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For some people, freelancing is the way they earn their living, relishing the freedom and flexibility of this type of work. For others, it’s a smart way to bring in some income in addition to a salary. Regardless of whether you’re managing your freelance business as a full-time endeavor or a side hustle, one fact is true: You’ve got to pay taxes on your earnings.

In this guide, you’ll learn about the steps to take in your situation, including:

•   How do you pay taxes as a freelancer?

•   Why are freelance taxes higher?

•   What are some ways to reduce taxable income?

•   What deductions should freelancers take?

•   What should freelancers know about tax refunds?

How Taxes for Freelancers Are Different

The first thing to note is that taxes for freelancers are notably different in two major ways: Freelancers pay a larger percentage of their income (because of self-employment tax), and they’ve got to make estimated tax payments every quarter.

What Is Self-Employment Tax?

The self-employment tax rate is 15.3%. That’s 12.4% for Social Security and 2.9% for Medicare.

That doesn’t mean that’s all that freelancers pay. Self-employment tax is what freelancers pay on top of regular income taxes. The percentage you pay in income taxes depends on what tax bracket you’re in but can range from 10% to 37%.

Why do freelancers pay a self-employment tax? When you’re an employee for a business who receives a W-2 form, your company pays some taxes for you.

But if you’re a freelancer — whether a writer, photographer, dog walker, or consultant — your clients don’t pay any taxes for you, so you’ve got to pick up the slack.

And don’t forget: You may also have to pay state and local taxes, depending on where you live.

What Are Quarterly Taxes?

Most people think of April 15 as the dreaded Tax Day for all Americans, when they have to pay their taxes. But taxes aren’t actually due on April 15: They’re due when you earn the money.

That’s why employers withhold taxes from every paycheck. Tax season is just that special time where the IRS wants you to go over the numbers and make sure the right amount was withheld — and pay up if you actually owe more. (Or, if you overpaid, file your return to claim a refund.)

But since taxes aren’t withheld when freelancers earn revenue from clients, the government expects freelancers to make quarterly tax payments throughout the year.

Freelancers have two options:

1.    Pay 100% of the taxes they owed the prior year, split over four payments.

2.    Pay 90% of the taxes they’ll owe for the current year, split over four payments.

Note that these percentages may be different if you’re a farmer, fisherman, or high-income earner.

Estimated taxes are among the most complicated parts of being a freelancer, and you can face underpayment penalties if you don’t send Uncle Sam your fair share throughout the years.

You can check out the IRS’s guidelines for estimated taxes , but a tax professional may be worth the cost if you’re confused.

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

Paying Taxes as a Freelancer

Now that you understand that freelancers must pay more in taxes and that they need to keep track of more tax deadlines, consider the actual process for freelancer tax filing.

Here’s how to pay freelance taxes in five steps.

1. Determine If You Have to Pay Freelancer Income Tax

First and foremost, it’s a good idea to make sure you actually have to pay freelancer taxes. If you fit the bill of the IRS’s definition of an independent contractor, you’ll have to file as a freelancer and will be subject to self-employment taxes.

The IRS says you’re an independent contractor “if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”

It’s a rather broad designation and might fit traditional freelance gigs like writers and graphic designers, but it can also apply to app-based workers, like drivers for Uber and Lyft, and even doctors, lawyers, and veterinarians.

Even if you receive a W-2 from an employer but made other revenue on the side, you’re still subject to freelancer income taxes — and must make estimated payments on that income.

2. Calculate How Much You Earned

As a freelancer, you may receive 1099-NECs from clients for the work you do, detailing just how much money you made from them. For the 2025 tax year, clients must issue a 1099-NEC if they pay a freelancer $600 or more; this threshold will increase to $2,000 for payments made in 2026, with adjustments for inflation thereafter.

Even if you don’t receive a 1099, you still have to report any income you made on your tax return. This means paying taxes if you are paid on Venmo or another platform versus by check or a direct deposit.

If you don’t declare the income, you’re committing tax fraud — and the IRS can find out during an audit.

You may want to use a tax preparation checklist to help you organize these materials. You might start by compiling all your 1099-NECs and any other income forms, including 1099-INTs, 1099-Ks, 1099-MISCs, and W-2s, and then input them on your tax return or into your tax software. If you have additional income not represented by any forms, you’ll be able to report that as well.

3. Compile Your Business Expenses

As a freelancer, there are several tax deductions that can cut your business tax bill and protect your profits. These deductions include a broad range of ordinary and necessary costs associated with running your business.

Common Tax Deductions for Freelancers

Business expenses can vary significantly depending on the kind of work you do, but you may be able to to use some of these freelancer tax deductions, like:

•   A portion of your rent or mortgage (your home office deduction)

•   Phone and internet bills

•   Any computer and software expenses

•   Automotive expenses, including miles on your car when used for business (and only for business)

•   Office supplies

•   Travel expenses

•   Marketing and advertising expenses

•   Continuing education

Freelancers may also be able to take the qualified business income deduction and self-employment tax deduction.

Other Tax Deductions and Tax Credits

Business expenses may apply to freelancers specifically, but independent contractors can take advantage of other common tax deductions and credits.

If you itemize rather than take the standard deduction, you may be able to deduct mortgage interest payments, charitable contributions, and the state and local taxes. And if you have education debt, you may be able to take the student loan interest deduction.

Tax credits are also a useful tax tool and can greatly reduce your tax bill as a freelancer. Some popular tax credits include the child tax credit, Earned Income Tax Credit, and electric vehicle tax credit.

Recommended: Fastest Ways to Get Your Tax Refund

4. Account for Estimated Payments

If you made estimated tax payments the previous year, don’t forget to apply those to your tax form when filing. After all, if you’ve handed over a chunk of change to the IRS already, you’ll want credit for it.

You’ll add your total payments to line 26 on Form 1040 if filling out the form yourself, but most tax software and accountants should prompt you for this information.

5. File and Calculate Estimated Payments

The last step in how to pay freelance taxes: You’re now ready to complete your forms, and send in your tax return and any payments that you owe. And it’s not necessarily just federal taxes that are needed for freelancer tax filing: Depending on where you live, you may owe state, local, and school district income taxes as well.

After filing, surprise: You’re not done yet. You’ll also need to estimate taxes for the current year. Your first quarterly payment is due on Tax Day in April.

If you’re working with an accountant, they can help you calculate how much you’ll likely owe and print out vouchers for you to mail in with your payments. If you wind up making significantly more or less throughout the year, you can adjust your estimated payments to match. That’s part of learning how to budget on a fluctuating income.

Freelancer Tax-Filing Tips

Freelancing and taxes can seem complicated. Here are tips to help you save money and hit all your deadlines.

Plan for Retirement as a Freelancer

Reducing your taxable income is helpful when you have to pay significantly more in taxes on your earnings. One way to do this — and prepare for your future — is to open a retirement account and make pre-tax contributions.

You can contribute to a traditional IRA, but there are also retirement plans designed for self-employed individuals, including a SEP IRA and a solo 401(k). It’s worth educating yourself about how these work and contribution limits so you can find the best option for your financial situation and aspirations.

Research Deductions

You may be tempted to take the standard deduction when filing, but if you have a lot of business expenses, you may earn a larger tax break by itemizing. Tax software and accountants generally know all the different types of taxes and guidelines. They can help you find all the tax deductions you qualify for, but it never hurts to do some research on your own.

Stay Organized

Organization is crucial when running your own business — and that holds true at tax time. By organizing your bills and tracking your income throughout the year (even on a daily basis), you should have good records of all your revenue and expenses.

Find record- and receipt-keeping systems that work for you. You may also want to set calendar reminders so you never miss a quarterly tax payment deadline.

Work with a Tax Professional

Freelancer income taxes can be challenging and confusing. If you’re overwhelmed and worried about making a mistake, it may be worth the money to hire an accountant or tax preparer.

Plus, the tax-filing fee may count as a deductible business expense for next year.

Understand Tax Refunds for Freelancers

Know that it is unlikely that you’ll get a tax refund as a freelancer. What often triggers a tax refund is that a full-time employee had too much money withheld for taxes from each paycheck and their overpayment comes back to them. (They can adjust their W-4 employee withholding tax form to avoid this situation in the future.)

But as a freelancer, it is unlikely you are overpaying your taxes, especially if you are tracking your income and paying the appropriate amount of quarterly taxes.

Recommended: Maximizing Your Time and Money

The Takeaway

Taxes can get more complicated if you’re a freelancer. You likely will pay more in taxes (thanks to the self-employment tax), and you’ll probably need to make quarterly estimated payments. It’s wise to regularly track and review your earnings and expenses so you can stay on top of how you are doing. For many freelancers, working with a tax professional is the best path forward.

Also worth noting: As a freelancer, you need several tools to stay organized and run your business, including a bank account.

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

FAQ

Why is freelance tax so high?

Freelance taxes are higher because they include self-employment tax. This additional 15.3% is what employers traditionally pay on behalf of their employees. In the case of freelancers, they’re both the employer and the employee so they have to cover that amount.

Do I need to declare freelance income?

Yes, you must declare all freelance income. Even if you didn’t make enough to trigger a 1099 from a client — or that client forgot to send you a 1099 — you must report any and all income to the IRS.

What happens if you don’t file freelance taxes?

If you don’t make quarterly tax payments as a freelancer, you could be subject to underpayment penalties when you go to file. If you don’t pay at all, you’ll be subject to Failure to File and Failure to Pay penalties. You’ll owe interest on top of the fines — and eventually could face jail time if you don’t pay.

Can freelancers pay taxes annually?

While freelancers must file taxes annually like everybody else, they are usually required to make quarterly estimated taxes since no taxes are being withheld from their payments throughout the year.

Photo credit: iStock/pcess609

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

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

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

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

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

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

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.

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.
SOBK0224010
CN-Q425-3236452-133

First-time parents can be so preoccupied with the love they feel for their new babies and the constant care required that they may lose sight of their larger financial goals. When you’re busy getting to know your little human, you may not prioritize money management.

But securing your growing family’s finances is an important consideration. You have new needs and goals evolving, such as your child’s education and your retirement. Here’s smart advice to help you manage your money well during this new life stage and beyond.

7 Financial Tips for New Parents

Raising a child can cost more than $15,000 a year, according to one recent calculation using U.S. Department of Agriculture data. That can put some serious stress on your finances. Here’s guidance on making your money work for you and your family.

1. Avoid Overspending on Baby Gear

As a first-time parent, you likely have quite a bit of work to do before the baby arrives. You may need to create and furnish a nursery for your child, and stock up on diapers, bottles, clothes, toys, and so much more.

As you’re setting up your new life with a baby, it can feel like buying everything brand-new is the only option, but that can be costly. You might consider taking advantage of used or gifted items so as not to deplete your bank account.

You can buy a lot of items secondhand at a lower cost through online marketplaces or used goods and consignment stores. Or you might see what “freecycle” networks in your area have available at no charge. That’s one way to save money daily.

And if you have friends, family, or neighbors that already have children, they may be looking to unload some of the gear their children no longer use. Families with older kids are often happy to pass on items such as clothes, cribs, playpens, toys, and books. You might check Nextdoor.com and other community sites, which can be a good resource for local families seeking to offload these items.

2. Don’t Live Without a Safety Net

As a parent, you have a host of new responsibilities, and expenses you never imagined may pop up. So consider these moves:

•   An emergency fund becomes even more important when you have a child or one is on the way. You’re now responsible for all of their needs, and there may be unplanned costs that pop up along the way. Or, if you were to endure a job loss, you’d need to continue to provide for your child.

•   Saving for an emergency is a process, and it’s okay to start small — even just $25 a week will add up over time. Some people opt to store their emergency fund in a high-yield savings account or checking account. Earning interest that way will help your money grow faster.

•   Review your health insurance. You may want to opt for a different plan now that you have a child. An addition to the family is usually a qualifying life event (QLE) that can allow you to make changes regarding your plan outside of the usual open enrollment period.

•   Consider life insurance and disability insurance if you don’t already have it or, if you do, see if you want to update your coverage. When a little one is depending on you, you probably want to protect their future if you weren’t able to earn your usual income. Maybe you can only afford a modest policy at this moment. That can be fine; it’s a start and something you can revisit later as you grow your wealth.

3. Keep a Budget

With a baby on board, you likely have a host of new expenses, from the life insurance mentioned above to daycare to toys (and more toys). Making a budget can help you prepare to pay for the extra expenses.

The word “budget” can conjure up fear, but it’s really just a helpful set of financial guardrails that help you balance how much you have coming in and how much is going out towards expenditures and savings.

•   You might try the popular 50/30/20 budget rule which says that 50% of your take-home pay should go toward needs, 30% toward wants, and 20% toward savings.

•   You could check with your financial institution to see what kinds of tools they provide for tracking your money. This can be a great resource as you work to improve your money management and hit your goals.

•   To make a budget, you might also see what apps or websites offer products that could work for you. Check with trusted friends to see what they may recommend.

4. Don’t Put Off Retirement Savings

Another financial mistake new parents: Learning to pay yourself first isn’t easy for a lot of parents to do, but it’s vital. (For instance, while you can borrow money for college expenses for your child, you can’t likely borrow for your retirement.)

For retirement saving, one way to start is by enrolling in your company’s 401(k) plan if one is offered. Some employers will match your contribution, up to a certain percentage, and you’ll be able to have your contribution taken directly from your paycheck.

If your employer doesn’t offer a 401(k), you could open an individual retirement account, or IRA, instead. Getting in the habit of saving at least a little for your own future can be important as your focus shifts to your new addition.

It’s never too early to start saving for retirement.

5. Start Savings for Your Child’s College

Saving for your children’s tuition can be an important step for many new parents. That’s because the sooner you start, the better. Your money will have that much more time to grow. College is a big-ticket expense, with estimates of tuition in 18 years being calculated as follows:

•   $25,039 per year for a public college

•   $48,380 per year for a private college

While a standard savings account may seem like the easy choice, there are other options designed to help you or grandparents save for a child’s education.

•   You might opt for the benefits of a 529 college savings plan. There are two types: education savings plans and prepaid tuition plans.

•   With an education savings plan, a tax-deferred investment account is used to save for the child’s future qualified higher education expenses, like tuition, fees, room and board, computers, and textbooks. Funds used for qualified expenses are not subject to federal income tax.

•   With a prepaid tuition plan, an account holder purchases units or credits at participating colleges and universities for future tuition and fees at current prices for the beneficiary. Money in this fund is guaranteed to rise at the same rate as tuition. Most of the plans have residency requirements for the saver and/or beneficiary.

•   A Coverdell Education Savings Account may also be worth looking into. In general, the beneficiary can receive tax-free distributions to pay for qualified education expenses. Contributions to a Coverdell account are limited to $2,000 per year, per beneficiary. The IRS sets no specific limits for 529s.

6. Make the Most of Tax Breaks

Another bit of financial advice for parents is that when you have a child, you may be eligible for certain tax benefits.

•   The Child and Dependent Care Credit: If your child is in daycare or preschool or you pay for another kind of caregiving, you may be eligible to claim this credit, which varies based on your income. In 2025, you can get a credit of between 20% and 35% of qualifying expenses up to $3,000 for one dependent or $6,000 for two or more. In 2026, the credit will increase to 50% of qualifying care expenses — up to $3,000 for one child or $6,000 for two or more. 

•   The Child Tax Credit: This allows parents to get a tax credit of up to $2,200 per child under the age of 17 for 2025 and 2026. Parents may qualify for the full amount per child if their modified adjusted gross income (MAGI) is less than $200,000 as an individual filer or $400,000 for joint filers.

•   The Earned Income Tax Credit: Lower-income parents may be able to claim this credit, which varies with income and number of children. The Internal Revenue Service (IRS) offers a calculator to check eligibility.

•   Adoption Tax Credit: This offers tax incentives to cover the cost incurred if you adopted a child. In 2025, the maximum credit is $17,280 per qualifying child. The credit begins to phase out for taxpayers with a MAGI above $259,190; it completely phases out once your MAGI reaches $299,190. In 2026, the adoption tax credit is worth up to $17,670; the credit phase-out begins at a MAGI of $265,080 and phases out completely at $305,080 or above.

You might consult a tax professional to see which of these you can claim.

7. Teach Your Kids About Money

If kids aren’t taught the basics of financial literacy at a young age, they may struggle to make a budget, avoid credit card debt, or save money when they’re older. You can help your children learn what it means to manage money in these ways:

•   Kids often love to play store, so go ahead and join in. By exchanging goods for money, they’re already beginning to understand the basic principles of commerce.

•   As they get older, you may want to give them an allowance in exchange for chores or homework completion.

•  You could even have them make a budget with their earnings, and encourage them to spend, save, and donate.

•  You could open a checking account with them, once they are old enough, and teach them how it works.

•  You might give them a gift card or prepaid debit card and coach them on sensible spending.

Can You Ever Be Fully Financially Ready for Parenthood?

It’s probably not possible to be fully financially ready for parenthood or for adult life in general. Part of each person’s financial journey is learning how to plan for the unexpected and navigate curveballs. That might mean financing a child’s dance lessons or speech therapy. You might wind up moving to what you consider a better school district and paying more for your mortgage and taxes.

That’s why embracing some of the guidelines above, such as making a budget, stocking an emergency fund with cash (perhaps sending some money there via direct deposit), and saving for the future can be so important.

The Takeaway

Being a new parent is a joyful time but also a challenging one. One priority not to lose track of is your financial health, especially since you are now providing for a little one and their future. By budgeting and spending wisely, saving for the future, and knowing which tax credits you may be able to claim, you can help yourself get on the path to financial security for your family.

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


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

FAQ

How can you plan financially for parenthood?

Planning financially for parenthood can involve updating your budget, allocating funds to the right insurance policies and long-term goals (such as your child’s education and your own retirement), and creating an emergency fund, if you don’t already have one. Also educate yourself on any tax credits you might qualify for once you become a parent.

What are the biggest unforeseen expenses of parenthood?

Some of the unforeseen expenses of parenthood include your child’s medical, dental, and mental health costs; academic support (such as tutors and prep classes); hobbies (taking tae kwon do classes, perhaps, or traveling with their soccer club); and funding any family travel and vacations.

How much does a child cost per year?

The cost of raising a child per year can vary widely, depending on such factors as medical needs and whether they are attending public or private school. That said, recent studies suggest the current average figure is around $15,000 to $17,500 per year per child.

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

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

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

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

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

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

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

SOBNK-Q324-101
CN-Q425-3236452-138

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Learning that you are eligible for a tax refund can be a welcome surprise. Or maybe it’s something you’ve been hoping (or even waiting for) for months.

If you have any pressing expenses — maybe you’re behind on a few bills or have been putting off going to the dentist because of the cost — you may be wondering how you might be able to get that money into your hands ASAP.

Fortunately, there are a few simple things any taxpayer can do to help ensure that their refund comes quickly.

This includes e-filing with the IRS (rather than physically mailing in your return) and setting up direct deposit, so there’s no waiting for that refund check to come through the mail.

Read on to learn more about getting your tax refund sooner, including:

•   How to plan your tax return filing

•   How to file electronically

•   How to set up direct deposit

•   How to track your refund

Quickest Ways to Get Your Tax Refund

Here are some key steps you may want to take as tax season gets underway, starting well before Tax Day in April. They’ll help ensure that you get your refund ASAP.

1. Start Planning Your Tax Return Filing in January

In general, the fastest way to get your tax refund is to file your taxes early, and you certainly don’t want to miss that tax-filing deadline.

This means that, starting in January, you may want to begin collecting all the necessary information for filling out your tax forms, such as your W-2 and any 1099s. You’ll also likely need to decide whether you are going to file on your own (perhaps using tax software) or hire a tax preparation service or accountant to help.

2. Get Your Return in ASAP

The further into tax season that you file, the more likely the IRS is to be inundated with returns. That can slow processing times, which can delay your refund.

If you followed Step 1, above, then you’ll have your documentation organized. All of the forms you need should be issued by January 31.

If you prefer working with a professional tax preparer, it’s wise to book them in advance, since they’ll likely be very busy with other clients. If you plan to use tax software, buy it early and learn how to use it. You’ll be ready to be one of the first filers out of the starting gate.

3. File Your Tax Return Electronically

One of the fastest ways to get your refund can be to choose electronic filing instead of sending your return by mail.

That way, your refund can begin moving through the system immediately, rather than having to wind its way through snail mail and hands-on processing.

A paper tax return can take about six to eight weeks to process, but with electronic filing, or e-filing, taxpayers can typically expect to receive their refund within 21 days. Your tax preparer will usually offer ways for you to file electronically.

Taxpayers can also use tax preparation software such as TurboTax, TaxSlayer, TaxAct, or H&R Block. You can use these programs to file your taxes yourself, or you might go to a professional who knows how to use this type of software. Either way, electronic filing is probably an option.

4. Get Help Filing Your Return Quickly

But what if you don’t have funds for tax help and are feeling overwhelmed by the process and therefore don’t file right away? Fortunately, help is available. The Internal Revenue Service (IRS) offers a few options for
e-filing which can help you get this task completed.

If taxpayers make an adjusted gross income (AGI) of $89,000 or less per year, then they can use IRS Free File to turn in their tax forms.

For taxpayers whose AGI is greater than $89,000, they can use the IRS’s Free File Fillable Forms service, which lets you simply input your data onto your tax forms so you can e-file (if you choose this option, you’ll need to know how to prepare your own tax return).

The IRS Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs also provide help and e-file for taxpayers who qualify.

Many states also offer free e-filing options for state returns.

The IRS has a helpful tool on their website where taxpayers can find an authorized IRS e-file Provider
Locator . All taxpayers have to do is input their zip code and choose what kind of provider they need.

5. Set Up Direct Deposit

How else to get your refund fast? The speediest way to get your tax refund is to have it electronically deposited into your financial account. This is known as direct deposit, and the service is free. It’s also possible to break up your refund and have it deposited into one, two, or even three accounts.

You can set up direct deposit simply by selecting it as your refund method through your tax software and then inputting your account number and routing number (which you can find on your personal checks or through your financial institution).

Or, you can tell your tax preparer that you want direct deposit.

It’s also possible to select direct deposit if you’re filing by paper and sending your return through the mail (you may want to double check to make sure you didn’t make any errors inputting your financial account information). But remember, paper returns tend to move through processing more slowly.

💡 Quick Tip: As opposed to a physical check that can take time to clear, you don’t have to wait days to access a direct deposit. Usually, you can use the money the day it is sent. What’s more, you don’t have to remember to go to the bank or use your app to deposit your check.

6. Open a Bank Account If You Don’t Have One

If you just read the step above and thought you can’t use direct deposit because you don’t have a bank account, this could be the moment to set one up. Perhaps you haven’t gotten around to opening a checking or savings account. Now is a great moment to open one. Many online banks can guide you through the application and opening process online, from your home, in a minimal amount of time. This can be an excellent move as you prepare for tax season.

If you were previously turned down for a bank account, you might want to look into what are known as second chance accounts. Offered by some banks and credit unions, these may not have all the features of conventional accounts, but they can give you a good landing pad for your tax refund via direct deposit.

Recommended: What Are the Different Types of Taxes?

When Can I Expect My Tax Refund?

As long as taxpayers have e-filed by the deadline and chosen direct deposit, then the refund should hit their account within three weeks. According to the IRS, nine out of 10 refunds arrive in less than 21 days. However, if you file a paper return, the timing will more likely be six to eight weeks.

And, remember, if you file later in the tax season, you might face processing delays. That’s because the volume of returns working their way through the IRS rises significantly. So being an early bird can be among the quickest ways to get your refund.

Recommended: What Is Income Tax Withholding?

Finding Out Where Your Refund Is

Once everything is filed, taxpayers can check their tax refund status on the IRS’s Where’s My Refund? page. This requires inputting your Social Security number, filing status, and the exact amount of the refund, which can be found on the tax forms that were submitted.

Can I Track the Status of My Tax Refund?

Taxpayers can check “Where’s My Refund?” starting 24 hours after e-filing.

The site is updated daily, usually at night. The IRS cautions that you may experience delays in getting your refund if you file by mail, or you are responding to a notice from the IRS.

If it’s been more than 21 days and you still haven’t received your refund, you can call the IRS at (800) 829-1040 for help. You may also want to contact the IRS if “Where’s My Refund?” instructs you to do so.

Can You Get Your Tax Refund Back the Same Day?

Unfortunately, there is currently no way to get a tax refund back the same day. The speediest timing tends to be closer to eight days from e-filing to direct deposit of a refund.

However, if taxpayers are in a bind, some tax preparation services offer 0% interest tax-refund loans. Tax-refund loans, also called “refund advances,” allow you to access your refund early, but you may want to keep in mind that tax preparers typically charge fees for filing tax returns.

If you are paying a tax preparer just to get the advance, you’ll essentially be paying a company in order to access your refund. Consider these points:

•   Some providers may charge an additional fee for the advance service.

•   These short-term loans range from $200 to $4,000. In some cases, there may be a minimum amount your refund must meet in order to qualify for a refund advance (how much can vary from one company to another).

•   You may only get part of your expected refund in advance.

•   Some companies may offer to give you a prepaid card with the loan amount on it within 24 hours.

•   Once your tax refund is issued, the tax preparer will typically deduct the loan amount from your refund.

Also be aware that you may be offered this kind of quick cash from other non-bank lenders with significant fees. Proceed with caution.

If you’d rather not pay any fees, however, you may also want to look into other options.

•   If you have bills that are due, it may be worth calling up your providers or credit card companies to see if they can extend their due date while you are waiting for your refund.

•   You might open a 0% interest credit card, such as a balance transfer one, and charge an urgent expense on that card and then pay it off as soon as the refund comes in.

What’s the Best Way to Spend Your Tax Refund?

Finally! Your tax refund has arrived. You may wonder about the best way to use the funds. Yes, it can be tempting to splurge on a weekend away or those new boots you’ve had your eye on, but consider this financially-savvy advice first:

•   If you are carrying any high-interest debt, one smart move might be to put your tax refund towards minimizing the debt or, if possible, wiping it out all together. Doing this can help you avoid spending more money on interest charges. It may also help boost your credit score, which may help you qualify for loans and credit cards with lower interest rates in the future.

•   Or you might consider using your tax refund to jump-start one of your current savings goals, such as building up an emergency fund, a downpayment on a home, or buying a new car.

For an emergency fund or savings goals you hope to accomplish within the next few years, you may want to put your refund in a high-yield savings account. These options typically offer a higher return than a traditional savings account but allow you easy access to your money when you need it.

•   Your tax refund can also help you start saving for the longer term, such as retirement or paying for a child’s education. Using a tax refund to buy investments can help you create additional wealth over time to help fund these far-future goals.

The Takeaway

To get your tax refund as quickly as possible, it’s a good idea to file early, and, if possible, avoid the mail. That means filing electronically (using the IRS’s free service or tax software, or hiring a tax pro) and signing up for direct deposit when you file.

It’s also wise to keep track of your refund on the IRS site and reach out to the agency if you haven’t received your refund within three weeks.

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

FAQ

How can I receive my tax refund sooner?

To receive your tax refund as soon as possible (which typically means within three weeks of filing), file electronically and request that the refund be paid by direct deposit.

Is direct deposit faster than mail for tax refunds?

Direct deposit will typically save time versus a check sent by mail in terms of tax refunds. If you file your return electronically too, you’ll likely have the shortest possible time from finishing your return to receiving funds that are due to you.

When should you start planning to file your tax return?

Tax season begins in January, with the forms you need having to be sent by January 31. It’s wise to start getting organized as soon as possible in the New Year to get your return done. If you work with a professional tax preparer, you might want to book them even earlier since January through April will be their busy season.

About the author

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer who covers topics such as credit cards, loans, investing, and budgeting. She has worked for major brands such as Mastercard and Visa, and her work has been featured by MoneyGeek, Slickdeals, TaxAct, and LegalZoom. Read full bio.

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

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

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

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

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

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

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.

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.
SOBK0224014
CN-Q425-3236452-130

You may wonder if anyone balances their bank account manually anymore given how many aspects of personal finances have become electronic. However, tracking withdrawals and deposits and tallying up amounts can have value.

Monitoring your checking account in this way can help you identify errors or fraud. It can reveal charges and fees you may not have known you were being assessed. It can also put you in better touch with your money and your spending. All those things are definitely positives.

This guide will help you learn the step-by-steps for balancing your checkbook as well as its benefits.

How to Balance a Checking Account Step-by-Step

Here’s how to balance your checking account. It can take a little time and effort but rewards you with control over your finances.

Step 1: Gather Your Bank Statement and Transaction Records

Start by gathering the receipts and records for spending and deposits for the period chosen. If you use a check register, grab that. If you write your purchases down in a notebook or use software or a spreadsheet, use those. If you collect ATM receipts, pull that pile together, too.

Step 2: Compare Deposits and Add Any Interest Earned

Next, you’re going to match those records with the bank statement. Many people review these online or in their bank’s app; some people may still get hard copies sent by snail mail.

In this step, you’re specifically looking for deposits. Make sure you have accounted for every transaction. If you missed something the bank has listed and you’re sure it’s accurate (for example, or a birthday check you deposited and forgot about), add it to your records. Factor in any interest you may have earned on the amount of money in your account.

Step 3: Check Off All Cleared Withdrawals, Payments, and Debits

Go ahead and make sure you have included all debits. This can mean any withdrawals from the ATM, autopayments, debit card transactions, and other transactions deducted from your account. This will help you get to the true bottom line of your account.

Step 4: Subtract Any Bank Fees or Service Charges

Don’t forget to account for any bank fees and service charges. Perhaps you keep your accounts at a fee-free bank, or maybe you pay a maintenance fee and overdraft charges from time to time. Check your statement and account for any such fees.

Every little bit counts: If you use fee-free ATMs, great, but if you paid a few dollars as a fee, don’t forget to account for that as you do the math.

Step 5: List and Total All Your Outstanding Transactions

Take note of any transactions that are pending. Did you deposit a check by mobile deposit last night that hasn’t fully cleared yet? Do you have an autopay that’s currently processing? Consider what might be about to hit your account and add or subtract it.

Reconcile Your Records With the Bank’s Balance

Now for your account reconciliation: The amount you come up with should match with the balance you have in your register/notes/spreadsheet and jibe with what you are seeing online or in app, once pending transactions are accounted for. If it doesn’t, you may have to do a closer check to see what you might have missed or if your math is a little off.

If you’re confident that the bank made a mistake or you notice anything else askew, contact the bank by phone, email, messaging, or in-person right away to let them know about the inconsistency.

Modern Tools to Help You Balance Your Account

If the thought of doing this reckoning and the math has you in a cold sweat, relax. There are tools to help you balance your checking account with less stress.

Using Your Bank’s Mobile App and Website

Your bank’s app and/or website can typically play a major role in balancing your account. By checking these options, you can see your real-time balance, transaction history, and digital statements. You can also likely glean spending insights that help you match your records to the bank’s, not to mention budget better.

You can also uncover errors this way. You use these tools to see what your bank knows and then compare that to your records to find discrepancies.

Using a Personal Budgeting Spreadsheet

Another system that can help you balance your account is a budgeting spreadsheet. There are many variations of these templates available online. It can be a smart move to start with one that is free to download. Digital spreadsheets vs. physical ones can offer the benefit of automatically doing the math for you as you enter your starting balance, credits, debits, and other bits of data.

If you’re the kind of person who enjoys working on a hard copy, you can print out these spreadsheets or buy paper ones at a local office supply retailer or perhaps a big box store.

Why Is Balancing Your Checking Account Still Important?

Balancing your checking account is still important because it helps you manage your money better, even in this era of online banking.

It Helps You Catch Bank Errors and Overcharges

Even if you are a fastidious record keeper, logging every cash withdrawal, bill payment, and deposit into a paper ledger, spreadsheet, or app, we all make mistakes from time to time.

Maybe an ATM receipt went missing or a bill payment was forgotten or recorded incorrectly. Or perhaps you were double-charged by a merchant. By reconciling an account regularly, these little mistakes can be quickly fixed. Banks also can make errors in rare instances. Balancing your checking account can allow you to bring a possible mistake to the attention of customer service.

It Helps You Spot Fraudulent Activity Sooner

Every time a person makes an ATM withdrawal, pays for gas with a debit card, or places an order online, there’s a slight chance that a scammer will intervene.

Consumers who check their accounts regularly may have a better chance of spotting fraud faster, limiting their own liability and helping the bank deal with potential problems.

It Gives You Control Over Automatic Payments and Subscriptions

Automatic bill payments are convenient and can help an account holder avoid late payments (and late fees).

But the downside is that those bills might not get the same attention as those paid every month by check, phone, or online. Ready or not, the money comes out of the bank account as scheduled, and if the account is low on the payment date, it can lead to bounced checks and overdraft fees.

Account holders who check their statements regularly may find they’re more aware of and prepared for the amount and timing of their autopay charges. They also might find they’re ready to dump or reduce the cost of some of the services and subscriptions they’ve been paying for from their checking account every month or year.

It Provides a Clear Picture of Your Spending Habits

Balancing your checking account can benefit those who need or want to take more control of their spending to see exactly where their money is going every day, week, or month.

Regularly scheduled reconciliations enable people to see exactly how much they’re spending every week on nonessentials, such as in-app purchases or happy hours. This kind of information can help people budget more effectively and help bring them closer to their savings goals, such as a downpayment on a home.

Recommended: ATM Withdrawal Limits — What You Need To Know

The Takeaway

Balancing a bank account every month can serve as an important backup and safeguard, especially for those who have multiple accounts, or who have turned over certain financial tasks (say, bill paying and budgeting) to automation and apps. It can also help you avoid unnecessary fees, spot mistakes or fraud, and enable better budgeting and money management.

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

FAQ

How often should I balance my checking account?

How often you should balance your checking account can vary. Financial experts recommend a minimum of once a month, with some saying weekly is a good cadence. If you conduct a lot of transactions, an even more frequent rhythm can be best.

What should I do if my checking account doesn’t balance?

If your checking account doesn’t balance, it’s wise to dig in and reconcile the account, looking for missing and pending transactions, fees you forgot about, and math errors. If you can’t find an error or if you see any unauthorized or incorrect activity, contact your bank immediately.

Do I need to balance my account if I use a banking app?

It’s a good idea to balance your account even if you use a banking app. The reason: Apps can’t necessarily catch instances of fraud or mistakes the way you can, and they may not show pending transactions (like an upcoming autopay) in a way that allows you to manage your money optimally.

What is the difference between my current balance and my available balance?

Here’s the difference between these two amounts: Your current balance reflects money in your account for all transactions that have cleared or are in the works. Your available balance, however, shows what you can spend right now. It doesn’t include transactions that are still pending or processing, nor does it reflect any funds that have a hold on them.

What is a check register and is it still used?

A check register is a ledger (often in booklet form) that is filled out to track bank account activity, such as deposits, checks written, and ATM withdrawals. This serves as a tracker for account activity and current balance. Some people still use them; others prefer online tools to keep tabs on their money.

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

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

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

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

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

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

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

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

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

SOBNK-Q425-042

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

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

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

25 Ways to Lower Your Taxable Income

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

1. Contribute to a Retirement Account

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

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

2. Open a Health Savings Account

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

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

3. Check for Flexible Spending Accounts at Work

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

4. Business Tax Deductions

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

5. Home Office Deduction

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

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

6. Rent Out Your Home for Business Meetings

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

7. Write Off Business Travel Expenses

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

8. Deduct Half of Your Self-Employment Taxes

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

9. Get a Credit for Higher Education

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

10. Itemize State Sales Tax

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

11. Make Charitable Donations

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

12. Adjust Your Basis for Capital Gains Tax

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

Recommended: Should I Sell My House Now or Wait?

13. Avoid Capital Gains Tax by Donating Stock

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

14. Invest in Qualified Opportunity Funds

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

15. Claim Deductions for Military Members

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

16. Enroll in an Employee Stock Purchasing Program

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

17. Deduct the Student Loan Interest You’ve Paid

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

18. Sell Your Losing Stocks to Claim Capital Loss Carryover

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

Recommended: Tax Loss Carryforward

19. Deduct Mortgage Interest

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

20. Deduct Medical Expenses

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

21. Delay IRA Withdrawal Upon Retirement

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

22. Ask Your Employer to Defer Income

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

23. Open a 529 Plan for Education

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

24. Buy Tax-Exempt Bonds

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

25. Time Your Investment Gains or Losses

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

The Takeaway

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

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FAQ

How can I lower my taxable income?

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

What are the tax loopholes for the rich?

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

Do 401(k) contributions reduce taxable income?

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

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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.

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

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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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