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Updating the wiring in a house could cost between $6 and $10 per square foot, but keeping old wiring could have disastrous consequences. Electrical issues are the third most common cause of house fires in the United States.

Modern technology also may demand rewiring a house. Powering multiple electronic devices, having adequate interior and exterior lighting, and heating and cooling a home to today’s standards are difficult if a home’s electrical system is not up to the task.

Factors That Affect the Cost to Rewire a House

Rewiring a home involves removing the outdated wiring inside a home’s walls and installing new, modern wiring that can safely meet today’s electrical needs.

Rewiring is typically done by a licensed electrician who strips out the old wiring and runs new wiring throughout the entire house, installs a new circuit breaker panel to handle the load of the new wiring system, and ensures that building codes are met.

It can be a big job — and an expensive one, too. Let’s look at some common factors that can impact the total cost.

Size of the House

The bigger the home, the more materials and labor the job will likely require. And that can drive up the price. Rewiring a 1,300-square-foot house, for instance, runs around $7,800 to $13,000. For a 2,500-square-foot home, you can expect to pay between $15,000 to $25,000.

House’s Age

Older homes weren’t constructed with 21st century living in mind, so a rewiring project will likely cost more. Common necessities like opening a wall to reach out-of-the-way wiring ($4-$8 per square foot), upgrading outdated wiring ($200-$2,300), and replacing an electrical outlet ($125-$200) can all add to the price tag.

Extent of Work Needed

Small-scale projects are typically cheaper than larger, more complex ones. If you’re planning to set up a new alarm system, run wiring to a backyard shed, or upgrade the electric panel, you’ll likely need to adjust your budget accordingly.

Recommended: How to Find a Contractor for Home Remodeling

Signs You Need to Rewire a Home

Flickering lights, outlets making a popping sound, or tripped breakers indicate that a home might need to be rewired. When buying an older home, a home inspection typically reveals if rewiring is recommended or necessary.

Even before a professional inspection, prospective homebuyers may be able to get a good idea of how the home is wired by peeking into the attic, basement, or crawl space.

Vintage charm does not extend to knob and tube wiring, which was common through the mid-1900s. The lack of a ground wire is seen as a significant fire hazard, and most carriers will deny homeowners insurance for a home that has knob and tube electrical wiring.

Another way to check for outdated wiring is to find the electrical panel and see if it has modern breaker switches or round fuses. The fuses indicate that the system is outdated, and rewiring the house might be recommended.

In almost every state, home sellers must disclose defects, but cautious buyers may still want to include the inspection contingency in the purchase contract.

If you’re living in a home with older wiring and notice that your circuit breakers trip often, lights flicker, the light switches feel warm to the touch, or there is a burning smell coming from an outlet, it’s time to schedule an appointment with an electrician.

Cost to Rewire a House Per Material

The cost of rewiring a house depends on square footage and how easy or difficult it is to access the space. But the wiring and cable materials can also have an impact. Let’s take a look:

•   Used in most homes, nonmetallic (NM) cables are easy to install, flexible, and cost-effective. If you’re rewiring these cables, expect to pay between $0.40 and $0.80 per linear foot, according to Angi.

•   Underground feeder (UF) cables are similar to NM cables, except that they’re designed to go underground or in damp areas. Rewiring UF cables costs around $0.50 to $0.75 per linear foot.

•   Durable and able to handle high temperatures, THHN and THWN wires are often used in an unfinished space, like a basement, or for hot water heaters and garbage disposals. They cost $0.80 to $1.60 per linear foot to rewire.

•   Coaxial cables have high bandwidth support and are easy to install, which once made them a go-to choice for televisions and video equipment. Today, they’re more commonly used to connect cable or satellite TV signals or for internet connectivity. These cables cost around $0.25 to $0.35 per linear foot to rewire.

Updating a doorbell or thermostat? You’ll likely be working with low-voltage wires, which are used for circuits less than 50 volts. Rewiring typically costs between $0.25 and $0.35.

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How to Cover Your House Rewiring Costs

Rewiring a home is not a small expense. Fortunately, there are various ways to pay for it. Here’s a look at some options.

Home Equity Loans

If you’ve built up equity in your home and are facing a major rewiring project, a home equity loan may be the right choice. There are three main types to consider: a fixed-rate home equity loan, a home equity line of credit (HELOC), and cash-out refinancing.

Each has its pros and cons. For instance, with a fixed-rate home equity loan, you receive a lump sum payment, which you’ll pay back over a period of time with a set interest rate.

A HELOC, on the other hand, is revolving debt. As the balance borrowed is paid down, it can be borrowed again during the draw period, which typically lasts 10 years.

With a cash-out refinance, you can refinance your mortgage for more than what you currently owe, and then take the difference in cash.

Home Improvement Loans

A home improvement loan is a type of personal loan used to fund renovations and upgrades, including rewiring a house. Once your loan application is approved, you’ll receive a lump sum of cash, which you can use to pay for home improvements. You’ll repay the loan, with interest, in regular installments over the life of the loan — typically five to seven years.

These loans are unsecured, which means your home isn’t used as collateral. As a result, they often come with a higher interest rate.

💡 Quick Tip: Check out SoFi’s home improvement loan rates to explore competitive terms and find the right financing for your renovation needs.

Credit Cards

A credit card is a fast, easy way to fund a rewiring project, and it can be a good option if you’re able to pay off the balance on the card that month. Or look for a card with an introductory 0% annual percentage rate (APR), as this allows you anywhere from six to 18 months to pay back the balance with zero interest. But keep in mind that any balance left after the promotional period ends will start accruing the card’s regular APR.

Cash

Depending on the scope of the project and your budget, you may decide to dip into your savings account or withdraw money from your emergency fund, if you have one.

As you create a budget and weigh your financing options, look for opportunities to save money. Research how much rewiring a house costs in your area, and include a cushion in your budget for unexpected expenses. If you’re not planning to tackle the job yourself, gather quotes from reputable licensed electricians in your area and see which one can offer you the best deal.

Finally, factor in the long-term costs and benefits. Although rewiring might seem cost-prohibitive when buying a single-family home, owners may find that the cost of rewiring a house — and the peace of mind the upgrade provides — can be money well spent.

The Takeaway

At $6 to $10 per square foot, the cost of rewiring a house may seem high. But adequate electrical panels and modern wiring can amp up your home value and prevent fires. Wondering how you’re going to pay for it all? Home equity loans, savings, credit cards, and home improvement loans are all ways to pay for the average cost to rewire a house.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

Is it worth rewiring an old house?

Yes, it’s worth rewiring an old house. Replacing outdated wiring can help prevent a house fire and add value to the property. Plus, updated, energy-efficient fixtures are sometimes included in a remodeling job of this scope, which can potentially lower utility costs.

How much does it cost to replace all the electrical wiring in a house?

According to the home services website Angi, home owners can expect to pay anywhere from $601 to $2,590 to rewire a house. However, if you have an older, larger home, you’ll likely pay closer to $6,000.

Can a house be rewired without removing drywall?

In many cases, at least some drywall will need to be removed during a rewiring project. But talk to your electrician to see if the work can be done without disrupting your walls.

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SOPL-Q424-018

Mutual fund investors pay taxes on the income or capital gains they see from their investments. But the specific tax treatment of mutual fund investments depends on several variables, which can breed confusion. For a long time, mutual funds have been a popular investment vehicle for millions of investors, largely because they offer an easy way to purchase no-fuss, diversified assets with relative ease. This out-of-the-box diversification and risk mitigation is something that individual stocks can’t match.

Read on to learn how taxes on mutual funds work, what investors should expect or anticipate when dealing with mutual funds and the IRS, and some strategies for tax-efficient investing.

Quick Mutual Fund Overview

A mutual fund is a pooled investment vehicle that allows individuals to invest in a professionally managed portfolio of stocks, bonds, and other securities. Mutual funds are managed by professional portfolio managers who use the pooled capital to buy and sell securities according to the fund’s stated investment objective. When investors buy into a mutual fund while online investing, they’re purchasing a spectrum of assets all at once.

Mutual funds can be actively managed, where the portfolio manager actively buys and sells securities in the fund, or passively managed, where the fund tracks an index. Mutual funds are a popular way for individuals to diversify their portfolios and access professional investment management.

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Do You Pay Taxes on Mutual Funds?

Mutual fund investors generally need to pay taxes on any income or capital gains the mutual fund distributes, including dividends, interest, and realized capital gains from the sale of securities within the fund.

It’s worth noting that mutual funds can be structured in different ways, and the tax treatment of mutual fund investments can vary depending on the specific type of mutual fund. For example, some mutual funds are classified as tax-exempt or tax-deferred, which means that they are not subject to certain taxes or that taxes on the income or gains from the fund are deferred until later.

When a mutual fund distributes income or capital gains to its investors, it must provide them with a Form 1099-DIV, which reports the distribution amount and any associated taxes. Investors are then responsible for reporting this income on their tax returns and paying any taxes that are due.

How Are Mutual Funds Taxed?

Mutual funds are taxed based on the income and capital gains they generate and distribute to their investors. This income and capital gains can come from various sources, such as dividends on stocks held by the fund, interest on bonds held by the fund, and profits from the sale of securities within the fund.

The tax treatment of mutual fund investments can vary depending on the type of fund and the type of income or capital gains it generates. Here are some general rules to keep in mind:

Paying Tax on “Realized Gains” from a Mutual Fund

It may come as a surprise that shareholders may owe taxes on their mutual fund holdings even if they don’t sell shares of the fund. That’s because shareholders still generate income from those holdings, which are often called “realized” gains.

Mutual funds are often actively managed, meaning that a portfolio manager regularly makes decisions about what the fund contains by buying and selling investments — a process that can net profits. Those profits, or gains, are then passed back to shareholders as distributions (or as dividends) or reinvested in the fund.

When shareholders are awarded distributions from funds, they see a “realized” gain from their investment. For that reason, shareholders may end up owing tax on investments that they have not sold or may have lost value over the year.

Paying Capital Gains on Mutual Funds

Most investors likely know that when they sell shares of a mutual fund, they’ll need to pay taxes on the earnings. Specifically, they’ll pay capital gains tax on the profit from selling an investment. The capital gains tax rate will vary depending on how long an investor holds the investment (short-term versus long-term).

Because funds contain investments that may be sold during the year, thereby netting capital gains, investors may be responsible for capital gains taxes on their mutual fund distributions. As each fund is different, so are the taxes associated with their distributions. So reading through the fund’s prospectus and any other available documentation can help investors figure out what, if anything, they owe.

How Much Tax Do You Pay on Mutual Funds?

The amount of tax you may need to pay on mutual fund investments depends on the type of fund, the type of income or capital gains the fund generates, and your individual tax situation.

Here are some general rules to keep in mind:

•   Dividends: Dividends paid by mutual funds are taxed at different rates, depending on whether the payouts are ordinary or qualified dividends. Qualified dividends are taxed at a lower rate than ordinary dividends; they’re taxed at the long-term capital gains rate, which ranges from 0% to 20%. In contrast, ordinary dividends are taxed at an investor’s ordinary income tax rate.

•   Interest: The tax on the interest income from mutual funds depends on whether the payout comes from tax-exempt bonds, federal debt, or regular fixed-income securities. Depending on the type of asset, the interest may be taxed at ordinary income tax rates or exempt from certain taxes.

•   Capital gains: When a mutual fund sells securities for a profit, it may realize a capital gain, which is subject to tax. The tax rate on capital gains depends on how long the securities were held and your tax bracket. Short-term capital gains (on securities held for one year or less) are taxed at the same rate as ordinary income. In comparison, long-term capital gains (on securities held for more than one year) are generally taxed at the lower capital gains tax rate.

How to Minimize Taxes on Mutual Funds

Here are a handful of ways to potentially lower taxable income associated with mutual funds:

Know the Details Before You Invest

Do your homework! The holdings in each fund and how they’re managed will ultimately play a significant role in the tax liabilities associated with each fund. Before investing in a specific mutual fund, it’s worth digging through the prospectus and other documents to understand what to expect.

For example, an investor can typically find out ahead of time if a mutual fund makes capital gains distributions or how often a fund pays out dividends. Those types of income-generating events will need to be declared to the IRS come tax time.

Some investors may look for tax-efficient funds specifically designed to help mutual fund investors avoid taxes.

Use a Tax-deferred Account

Some brokerage or investment accounts — including retirement accounts like IRAs and 401(k) plans — are tax-deferred. That means they grow tax-free until the money they contain is withdrawn. In the short term, using these types of accounts to invest in mutual funds can help investors avoid any immediate tax liabilities that those mutual funds impose.

Recommended: Are Mutual Funds Good for Retirement?

Hang Onto Your Funds to Try and Avoid Short-term Capital Gains

If the goal is to minimize an investor’s tax liability, avoiding short-term capital gains tax is important. That’s because short-term capital gains taxes are steeper than the long-term variety. An easy way to ensure that an investor is rarely or never on the hook for those short-term rates is to subscribe to a buy-and-hold investment strategy.

This can be applied as an overall investing strategy in addition to one tailor-made for avoiding additional tax liabilities on mutual fund holdings.

Talk to a Financial Professional

Of course, not every investor has the same resources, including time, available to them. That’s why some investors may choose to consult a financial advisor specializing in these services. They usually charge a fee, but some may offer free consultations. For some investors, the cost savings associated with solid financial advice can outweigh the initial costs of securing that advice.

How Do You Report Mutual Funds on Your Taxes?

If you own mutual funds, you will generally need to report any income or capital gains you receive from the fund on your tax return.

Mutual funds are required to provide their investors with a Form 1099-DIV, which reports the amount of any dividends, interest, and capital gains distributions the fund paid out during the year. Make sure to keep this form for your records and use it to help complete your tax return.

You will then need to report any dividends, interest, and capital gains distributions you received from your mutual fund on your tax return, specifically on IRS Form 1040 or Schedule D (Form 1040).

The Takeaway

Mutual fund taxes are generally unavoidable, but with a little planning, you may be able to minimize the amount you get taxed. Employing some of the above strategies can help you minimize your mutual taxes. For example, those investing for long-term financial goals, like retirement, can use tax-deferred accounts as their primary investing vehicles. And by using those accounts to invest in mutual funds and other assets, they can help offset their short-term tax liabilities.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

FAQ

Do you pay taxes when you sell mutual funds?

Yes, you may be required to pay taxes when you sell mutual funds. The specific taxes you may be required to pay will depend on several factors, including the type of mutual funds you are selling, how long you have held the funds, and the type of gains you have earned from the sale.

Are mutual funds taxed twice?

Mutual funds are not taxed twice. However, some investors may mistakenly pay taxes twice on some distributions. For example, if a mutual fund reinvests dividends into the fund, an investor still needs to pay taxes on those dividends. Later, when the investor sells shares of the mutual fund for a gain, they’ll have to pay capital gains taxes on those earnings.