SEP IRA is an easy way for a small business owner or self-employed individual to set up a retirement plan.

•   The contribution limit is higher than that for a SIMPLE IRA. In 2025, the contribution limit is $70,000 to a SEP IRA, and in 2026, the contribution limit is $72,000.

•   Employers can deduct contributions to the account from their taxes up to certain amounts, and employees don’t have to include the contributions in their gross income. The money in the account is tax-deferred, and employees don’t pay taxes on the money until it gets withdrawn.

•   For self-employed individuals, a SEP IRA may help reduce certain taxes, such as self-employment tax.

•   An employer isn’t required to make contributions to a SEP IRA every year. This can be helpful if their business has a bad year, for example.

•   For employees, the money in a SEP is immediately 100% vested, and each employee manages their own assets and investments.

•   Having a SEP IRA does not restrict an individual from having other types of IRAs.

Cons

There are some drawbacks to a SEP IRA for employees and employers. These include:

•   Employees are not able to make contributions to their own SEP accounts.

•   Individuals cannot choose to pay taxes on the contributions in their SEP now, even if they’d like to.

•   Employers must contribute the same percentage to all employees’ SEP accounts that they contribute to their own account.

•   There are no catch-up contributions for those 50 and older.

How SIMPLE IRAs Work

SIMPLE IRAs, or Savings Incentive Match Plan for Employees Individual Retirement Accounts, are set up for businesses with 100 or fewer employees. Unlike the SEP IRA, both the employer and the employees can contribute to a SIMPLE IRA.

Any employee who earns more than $5,000 per year (and has done so for any two- year period prior to the current year) is eligible to participate in a SIMPLE IRA plan. Employees contribute pre-tax dollars to their plan — and they may have the funds automatically deducted from their paychecks.

Employers are required to contribute to employee SIMPLE IRAs, and they may do so in one of two ways. They can either match employee contributions up to 3% of the employee’s annual salary, or they can make non-elective contributions whether the employee contributes or not. If they choose the second option, the employer must contribute a flat rate of 2% of the employee’s salary up to a limit of $350,000 in 2025, and up to a limit of $360,000 in 2026.

Both employer contributions and employee salary deferral contributions are tax-deductible.

As of 2025, the annual contribution limit to SIMPLE IRAs is $16,500. Workers age 50 and up can contribute an additional $3,500. In 2026, the annual contribution limit is $17,000, and workers age 50 and up can contribute an additional $4,000.

SIMPLE IRA Pros and Cons

There are benefits and drawbacks to a SIMPLE IRA.

Pros

These are some of the pros of a SIMPLE IRA:

•   A SIMPLE IRA is a way to save for retirement for yourself and your employees. And the plan is typically easy to set up.

•   Both employees and employers can make contributions.

•   Money contributed to a SIMPLE IRA may grow tax-deferred until an individual withdraws it in retirement.

•   For employees, SIMPLE IRA contributions can be deducted directly from their paychecks.

•   Employers can choose one of two ways to contribute to employees’ plans — by either matching employee contributions up to 3% of the employee’s annual salary, or making non-elective contributions of 2% of the employee’s salary up to an annual compensation limit.

•   Employees are immediately 100% vested in the SIMPLE IRA plan.

•   A SIMPLE IRA has higher contribution limits compared to a traditional or Roth IRA.

•   Catch-up contributions are allowed for those 50 and up.

Cons

SIMPLE IRAs also have some drawbacks, including:

•   A SIMPLE IRA is only for companies with 100 employees or fewer.

•   Employers are required to fund employees’ accounts.

•   The SIMPLE IRA contribution limit ($16,500 in 2025, and $17,000 in 2026) is much lower than the SEP IRA contribution limit ($70,000 in 2025, and $72,000 in 2026).

Main Differences Between SEP and Simple IRAs

While SEP IRAs and SIMPLE IRAs share many similarities, there are some important differences between them that both employers and employees should be aware of.

Eligibility

On the employer side, a business of any size is eligible for a SEP IRA. However, SIMPLE IRAs are for businesses with no more than 100 employees.

For employees to be eligible to participate in a SIMPLE IRA, they must earn $5,000 or more annually and have done so for at least two years previously. To be eligible for a SEP IRA, an employee must have worked for the employer for at least three of the last five years and earned at least $750.

Who Can Contribute

Only employers may contribute to a SEP IRA. Employees cannot contribute to this plan.

Both employers and employees can contribute to a SIMPLE IRA. Employers are required to contribute to their employees’ plans.

Contribution limits

Employers are required to contribute to employee SIMPLE IRAs either by matching employee contributions up to 3% of the employee’s annual salary, or making non-elective contributions of 2% of the employee’s salary up to a limit of $350,000 in 2025, and up to a limit of $360,000 in 2026.

With a SEP IRA, employers can contribute up to 25% of an employee’s annual salary or $70,000 in 2025, whichever is less. In 2026, an employer can contribute up to 25% of an employee’s annual salary or $72,000, whiever is less. A business owner and all employees must receive the same rate of contribution. Employers are not required to contribute to A SEP plan every year.

Taxes

For both SEP IRAS and SIMPLE IRAs, contributions are tax deductible. Individuals typically pay taxes on the money when they withdraw it from the plan.

Vesting

All participants in SIMPLE IRAs and SEP IRAS are immediately 100% vested in the plan.

Paycheck Deductions

Employees contributing to a SIMPLE IRA can have their contributions automatically deducted from their paychecks.

Employees cannot contribute to a SEP IRA, thus there are no paycheck deductions.

Withdrawals

For both SEP IRAs and SIMPLE IRAS, participants may withdraw the money penalty-free at age 59 ½ . Withdrawals are taxable in the year they are taken.

If an individual makes an early withdrawal from a SEP IRA or a SIMPLE IRA, they will generally be subject to a 10% penalty. For a SIMPLE IRA, if the withdrawal is taken within the first two years of participation in the plan, the penalty is raised to 25%.

SEP IRAs may be rolled over into other IRAs or certain other retirement plans without penalty. SIMPLE IRAs are eligible for rollovers into other IRAs without penalty after two years of participation in the plan. Before then, they may only be rolled over into another SIMPLE IRA.

Here’s an at-a-glance comparison of a SEP IRA vs. SIMPLE IRA:

The Takeaway

Both the SEP IRA and the SIMPLE IRA were created to help small business owners and their employees save for retirement. Each account may benefit employers and employees in different ways.

With the SEP IRA, the employer (including a self-employed person) contributes to the plan. They are not required to contribute every year. With the SIMPLE IRA, the employer is required to contribute, and the employee may contribute but can choose not to.

In addition to these plans, there are other ways to save for retirement. For instance, individuals can contribute to their own personal retirement plans, such as a traditional or Roth IRA, to help save money for their golden years. Just be sure to be aware of the contribution limits.

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