Jan
24
2025

Tips for Eating Out at Restaurants While on a Budget

By | Budgeting & Goals, Financial Topics | Comments Off on Tips for Eating Out at Restaurants While on a Budget

The cost of eating out, like just about everything else, goes up with inflation, but that doesn’t mean you have to skip it altogether. It can be a fun way to take a night off from cooking, try new foods, and perhaps most importantly, bond with others.

If you’d like to enjoy eating out without breaking the bank, try these strategies to make dining out more affordable. They include timing your visits wisely, seeking out deals, ordering strategically, and taking advantage of loyalty programs.

Key Points

•   Choose budget-friendly restaurants like fast-casual eateries to save money while dining out.

•   Time visits wisely by opting for lunch menus or dining during happy hours for discounts.

•   Utilize restaurant apps and loyalty programs to access deals and earn rewards.

•   Share meals or appetizers to reduce costs, but be aware of potential surcharges.

•   Set a dining-out budget and stick to it to avoid overspending.

Choose Budget-Friendly Restaurants

The Bureau of Labor Statistics reports that the spending on food outside the home rose 8.1% in 2023. That’s a significant jump and can take a bite out of your discretionary spending funds. (There are, as you might expect, risks to not saving money or blowing your budget in this way.)

However, with careful planning, you can find ways to save and still eat out without going into debt. Opting for fast-casual restaurants is a good choice if you want to avoid an expensive meal. Prices at these restaurants are designed to appeal to typical Americans. Examples of fast-casual restaurants are Olive Garden, Outback Steakhouse, Macaroni Grill, and P.F. Chang’s.

The meals at fast-casual eateries straddle the line between fast food and fine food. You will also find an extensive children’s menu in many cases, which can be more affordable than ordering an adult-sized meal for a kid.

Time Your Visits Wisely

One simple way to save money when eating out is to go midday: Restaurant lunch menus tend to go easier on your eating-out budget. Lunch menus are cheaper because the portions tend to be smaller so the restaurant charges less. Also, the restaurant may want to encourage more diners at lunch time.

Many eateries will offer deals on certain days of the week, such as Mondays when people might tend to work from home and not dine out. A restaurant might allow children to eat for free on certain nights, making eating out on a budget easier for families.

Check local media and community pages to find out which restaurants are offering deals and when. Also look at restaurant Facebook pages, Yelp, and other social media for time-sensitive deals that can help you save money on food.

Take Advantage of Happy Hours

Happy hours are another way that restaurants try to attract business at slower times, and they can be a good deal if you are on a budget so you don’t deplete your checking account. Happy hours are often scheduled to increase foot traffic in the early evenings during weekdays. Although cheap drinks are usually what come to mind for happy hour, many restaurants offer discounts on food, too. You might have a budget-priced beer or glass of wine and some snacks and consider it dinner.

If you want to save as much as possible when eating out, consider stacking deals. You might be able to go out to eat on, say, a Monday during the happy hour and reap a double discount in some places.

Recommended: 50/30/20 Budget Calculator

Make the Most of Deals and Discounts

Lots of restaurants offer deals and discounts, you just have to know how to access them. That’s often through an app. Bigger chains like Panera and Olive Garden have an app with deals and offers reward points (more on that below), which can encourage customer loyalty and more frequent dining. According to Bluedot, a restaurant technology company, 51% of customers find deals using a restaurant’s app, while 43% find deals through coupons in the mail.

Other ways to find restaurant deals are to check such websites as Groupon and LivingSocial. You might also find discounted, restaurant-specific gift cards on these sites. Also look on social media for deals; you might see an offer, such as two pasta entrees and a bottle of wine, at a price that’s gentle on your bank account.

Another tip: At restaurant.com, you can buy a certificate for a specific restaurant at a discounted price, for example, a $25 gift certificate for $10.

Join Loyalty Programs

Restaurants use loyalty programs to attract consumers. According to PYMTS.com, 67% of restaurants now provide a loyalty program. Restaurants often offer incentives to sign up for loyalty points, such as a free appetizer, dessert, or entrée.

Panera has a popular program that is based on the number of visits members make to their locations. Members of the program receive personalized treats and rewards, such as free bagels, savings on salads and sandwiches, birthday surprises, and an unlimited coffee subscription.

Order Strategically

Plan ahead how you might keep your bill within your budget’s boundaries.

Sidestep Pricey Drinks

Alcohol tends to be expensive in restaurants, so you might stick with a soft drink or the cheapest option, free tap water. If you would like some wine with your dinner, call the restaurant and ask if they allow you to bring your own and if they charge a corkage fee. It might be cheaper to take your own wine and pay the corkage fee.

Also take note of how beverages like coffee and iced tea are handled. Some eateries offer free refills; others don’t. Know the impact on your wallet before you opt for that second (or third) serving.

Share Meals or Appetizers

Many restaurants serve large portions, so one strategy for saving money when eating out is to share appetizers with others or split an entrée. For example, you might make a meal for three people out of two entrees and a couple of sides instead of three entrées.

If you split an entrée, the kitchen might be willing to split it between two plates before serving it. If not, ask for an extra plate when the meal comes. You can then split the bill politely when dining out by asking the server to divide the amount or having one person pay and the others transfer their share to them.

Recommended: How Much of Your Paycheck Should You Save?

Set a Restaurant Budget

Set a budget for eating out each week or month so that you don’t spend too much. To help figure out the amount, track your current dining habits for a week, and then consider how much you can reasonably allow based on your lifestyle and total budget.

You might try out some different budgeting methods, such as the envelope system. With this technique, you could allot a certain amount of money to dining out at the beginning of the month. Once that money is gone, stop dining out, or else borrow from another spending category if you have wiggle room there. But this is not a moment to be transferring money from one bank account to another, as in from savings to checking, to fuel your restaurant tab. You want to stay on target and not put too much of your hard-earned cash towards eating out.

Recommended: How to Merge Bank Accounts

The Takeaway

Eating out can get expensive, but there are ways to lower the cost and still enjoy meals at restaurants. Timing your visits strategically, snagging deals via loyalty programs, and sharing food can be some of the ways to stick to your budget.
Another idea for helping your budget can be to pick the right banking partner.

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


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

FAQ

How effective is it to split meals when dining out on a budget?

How to eat out inexpensively can include splitting meals for significant savings. However, some restaurants may add a meal-sharing surcharge or reduce portion sizes to discourage people from splitting meals. Use your judgment to see if this is a good tactic for lowering dining-out costs.

Are lunch menus typically more budget-friendly than dinner options?

Yes. Lunch menus tend to be cheaper because the portions may be smaller and fewer employees are typically required to staff a restaurant at lunchtime compared to dinner time.

What days of the week often have the best restaurant deals?

Mondays, Tuesdays, and Wednesdays tend to have the best deals to attract more diners vs. the standard “eating out” days of Friday and Saturday.

Photo credit: iStock/Daniel Suhre

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at 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.

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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

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Jan
24
2025
What Is an Itemized Deduction?

Guide to Itemized Deductions

By | Budgeting & Goals, Family Finances, money | Comments Off on Guide to Itemized Deductions

Tax deductions enable taxpayers to reduce their total taxable income. That can be a very good thing: It can result in a lower tax bill or, if you had too much withheld through the year, a larger refund.

While most people now take the standard deduction — especially since the Tax Cuts and Jobs Act of 2017 effectively doubled the standard deduction amount — some taxpayers may benefit from itemizing their deductions.

Doing so can be a somewhat complicated and time-consuming process, but it may save you money. Here’s your guide to itemizing deductions; read on to learn:

•  What is an itemized deduction?

•  How do itemized deductions differ from standard deductions?

•  What are examples of itemized deductions?

•  What are the pros and cons of itemizing deductions?

What Is an Itemized Deduction?

Itemized deductions are a strategy to lower your adjusted gross income for a tax year. Rather than taking a set standard deduction whose amount is determined by the Internal Revenue Service (IRS), some taxpayers choose to calculate all deductions for which they’re eligible. They can then decrease their taxable income by that amount.

It’s worthwhile for some taxpayers to do the math and see how much they can reduce their tax bill by itemizing. That said, many may realize they can actually reduce their taxable income more by taking the standard deduction. Why? The standard deduction is much larger than it used to be since the passing of the Tax Cuts and Jobs Act at the end of 2017.

For the 2024 tax year (filing in 2025), the standard deduction is:

•  $14,600 for single tax filers

•  $21,900 for heads of household

•  $29,200 for married couples filing jointly

Almost everyone can take the standard deduction — and there’s a lot less math and paperwork involved. But for a unique set of taxpayers, itemized deductions could yield an even larger tax liability reduction than what the IRS offers through the standard deduction.

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Itemized vs. Standard Deduction: What’s the Difference?

So what are the differences between itemized deductions and the standard deduction? Let’s take a look.

•  Dollar amount: The standard deduction is a set amount. If you choose the standard deduction, you cannot reduce your tax liability further by tacking on itemized deductions. When itemizing, the amount by which you reduce your tax burden varies depending on your unique tax situation. In nearly every case, it only makes sense to itemize if the resulting deduction is larger than the standard deduction or if you aren’t eligible to take the standard deduction.

•  Process: Claiming the standard deduction is straightforward. You don’t need to produce receipts and sort through expenses. If you itemize, you’ll need to educate yourself about all the deductions for which you qualify, produce the proof that you qualify in case of a tax audit, and fill out what is known as Schedule A on your tax return.

•  Eligibility: Anyone can itemize their deductions, but the standard deduction has a few exceptions. For example, if you’re married but filing separately and your spouse itemizes, you must itemize as well. While almost everyone is eligible to take the standard deduction, it never hurts to check with the IRS or your accountant to ensure eligibility.

Recommended: How to Pay Less Taxes: 9 Simple Steps

How Do Itemized Deductions Work?

Now that you know what itemized deductions vs. standard ones are, consider a more specific example of how they work.

Itemized deductions reduce your overall tax liability, just like the standard deduction. The catch? You can only take the itemized deductions for which you’re eligible. If you can cobble together enough itemized deductions to equal a larger tax-liability reduction than the standard amount, it could be worth itemizing.

As an example, let’s assume your gross income was $100,000.

•  The standard deduction for this income is $14,600 for single filers, so your taxable income would be $85,400.

•  Let’s suppose your itemized deductions are worth $20,000. It will lower your taxable income to $80,000.

Because your itemized deductions are greater than the standard deduction, it makes sense to itemize. Doing so will lower your taxable income and can thereby reduce the taxes you pay.

While it may take longer to calculate your deductions and prepare your tax return, it may make good financial sense to keep that extra cash in your pocket (or savings account, as the case may be).

Types of Itemized Deductions

The IRS offers an extensive list of potential itemized tax deductions, but you’ll probably only qualify for a handful. Here are a few of the most common:

•  Property tax deduction

•  Mortgage interest deduction

•  Charitable contribution deduction

•  Deduction of state and local sales taxes

•  Deduction of certain medical and dental expenses

While the IRS used to have a long list of miscellaneous deductions — from moving expenses to unreimbursed job expenses to tax preparation fees — many of these disappeared with the Tax Cuts and Jobs Act.

Independent contractors may want to consider itemizing; check out the tax deductions for freelancers to see which ones you may qualify for. As you itemize your business expenses, pay attention to the home office tax deduction, as well as how much you spend on office supplies, travel, and other business-related expenses. Make sure to keep good documentation of what you’ve paid.

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How to Claim an Itemized Deduction

To claim itemized tax deductions on your return, you’ll need to fill out IRS Schedule A with your Form 1040. Here’s what that process looks like:

1.   Research itemized deductions. It’s helpful to know which deductions you qualify for — and to gather up necessary documentation to enter in all the information beforehand. Preparing for tax season can make the process go much more smoothly!

2.   Fill out Schedule A. You’ll enter in all your expenses and add them up to get your total deduction.

3.   Compare it to the standard deduction. Before copying that total over to your Form 1040, it’s wise to reference the standard deduction for your filing status this year. Once you’re sure that the itemized deduction can yield larger savings, you can write down the number on Form 1040 and continue filing your taxes.

While the process sounds straightforward, it can be difficult to find out which deductions you’re eligible for and how to tabulate all your expenses. If you’re unsure, it may be a good idea to work with an accountant or at least professional tax preparation software.

Recommended: How to File Taxes for the First Time

Pros and Cons of Itemized Deductions

So what are the benefits and drawbacks of itemizing your deductions? Let’s take a look.

Pro: Itemizing could help lower your taxable income and save you more money than the standard deduction.
Con: Given changes to tax law a few years back, there’s a good chance you may save more with the standard deduction.
Pro: Because you’re writing off certain expenses and know which expenses are deductible, you may be more prudent with your spending habits throughout the year.
Con: Itemizing can involve a lot more paperwork and effort. It can be confusing, and you must make sure you’re only itemizing deductions for which you actually qualify to avoid trouble with the IRS.

The Takeaway

Most people will likely save more money on their taxes with the standard deduction, but depending on your scenario, you could see a greater reduction in your tax liability by itemizing. If you have the time, it may be worth it to go through the process of itemizing, just to see if you could save money. If you can, great! And if not, the standard deduction also offers great savings.

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


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

FAQ

Can anyone itemize a deduction?

All taxpayers are permitted to itemize deductions, but the Tax Cuts and Jobs Act has made it less attractive to itemize for many Americans. Why? The standard deduction essentially doubled in size, while fewer expenses became eligible for itemizing.

Still, it may be worth calculating your itemized deductions to see if you can save more than you would with the standard deduction.

What are some things that you cannot itemize?

Since the Tax Cuts and Jobs Act, there are fewer things that you can itemize on your tax return. Even some popular deductions that people used to take are no longer eligible, including moving expenses, tax preparation fees, and unreimbursed business expenses.

Many deductions have a lot of fine print — both for inclusion and exclusion — so it’s a good idea to work with an accountant or professional tax preparation software to determine what counts as an itemized deduction.

Do you need proof for itemized deductions?

Generally, you should have proof for expenses that you are claiming as an itemized deduction. Such documentation would prove that you paid the expenses and that they were eligible for the deduction. The IRS calls this the burden of proof.

Photo credit: iStock/Milan_Jovic
SoFi members with direct deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

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.


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Jan
24
2025
2022 IRS Tax Refund Dates and Deadlines

2025 IRS Tax Refund Dates and Deadlines

By | Budgeting & Goals, Financial Independence, relay | Comments Off on 2025 IRS Tax Refund Dates and Deadlines

According to the IRS, approximately 90% of tax refunds are issued in under 21 days. However, some tax returns require more attention, which can lengthen the process and push back your tax refund date.

The deadline for filing 2024 taxes is Tuesday, April 15, 2025. If you request an extension, the deadline is Wednesday, October 15, 2025. Keep reading to learn more about deadlines for 2024 tax returns, and how to track the progress of your tax refund.

Key Points

•   The 2024 tax filing deadline is April 15, 2025; extensions until October 15, 2025.

•   Most refunds are issued within 21 days of IRS acceptance, with electronic filers receiving confirmation in about 3 weeks.

•   Filing early and electronically reduces errors, speeds processing, and expedites refund receipt.

•   Delays in refund processing can result from claiming specific credits, errors, or owing government debt.

•   Refund status can be tracked online 24 hours after electronic submission.

Tax Refund Process, Explained

The process begins when you submit your return to the IRS. The IRS then breaks down the process into three steps: return received, refund approved, and refund sent.

If you file electronically, you should receive an email confirming that your return was received within 24 hours. Paper return filers will have to wait longer.

After the IRS processes your return and confirms the information, your refund will be approved and a tax refund date will be issued. This takes about 3 weeks for electronic filers. Taxpayers who file a paper return by mail will wait at least four weeks.

The last step is when your tax refund is sent out. For filers who provide direct deposit information, your refund should appear in your account almost immediately. Taxpayers who do not include their bank information will have to wait for a paper check to arrive by mail.

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Factors Impacting How Long a Tax Refund Takes

Several factors can affect the timing of your tax refund — including your financial organization skills and the accuracy of the information you provide. If you don’t receive your tax refund within 21 days, your return is likely being manually reviewed due to a mistake or complication.

The following factors can also affect your 2024 tax refund date.

How Early You File

Filing early is essential if you want to get your tax refund early. Ideally, you should be able to compile all your tax documents by the end of January. Forms such as W-2s, 1099-Rs, 1098-Es, and 1098s will provide the income information you need to file.

Filing early means submitting your tax return before the official deadline of Tuesday, April 15, 2025, for your 2024 tax return. Since many taxpayers file their returns on the official deadline, filing early allows you to beat the rush.

Similarly, if you requested an extension, filing “early” means before the October deadline. The deadline for 2024 returns is Wednesday, October 15, 2025. However, taxpayers can file anytime before October. This way, you’ll avoid the bottleneck that inevitably occurs on the deadline itself.

If You Are Claiming Certain Credits

Claiming certain credits on your tax return can push back your 2024 tax refund date. These include:

•   Earned Income Tax Credit

•   Additional Child Tax Credit

•   Injured Spouse Allocation

•   Child Tax Credit, if you claim the wrong amount

E-filed or Sent By Mail

Whether you do your own taxes by hand, use software to assist you, or hire an accountant or tax preparer, it’s best to opt for electronic filing. E-filed taxes are accepted by the IRS within a day or two, while mailed paper returns can take weeks to arrive.

Existing Government Debt

Some taxpayers owe the federal or state government due to unpaid child support, taxes from years past, or student loan payments. Taxpayers facing these issues will receive a reduced refund or none at all, and any refund can take longer than the standard 21-day timeframe after e-filing.

How to Track the Progress of Your Refund

If you’re like most taxpayers, it won’t take long until you start wondering where their tax refund is. Getting hold of a live IRS representative by phone is possible but challenging during tax season.

Fortunately, the IRS’s Refund Status tool provides updates on your 2025 tax refund date just 24 hours after you submit your 2024 taxes electronically.

The tool shows taxpayers one of three statuses: return received, refund approved, or refund sent. After the refund is approved, the IRS will give you a tax refund date. If you mailed your return, you’ll have to wait about four weeks for the tool to provide information on your refund.

What to Do Once Your Refund Arrives

How should I spend my tax refund? It’s a perennial question for taxpayers. Top choices include paying down debt, saving for a vacation, and investing. The important thing is to plan ahead so you don’t spend it all on frivolous or impulsive purchases.

One popular option is to treat your refund like regular income. You can budget the majority of the money for “needs” by setting up an emergency fund or paying down your mortgage. The rest can be set aside for “wants,” such as a year’s worth of dining out.

An online budget planner can help you decide the appropriate percentages for needs and wants. Likewise, a debt pay off planner can show you how much sooner you’ll be debt-free after depositing some or all of your refund.

What Happens If You Can’t File Income Taxes by the Deadline

Each year, taxpayers unable to file their return on time (usually mid-April) can ask the IRS for an extension. The IRS’s Free File tool allows you to electronically submit a request to change your filing deadline to October.

Be aware that taxpayers who want an extension must make an educated guess about the taxes they owe and pay the IRS that amount.

How to File Form 4868 for a Tax Return Extension

Another way to file for an extension is to complete form 4868. You can submit the form electronically or by mail.

The Takeaway

While you cannot predict your exact tax refund date, filing electronically early in the tax season can help you get your refund faster. The IRS sends out most refunds within 21 days of receiving the return. The deadline for filing 2024 taxes is Tuesday, April 15, 2025. If you request an extension, the deadline for filing a 2024 tax return is Wednesday, October 15, 2025.

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FAQ

When should I expect my 2025 tax refund?

Typically, you can expect to receive your refund within 21 days of filing your return. However, mistakes and special tax credits can slow down the process.

What days does the IRS deposit refunds in 2025?

The IRS deposits refunds Monday through Friday, except for holidays.

How long does it take the IRS to approve a refund in 2025?

Most refunds are issued in 21 days or less from when the IRS accepts your return. However, if there are issues with the return, it may take longer.

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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.

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

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

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Jan
21
2025

Roth IRA Explained

By | Budgeting & Goals, invest, Terminology | No Comments

A Roth IRA is an individual retirement account that allows you to contribute after-tax dollars and then withdraw your money tax-free in retirement. A Roth IRA is different from a traditional IRA in which you contribute pre-tax dollars but owe tax on the money you withdraw in retirement.

A Roth IRA can be a valuable way to help save for retirement over the long-term with the potential for tax-free growth. Read on to learn how Roth IRAs work, the rules about contributions and withdrawals, and how to determine whether a Roth IRA is right for you — just think of it as Roth IRA information for beginners and non-beginners alike.

Key Points

•   A Roth IRA is a retirement savings account that offers tax-free growth and tax-free withdrawals in retirement.

•   Contributions to a Roth IRA are made with after-tax dollars, and qualified withdrawals are not subject to income tax.

•   Roth IRAs have income limits for eligibility, and contribution limits that vary based on age and income.

•   Unlike traditional IRAs, Roth IRAs do not entail required minimum distributions (RMDs) during the account holder’s lifetime.

•   Roth IRAs can be a valuable tool for long-term retirement savings, especially for individuals who expect to be in a higher tax bracket in the future.

What Is a Roth IRA?

A Roth IRA is a retirement account that provides individuals with a way to save on their own for their golden years.

You can open a Roth IRA at most banks, online banks, or brokerages. Once you’ve set up your Roth account, you can start making contributions to it. Then you can invest those contributions in the investment vehicles offered by the bank or brokerage where you have your account.

What differentiates a Roth IRA from a traditional IRA is that you make after-tax contributions to a Roth. Because you pay the taxes upfront, the earnings in a Roth grow tax free. When you retire, the withdrawals you take from your Roth will also be tax free, including the earnings in the account.

With a traditional IRA, you make pre-tax contributions to the account, which you can deduct from your income tax, but you pay taxes on the money, including the earnings, when you withdraw it in retirement.

Roth IRA Contributions

There are several rules regarding Roth IRA contributions, and it’s important to be aware of them. First, to contribute to a Roth IRA, you must have earned income. If you don’t earn income for a certain year, you can’t contribute to your Roth that year.

Second, Roth IRAs have annual contribution limits (see more on that below). If you earn less than the Roth IRA contribution limit for the year, you can only deposit up to the amount of money you made. For instance, if you earn $5,000 in 2025, that is the maximum amount you can contribute to your Roth IRA for that year.

In addition, there are income restrictions regarding Roth IRA contributions. In 2025, in order to contribute the full amount to a Roth, single filers must have a modified adjusted gross income (MAGI) of less than $150,000, and married joint filers must have a MAGI of less than $236,000. Single filers whose MAGI is $150,000 up to $165,000 can contribute a reduced amount, and if their MAGI is $165,000 or more, they can’t contribute to a Roth. Married couples filing jointly who earn $236,000 up to $246,000 can contribute a reduced amount, and if their MAGI is $246,000 or more, they are not eligible to contribute.

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Tax Treatment

Contributions to a Roth IRA are made with after-tax dollars — meaning you pay taxes on the money before contributing it to your Roth. You can’t take your contributions as income tax deductions as you can with a traditional IRA, but you can withdraw your contributions at any time with no taxes or penalties. Once you reach age 59 ½ or older, you can withdraw your earnings, along with your contributions, tax-free.

If you expect to be in a higher tax bracket in retirement, or if you want to maximize your savings in retirement and not have to pay taxes on your withdrawals then, a Roth IRA may make sense for you.

Contribution Limits

As mentioned, Roth IRAs have annual contribution limits, which are the same as traditional IRA contribution limits.

For both 2024 and 2025, the annual IRA contribution limit is $7,000 for individuals under age 50, and $8,000 for those 50 and up. The extra $1,000 is called a catch-up contribution for those closer to retirement.

Remember that you can only contribute earned income to a Roth IRA. If you earn less than the contribution limit, you can only deposit up to the amount of money you made that year.

Calculate your IRA contributions.

Get a head start on retirement planning with SoFi’s 2024 IRA contribution calculator.

money management guide for beginners

Tax-Free Withdrawals

As noted, you can make withdrawals, including earnings, tax-free from a Roth once you reach age 59 ½. And you can withdraw contributions tax-free at any time. However, there are some specific Roth IRA withdrawal rules to know about so that you can make the most of your IRA.

Qualified Distributions

Since you’ve already paid taxes on the money you contribute to your Roth IRA, you can withdraw contributions at any time without paying taxes or a 10% early withdrawal penalty. But you cannot withdraw earnings tax- and penalty-free until you reach age 59 ½.

For example, if you’re age 45 and you’ve contributed $25,000 to a Roth through your online brokerage over the last five years, and your investments have seen a 10% gain (or $2,500), you would have $27,500 in the account. But you could only withdraw up to $25,000 of your contributions tax-free, and not the $2,500 in earnings.

The 5-Year Rule

According to the 5-year rule, you can withdraw Roth IRA account earnings without owing tax or a penalty, as long as it has been five years or more since you first funded the account, and you are 59 ½ or older.

The 5-year rule applies to everyone, no matter how old they are when they want to withdraw earnings from a Roth. For example, even if you start funding a Roth when you’re 60, you still have to wait five years to take qualified withdrawals.

Non-Qualified Withdrawals

Non-qualified withdrawals of earnings from a Roth IRA depends on your age and how long you’ve been funding the account.

•   If you meet the 5-year rule, but you’re under age 59 ½, you’ll owe taxes and a 10% penalty on any earnings you withdraw, except in certain cases, as noted below.

•   If you don’t meet the 5-year rule, meaning you haven’t had the account for five years, and if you’re less than 59 ½ years old, in most cases you will also owe taxes and a 10% penalty.

Exceptions

You can take an early or non-qualified withdrawal prior to 59 ½ without paying a penalty or taxes in certain circumstances, including:

•   For a first home. You can take out up to $10,000 to pay for buying, building, or rebuilding your first home.

•   Disability. You can withdraw money if you qualify as disabled.

•   Death. Your heirs or estate can withdraw money if you die.

  Additionally you may be able to avoid the 10% penalty (although you’ll still generally have to pay income taxes) if you withdraw earnings for such things as:

•   Medical expenses. Specifically, those that exceed 7.5% of your adjusted gross income.

•   Medical insurance premiums. This applies to health insurance premiums you pay for yourself during a time in which you’re unemployed.

•   Qualified higher education expenses. This includes expenses like college tuition and fees.

Advantages of a Roth IRA

Depending on an individual’s income and circumstances, a Roth IRA has a number of advantages.

Advantages of a Roth IRA

•   No age restriction on contributions. Roth IRA account holders can make contributions at any age as long as they have earned income for the year.

   * You can fund a Roth and a 401(k). Funding a 401(k) and a traditional IRA can sometimes be tricky, because they’re both tax-deferred accounts. But a Roth IRA is after-tax, so you can contribute to a Roth and a 401(k) at the same time and stick to the contribution limits for each account.

•   Early withdrawal option. With a Roth IRA, an individual can generally withdraw money they’ve contributed at any time without tax or penalties (but not earnings). In contrast, withdrawals from a traditional IRA before age 59 ½ may be subject to a 10% penalty.

•   Qualified Roth withdrawals are tax-free. Investors who have had the Roth for five years or more, and are at least 59 ½, are eligible to take tax- and penalty-free withdrawals of contributions and earnings.

•   No required minimum distributions (RMDs). Unlike traditional IRAs, which require account holders to start withdrawing money at age 73, Roth IRAs do not have RMDs. That means an individual can withdraw the money as needed without fear of triggering a penalty.

Disadvantages of a Roth IRA

Roth IRAs also have some disadvantages to consider. These include:

•   No tax deduction for contributions. A primary disadvantage of a Roth IRA is that your contributions are not tax deductible, as they are with a traditional IRA and other tax-deferred accounts like a 401(k).

•   Higher earners often can’t contribute to a Roth. Individuals with a higher MAGI are generally excluded from Roth IRA accounts, unless they do what’s known as a backdoor Roth or a Roth conversion.

•   The 5-year rule applies. The 5-year rule can make withdrawals more complicated for investors who open a Roth later in life. If you open a Roth or do a Roth conversion at age 60, for example, you must generally wait five years to take qualified withdrawals of contributions and earnings or face a penalty.

•   Low annual contribution limit. The maximum amount you can contribute to a Roth IRA each year is low compared to other retirement accounts like a SEP IRA or 401(k). But, as noted above, you can combine saving in a 401(k) with saving in a Roth IRA.

Roth IRA Investments

How does a Roth IRA make money? Once you contribute money to your IRA account you can invest those funds in different assets such as mutual funds, exchange-traded funds (ETFs), stocks, and bonds. Depending on how those investments perform, you may earn money on them (however, no investment is guaranteed to earn money). And if you leave your earnings in the account, you can potentially earn money on your earnings through a process called compounding returns, in which your money keeps earning money for you.

To choose investments for your Roth IRA, consider your financial circumstances, goals, timeframe (when you will need the money), and risk tolerance level. That way you can determine which investment options are best for your situation.

Is a Roth IRA Right for You?

How do you know whether you should contribute to a Roth IRA? This checklist may help you decide.

•   You might want to open a Roth IRA if you don’t have access to an employer-sponsored 401(k) plan, or if you do have a 401(k) plan but you’ve already maxed out your contribution to it. You can fund both a Roth IRA and an employer-sponsored plan.

•   Because Roth contributions are taxed immediately, rather than in retirement, using a Roth IRA can make sense if you are in a lower tax bracket currently. It may also make sense to open a Roth IRA if you expect your tax bracket to be higher in retirement than it is today.

•   Individuals who are in the beginning of their careers and earning less might consider contributing to a Roth IRA now, since they might not qualify under the income limits later in life.

•   A Roth IRA may be helpful if you think you’ll work past the traditional retirement age, as long as your income falls within the limits. Since there is no age limit for opening a Roth and RMDs are not required, your money can potentially grow tax-free for a long period of time.

The Takeaway

A Roth IRA can be a valuable tool to help save for retirement. With a Roth, your earnings grow tax-free, and you can make qualified withdrawals tax-free. Plus, you can withdraw your contributions at any time with no taxes or penalties and you don’t have to take required minimum distributions (RMDs).

That said, not everyone is eligible to fund a Roth IRA. You need to have earned income, and your modified adjusted gross income cannot exceed certain limits. You must fund your Roth for at least five years and be 59 ½ or older in order to make qualified withdrawals of earnings. Otherwise, you would likely owe taxes on any earnings you withdraw, and possibly a penalty.

Still, the primary advantage of a Roth IRA — being able to have an income stream in retirement that’s tax-free — may outweigh the restrictions.

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FAQ

Are Roth IRAs insured?

If your Roth IRA is held at an FDIC-insured bank and is invested in bank products like certificates of deposit (CDs) or money market account, those deposits are insured up to $250,000 per depositor, per institution. On the other hand, if your Roth IRA is with a brokerage that’s a member of the Securities Investor Protection Corporation (SIPC), and the brokerage fails, the SIPC provides protection up to $500,000, which includes a $250,000 limit for cash. It’s very important to note that neither FDIC or SIPC insurance protects against market losses; they only cover losses due to institutional failures or insolvency.

How much can I put in my Roth IRA monthly?

For tax years 2024 and 2025, the maximum you can deposit in a Roth or traditional IRA is $7,000, or $8,000 if you’re over 50. How you divide that per month is up to you. But you cannot contribute more than the annual limit.

I opened a Roth IRA — now what?

After you open a Roth IRA, you can make contributions up to the annual limit. Then you can invest those contributions in assets offered by your IRA provider. Typically you can choose from such investment vehicles as mutual funds, exchange-traded funds, stocks and bonds.

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

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

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Jan
21
2025

Price-to-Rent Ratio in 52 Cities

By | Budgeting & Goals, Home Ownership, mortgage | Comments Off on Price-to-Rent Ratio in 52 Cities

Better to buy or rent? The price-to-rent ratio is a reference point that can help gauge affordability in any city — especially for people on the move. More specifically, the price-to-rent ratio can be helpful when looking at a certain area and deciding whether to sink your life savings into a home, or pay a landlord and wait to buy.

Read on to see the home price-to-rent ratio in some of the biggest U.S. cities.

Key Points

•   The price-to-rent ratio is a measure of whether it’s more affordable to rent or buy a home in a particular city.

•   It is calculated by dividing the median home price by the annual rent.

•   A price-to-rent ratio below 18 suggests that buying is more affordable, while a ratio above 18 indicates renting may be more cost-effective.

•   The price-to-rent ratio varies across cities, with some cities having ratios well above 18, in many cases above 25. Others come in at 18 and below.

•   Factors such as housing market conditions and local economic and environmental factors may influence the price-to-rent ratio in different cities.

First, What Is the Price-to-Rent Ratio?

The price-to-rent ratio compares the median home price and the median annual rent in a given area. (You’ll remember that the median is the midpoint, where half the numbers are lower and half are higher.) To make sense of a city’s price-to-rent ratio, here’s a general idea of what the number suggests:

•   A ratio of 1 to 15 typically indicates that it’s more favorable to buy than rent in a given community.

•   A ratio of 16 to 20 indicates that it’s typically better to rent than buy.

•  A ratio of 21 or more indicates that it’s much better to rent than buy.

As you can see, the ratios could be useful when considering whether to rent or buy. Investors also often look at the ratios before purchasing a rental property.

The numbers also may be used as indicators of impending housing bubbles. A substantial increase in the ratio could mean that renting is becoming a much more attractive option in that specific housing market.

The ratios may warp after wildfires or other natural disasters, which can cause housing shortages and migration of residents, as well as rent spikes. Research released in 2024 by the University of Georgia and the Brookings Institute demonstrated that a succession of environmental events can drive up local rents as much as 12% over a five-year subsequent period.

If you’re exploring different areas, it can be a good idea to estimate mortgage payments based on median home prices in the place where you hope to live. That way, you can determine if they’re a cost you can reasonably afford to add to your budget on a monthly basis.

Recommended: How to Apply for a Home Loan Online

Price-to-Rent Ratio by City

Here are 52 popular metropolitan areas and their price-to-rent ratios. As of the third quarter of 2024, the median home sale price in the U.S. was $420,400, the Federal Reserve Bank of St. Louis reported.

Median sale price listed comes from Redfin as of the fourth quarter of 2024. Median rents listed come from the Zumper National Rent Report from January 2025, based on a one-bedroom apartment. Remember, as home prices and rents shift—over time or suddenly—so do the ratios.

1. San Francisco

It’s no secret that San Francisco housing prices are way up there. The median sale price was $1,350,000, and the median rent for a one-bedroom apartment was $3,160 per month (or $37,920 a year). That gives the hilly city a price-to-rent ratio of nearly 36.

2. San Jose, CA

Golden State housing continues its pricey reputation in San Jose. The median sale price here was $1,455,000, and the city had a median one-bedroom rent of $32,640 annually ($2,720 a month), leading to a price-to-rent ratio of 45.

3. Seattle

The Emerald City had a median sale price of $835,000. Meanwhile, the median annual rent for a one-bedroom was $23,400, for a price-to-rent ratio of around 36.

4. Los Angeles

A median sale price of $1,010,000 and a median one-bedroom rent of $28,800 a year ($2,400 a month) shines a Hollywood light on renting, with a rent-to-price ratio of 35.

5. Long Beach, CA

With a median home price of $855,000 and one-bedroom rent averaging $1,850 a month, Long Beach earned a ratio of 39.

6. Honolulu

The ratio in the capital of Hawaii is a steamy 22, with a $570,000 median sale price and a median rent of $26,400 per year.

7. Oakland, CA

Oakland, across the bay from San Francisco, had a median sale price of $802,500 and median rent of $24,000 a year ($2,000 a month). This earned the location a price-to-rent ratio of 33.

8. Austin, Texas

A hotbed for artists, musicians, and techies, Austin had a price-to-rent ratio of nearly 31. This was thanks to a median sale price of $550,000 and median annual rent of $18,000.

9. San Diego

Hop back to Southern California beaches and “America’s Finest City,” where a median sale price of $931,000 and median rent of $28,800 a year led to a ratio of almost 32.

10. New York, N.Y.

The median sale price here was $807,720 and median rent was $51,600 a year ($4,300 a month), which equates to a price-to-rent ratio of roughly 16.

Of course, the city is composed of five boroughs: the Bronx, Brooklyn, Manhattan, Queens, and Staten Island, and it’s probable that most of the sales under $800,000 were not in Manhattan (where the median sale price was $1.2 million) or Brooklyn (where the median was $999,000). Just looking at Manhattan using the same annual average rent figure, the ratio looks more like 23.

11. Boston

With a median sale price of $845,000 and median rent of $34,080 a year, Beantown had a price-to-rent ratio of nearly 25.

12. Portland, OR

The midpoint of buying here of late was $490,000, compared with median rent of $17,400 per year, for a price-to-rent ratio of just over 28.

13. Tucson, AZ

In Tucson, the median sale price of $340,000 and median annual rent of $10,920 came out to a ratio of 31.

14. Denver

The Mile High City logged a renter-leaning ratio of 28, thanks to a median sale price of $586,000 and median annual rent cost of $20,760.

15. Colorado Springs, CO

With a median sale price of $465,000 and annual rent of $14,880, this city at the eastern foot of the Rocky Mountains had a recent price-to-rent ratio of 31.

16. Albuquerque, NM

In the Southwest, Albuquerque heated up to a ratio of almost 31, based on a median home sale price of $350,000 and annual rent of $11,400.

17. Washington, DC

The nation’s capital is another pushpin on the map with a high cost of living. The median sale price of $699,000 compares with median rent of $27,600 annually ($2,300 a month), translating to a ratio of 25.

18. Mesa, AZ

With a median sale price of $463,000 and median annual rent of $14,640, Mesa has a price-to-rent ratio of nearly 32.

19. Las Vegas

Sin City has reached a ratio of almost 31, based on a $444,000 median sale price vs. $14,400 in annual rent.

20. Phoenix

Phoenix’s price-to-rent ratio has revved up to 29, with a median home sale price of $450,000 and $15,360 in rent.

21. Raleigh, NC

North Carolina’s capital, the City of Oaks, logs a ratio of 30. This is based on a $460,000 median home sale price and median annual rent of $15,000.

22. Tulsa, OK

Tulsa had a price-to-rent ratio of 19, with median annual rent of $12,000 and home sale prices at a median of $228,000.

23. Dallas

This sprawling city had a recent median sale price of $410,000 and median annual rent of $17,760, leading to a price-to-rent ratio of 23.

24. Sacramento, CA

This Northern California city had a recent median sale price of $485,000 and median annual rent of $18,120, for a price-to-rent ratio of nearly 27.

25. Fresno, CA

Fresno makes the list with a price-to-rent ratio of 22, based on median home sale prices of $374,750 and median annual rent of $16,680.

26. Oklahoma City

The capital of Oklahoma had one of the lower price-to-rent ratios until recent home price spikes. It logs a ratio of nearly 24 lately, based on a median sale price of $260,000 and median annual rent of $10,920.

27. Arlington, TX

Back to the Lone Star State, this city between Fort Worth and Dallas has a price-to-rent ratio of 24. This is thanks to a median sales price of $320,000 and median annual rent of $13,200.

28. San Antonio

This Texas city southwest of Austin had a median sale price of $251,750 and median annual rent of $12,840, resulting in a price-to-rent ratio of close to 20.

29. El Paso, TX

El Paso traded a low price-to-rent ratio for a higher one when home prices rose. It’s at a 24, based on recent figures of a median sale price of $254,970 and median rent at $10,560 a year.

30. Omaha, NE

With a median sale price of $277,000 and median annual rent of $13,920, Omaha has a lower home price-to-rent ratio than in recent years at 23.

31. Nashville, TN

The first Tennessee city on this list is the Music City, with a rising price-to-rent ratio of 23. Nashville has a median sale price of $455,000 and a median annual rent of $19,680 ($1,640 per month).

32. Virginia Beach, VA

The ratio here has nearly reached 20, based on a median home sale price of $376,000 and median rent of $19,200 per year.

33. Tampa, FL

This major Sunshine State city has a price-to-rent ratio of 23, based on a median home sale price of $450,000 and median annual rent of $19,320.

34. Jacksonville, FL

This east coast Florida city had a recent ratio of 22, based on a median sale price of $312,000 and median rent of $15,040 per year.

35. Charlotte, NC

Charlotte’s price-to-rent ratio of 23 arises from a median home sale price of $400,000 and median annual rent of $17,160.

36. Fort Worth, Texas

Panther City’s price-to-rent ratio has crept up to 22, based on a median home sale price of $345,000 and median rent of $15,720 per year.

37. Houston

Houston, we have a number: It’s a price-rent-ratio of 22. That’s based on a median sale price of $339,370 and median annual rent of $15,600.

38. Louisville, KY

Kentucky’s largest city has a median home sale price of $255,000 and median annual rent of $12,240. That leaves Louisville with a price-to-rent ratio of almost 21.

39. Columbus, OH

The only Ohio city on this list has a price-to-rent ratio of 19, due to a median sale price of $275,700 and median annual rent of $14,520.

40. Atlanta

Heading South, Atlanta has a median sale price of $400,000 and median annual rent of $19,080, for a price-to-rent ratio of 21.

41. Miami

Those looking to put down roots in this vibrant city will find a price-to-rent ratio of 20, based on a median home sale price of $635,000 and median rent of $32,280 annually.

42. Minneapolis

The Mini-Apple is sweeter on renting, with a ratio of 21. This is based on a median sale price of $344,000 and median annual rent of $16,200.

43. New Orleans

Next up is another charming southern city. New Orleans has a price-to-rent ratio of nearly 18, given a median sale price of $335,000 and median rent of $19,200 per year.

44. Kansas City, MO

In this Show-Me State city, a median home value of $275,000 and median annual rent of $13,560 equate to a price-to-rent ratio of 20.

45. Chicago

The Windy City’s almost 15 price-to-rent ratio is based on a $350,000 median home sale price and $23,760 median annual rent.

46. Memphis, TN

Memphis logs a price-to-rent ratio of 13, with a median home sale price of $170,000 and median annual rent of $12,960.

47. Indianapolis

The ratio in this capital city drifted down to 17, thanks to a median home sale price of $243,450 and median annual rent of $14,160.

48. Philadelphia

This major East Coast city had a recent median sale price of $260,000 and median annual rent of $18,600, for a price-to-rent ratio of 14.

49. Baltimore

Charm City had a recent median home sale price of $224,000 and median annual rent of $15,840, resulting in a price-to-rent ratio of 14.

50. Newark, NJ

Newark, anyone? The median sale price here is $510,000, with median rent at $1,750 a month (or $21,000 a year), leading to a ratio of 24.

51. Milwaukee

Milwaukee is hanging on as a city more favorable to homebuyers than renters, thanks to a price-to-rent ratio of 18. This Midwest city had a recent median sale price of $220,000 and median annual rent of $12,360.

52. Detroit

Detroit has seen a consistent rise in home sale prices, though the latest median sale price was a relatively low $97,200, compared with median annual rent of $12,600. This resulted in a price-to-rent ratio that is approaching 8.

Recommended: Cost of Living Index by State

How to Calculate Price-to-Rent Ratio

If you don’t see your city on the list, rest assured that it’s possible to calculate price-to-rent ratio yourself. To do so, you’ll simply take the median home sale price in your area and divide it by median annual rent.

Here’s an example: Let’s say the median rent in a city is $3,000 a month, and the median sale price is $1 million. You’d divide $1 million by $36,000 ($3,000 per month multiplied by 12, the number of months in the year). The result is a price-to-rent ratio of nearly 28.

The Takeaway

The price-to-rent ratio lends insight into whether a city is more favorable to buyers or renters. Usually in a range of 1 to 21-plus, the ratio is useful to house hunters, renters, and investors who want to get the lay of the land.

No matter what your dream city’s price-to-rent ratio, looking at the listings for homes for rent and for sale will tell you a lot about the market. Who knows, you might even happen on just what you wanted at an accessible price.

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

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