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Exploring IVF Financing Options

Couples who are finding it hard to get pregnant can often feel isolated while they’re going through this difficult experience. But struggling with fertility is actually quite common.

Between 10$ and 15% of couples trying to have children in the US experience infertility problems, according to the Mayo Clinic. More than 12% of American women between the ages of 15 and 49 have gotten medical treatment for infertility issues, according to the last National Survey of Family Growth. And more than 55,000 American women per year give birth thanks to assisted reproductive technology.

One of the most common and effective treatments for fertility problems is in vitro fertilization (IVF). This involves removing an egg from a woman’s ovaries, fertilizing it with sperm in a lab, and then implanting the embryo in her uterus. Women under the age of 35 have a nearly 50% chance of having a baby through IVF, while women over the age of 42 have about a 3.9% chance.

The procedure is expensive—the average cost of one IVF cycle in the U.S. is between $12,000 and $17,000. That number can depend on the city or state you live in, the treatment center you use, how many medications you take, and other factors. In many states, insurance doesn’t cover IVF at all. So, on top of the emotional toll of fertility struggles, the high cost of treatment can sometimes be a financial burden as well.

Options for Financing IVF

For many would-be parents, that hefty price tag is worth it for the chance to have children. But how can people afford to pay for treatment? Here are a few ideas for IVF financing.

1. Tapping into Your Health Insurance

Your first step should probably be to check whether your health insurance will cover IVF. There are 15 states that require insurance companies to cover infertility treatment: Arkansas, Connecticut, Delaware, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Montana, New Jersey, New Hampshire, New York, Ohio, Rhode Island, and West Virginia. However, not all of these states include IVF in the requirement. Another two states—California and Texas—require insurers to offer coverage for infertility treatment, and in California this doesn’t include IVF.

You can contact your insurer to find out your specific benefits. If you have the option and if the timing works out with your enrollment period, you might consider switching your insurance plan to one that covers IVF. But in most states, where insurance companies don’t have to pay for IVF, so in those locations, you may be responsible for covering all expenses yourself.

2. Using Your Health Savings Account or Flexible Spending Account

A health savings account (HSA) allows you to put away money for medical expenses. Typically, you get an HSA in tandem with a qualifying high-deductible health plan. If you have funds in your HSA, you can use them to pay for IVF and related medical expenses. As long as you paid for the expenses after you opened the HSA, you can reimburse yourself for them at any time—it doesn’t have to be in the year that you incurred the costs.

If your employer offers a flexible spending account (FSA), you can also use those funds to pay for IVF. You don’t need a qualifying health plan to have and use this account. However, you do have to use all your FSA funds in the year they’re doled out or lose them.

Bear in mind that there are annual limits on how much money you can contribute to either kind of account. For 2022, the individual cap on HSA contributions is $3,650 and the family cap is $7,300. Health flexible spending account limits were at $2,750 in 2021. At the time this article was updated, the IRS had not announced what, if any, changes it plans to make for 2022.

3. Budgeting and Saving

If you’re planning to pay for IVF out-of-pocket and you don’t just have that kind of cash lying around, the most basic financial move is to save up, the way you would for any major expense. That likely means making a budget. You can start by tallying up your monthly expenses and take-home income. If you have enough financial leeway to save cash every month, you could set up an automatic paycheck withdrawal amount that could go directly into a savings account dedicated to your IVF fund.

If you don’t have enough left over after your expenses to save for IVF, one option is to work on cutting your spending. Can you take in a roommate or boarder to reduce housing costs? Could you spend time doing more free or low-cost activities with your friends instead of going out to bars or shows? What about giving up that gym membership in favor of YouTube fitness videos or running outdoors?

Another option is to increase your income. Perhaps you or your partner could ask for a raise at work or look for a better-paying job. Or you might take on a side hustle, such as driving for a ride-sharing service or renting your place out on Airbnb.

4. Borrowing From a Loved One

If you have a friend or relative who is financially comfortable, you might consider asking them for a loan. There may be people in your life who would be happy to support you in such an important and personal investment. But approach this option carefully to avoid damaging relationships. You may want to make it clear that the person you’re asking can say no with no hard feelings. If they agree, it’s a good idea to set out the terms of the loan clearly, including whether you’ll pay interest and your repayment schedule. Then, of course, you should be sure to honor the agreement.

5. Getting a Medical or Fertility Loan

Some IVF providers work with companies that offer financing for medical treatments. You can also search for IVF-specific loans and financing programs online. Take note of any origination fees or penalties for repaying the loan early.

These options can be convenient, but it never hurts to shop around before borrowing, since both loans and financing programs can come with higher interest rates than you might expect.

Some fertility treatment providers may also offer IVF payment plans that let you break the cost down over a number of months.

6. Applying for a Grant

A number of nonprofit organizations offer grants and scholarships to those who cannot afford to pay for IVF. Bear in mind that there’s no guarantee that you’ll receive a grant. That said, groups that provide assistance nationally include the AGC Scholarship Foundation, BabyQuest Foundation, the Tinina Q. Cade Foundation, the Family Formation Charitable Trust, the Footsteps for Fertility Foundation, among others.

Other groups may offer support to individuals and families who live in specific regions. You might also want to look at this list of infertility financing resources from Resolve .

7. Taking Out a Home Equity Line of Credit

If you own a home, you may be able to take out a revolving line of credit against the equity that you’ve built up. The advantage is that home equity lines of credit (HELOC) often have lower interest rates than credit cards or other types of loans. As of September 1, 2021, the average rate for a R30,000 HELOC was 4.10% (but this rate will change daily).

The amount you can borrow and the terms depend on the equity in your home, as well as your credit history, debt-to-income ratio, and other factors.

The downside of a HELOC is that if you have trouble making payments, your home is on the line. It’s up to you to pay the entire balance off within a certain time period, or else, typically, a sky-high interest rate kicks in.

8. Borrowing From Your Retirement Account

This is a path that financial advisors generally would not recommend. That’s because nest eggs usually stay untouched for decades in order to have enough time to grow for retirement. The more funds you leave in, and the earlier you invest, the more time your retirement savings has to grow or to recover from losses.

However, you may have the option of borrowing up to $50,000 or half of the amount vested in your 401(k)—whichever is smaller. If you take this path, you are basically lending the money to yourself at market interest rates for up to five years. However, if you leave your job for any reason during the time you’re paying off the loan, there may be penalties for early withdrawal if you don’t pay the loan off in time. Keep in mind that you will be repaying the loan with after-tax dollars, and they’ll be taxed again when you take the money out in retirement.

You may also qualify to actually withdraw money from your 401(k) to pay for out-of-pocket medical expenses, if your plan allows what’s called a hardship withdrawal . You’ll have to pay taxes and a 10% penalty on the amount you take out. If you have a Roth IRA, you can withdraw your contributions (but not earnings) at any time without penalties or taxes.

9. Taking Out a Personal Loan

Compared to using high-interest credit cards or money in your retirement accounts, a personal loan might be a better option for many people. A personal loan can be used for almost any expense, including IVF, and it often (but not always!) comes with a much lower interest rate than credit cards.

Unlike a HELOC, unsecured personal loans don’t require you to put up any assets as collateral. With SoFi, for example, you can borrow from $5,000 up to $100,000 without paying any fees or prepayment penalties. If you qualify, you then have a fixed rate with a fixed monthly payment for the term of the loan, so you know exactly what to expect.

The Takeaway

IVF might be one of the most meaningful investments you’ll ever make, but it’s undeniably expensive. You can look to your insurance, health savings accounts, cash savings, or a loved one. If that’s not enough, an unsecured personal loan may be a smart way to finance treatment and help make your dreams a reality. See if you might be eligible for one of SoFi’s personal loans with no fees to help you cover the costs.


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SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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.
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.
Third Party Brand Mentions: No brands or products 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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Building a Line Item Budget

Many people worry that creating a budget will be too complicated, too restrictive, and put the kibosh on fun.

But a budget is really nothing more than a plan for your money. A well-thought-out budget can help you take control of your finances and use your money with intention, so you have enough to cover your bills, build your savings, and (yes) still have enough left over for fun.

A line item budget, which groups expenses into specific categories can be particularly helpful because it gives you a bird’s eye view of your spending patterns (including areas where you may overspend).

And while it might sound complicated to set up, you can actually put together a personal line item budget in a few relatively simple steps, which include: tallying your income, coming up with spending categories, and setting spending targets for each category.

What is a Line Item Budget?

A line item budget is a method used by many small businesses to plan and keep tabs on financial spending. But anyone can benefit from setting up this type of budgeting plan.

A line item budget groups related costs together. For an individual, that would include fixed expenses, such as rent and utilities, as well as variable expenses, like groceries, restaurants, and clothing.

Line item expenses can also include saving and investing, such as emergency savings, savings designated for specified large purchases (such as a car or a vacation), and retirement savings.

A line item budget helps ensure that you’ll have enough money each month to cover essentials and nonessentials (without running up debt), while also putting money aside for future goals.

Line Item Budgeting: Step by Step

To get started with budgeting, it can be a good idea to gather all of your financial paperwork, including bank and credit card statements and bills, for the past six months or so, and then follow these simple steps.

Step 1: Figuring Out Your Household Income

One of the most important pieces of information you’ll need to create a budget is how much money you bring in each month. You’ll want to look at after-tax income, since that is the money you have available to spend.

Depending on your situation, you may only need to look at your W2, paystubs, or the direct deposits on your bank statement to assess your monthly take-home income. But, some may have different streams of income, such as:

•  Side hustle cash flow

•  Investment income

•  Alimony

•  Child support

•  Small business income

If you’re self-employed, you can look at how much you bring in over six to 12 months and then come up with a monthly average, making sure you subtract any income taxes that will be owed on this money.

Step 2: Coming Up with Personal Budget Line Items

You can use the financial paperwork you’ve gathered to make a list of all bills that must be paid on a monthly basis–these will all be line items on your monthly budget.

If you have bills that come due quarterly, semi-annually, or annually, such as insurance, you can break the total amount into monthly payments so you can enter them in each month’s budget.

To figure out how much you spend each month on variable expenses, like groceries and entertainment, you can use credit card and bank statements, as well as any receipts you’ve saved.

To get a more accurate picture of your weekly spending (that includes cash payments like morning coffees and food truck lunches), however, you may want to actually track your spending for a month or so. There are plenty of apps you can use to track and categorize your spending. Or, you can also save receipts and add everything up on your own.

Everyone’s financial situation is different, but what follows is a list of suggested categories to help make sure you don’t forget any monthly expenses.

Housing

Mortgage or rent
Property taxes
Household repairs
HOA fees

Transportation

Car payment
Car warranty
Gas
Tires
Maintenance and oil changes
Parking fees
Repairs
Registration and DMV Fees

Food

Groceries
Restaurants
Pet food

Utilities

Electricity
Water
Garbage
Phones
Cable
Internet

Clothing

Adult clothing
Adult shoes
Children’s clothing
Children’s shoes

Medical/Healthcare

Primary care
Dental care
Specialty care (dermatologists, orthodontics, optometrists, etc.)
Urgent care
Medications
Medical devices

Insurance

Health insurance
Homeowner’s or renter’s insurance
Home warranty or protection plan
Auto insurance
Life insurance
Disability insurance

Household Items/Supplies

Toiletries
Laundry detergent
Kitchen/Cleaning supplies
Tools

Personal

Gym memberships
Haircuts
Salon services
Cosmetics/Grooming (like makeup or services like manicures)
Babysitter

Debt

Personal loans
Student loans
Credit cards

Retirement

401(k)
IRAs

Education

Children’s college
Your college
School supplies
Books

Savings

Emergency fund
Big purchases like a new mattress or laptop
Other savings

Gifts/Donations

Birthday
Anniversary
Wedding
Christmas
Special occasion
Charities

Entertainment

Alcohol and/or bars
Games
Movies
Concerts
Vacations
Subscriptions (Netflix, Amazon, Hulu, etc.)]

Step 3: Setting Up Your Line Item Budget

One you have all of your categories (or line items), you can use a computer spreadsheet or a lined notepad to list all monthly expenses.

Next to each entry, you can place the amount of money you are budgeting for it out of your monthly income. These numbers can be based on previous bills, as well as information gleaned from tracking your spending.

If you find there isn’t enough money in your monthly income to cover all of your expenses–including retirement and savings–you may then want to rejigger your budget.

This might involve cutting back on nonessential expenses. For example, you might decide to cook a few more nights per week and spend less on eating in restaurants or getting take-out. Or, you might opt to get rid of cable, or quit the gym and start working out at home. You can then reallocate that money toward saving for a future goal.

One guideline for budgeting you may want to keep in mind is the 50/30/20 budget rule, which states that you should put 50 percent of your income towards needs, 30 percent towards wants, and 20 percent for savings. How you allocate spending within these categories is up to you.

You may also want to keep in mind that a line item budget isn’t set in stone. As you adjust your goals or experience changes in your income or lifestyle, you can make tweaks and changes to your budget. Your life likely isn’t stagnant, and your budget shouldn’t be either.

The Takeaway

A line item budget, which groups expenses into categories and subcategories, can shine a light on exactly where your money is going each month and help ensure that your spending is in line with your priorities and goals.

In order to create a successful budget, everything should be accounted for, from large expenses like your mortgage and car payment to smaller expenses like your gym membership and Netflix subscription.

When creating a line item budget, you may notice that you’re spending more than you thought on things that aren’t all that important to you, or that you rarely use. You may then decide to reallocate that money towards something you really care about, such as saving up for a new car or a downpayment on a home.

Ready to take control of your money and start budgeting? With a SoFi Money® cash management account, you can easily track your weekly spending right in the dashboard of the SoFi app.

And, with SoFi Money’s special “vaults” feature, you can create different vaults for different savings goals listed on your line item budget.

Check out how SoFi Money can make it easy to manage your finances today.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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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What is a Stipend?

What is a Stipend?

A stipend is a fixed amount of money given to offset expenses or provide financial support while you’re engaged in a service or contributing to a project. A stipend may be paid in one lump sum, or it might be paid in a series of smaller amounts.

As you’re looking through employment opportunities, you may come across certain positions or experiences that don’t offer a salary but do offer a stipend. Stipends are also common in academia, where a stipend may be offered to grad students to TA classes, assist with research, or conduct research projects on their own.

Read on to learn more about how a stipend works, whether or not you can negotiate a stipend, and how receiving this type of payment may affect your taxes.

How Does a Stipend Differ From a Salary?

A stipend is a fixed sum of money that may be used by an organization to incentivize employees, interns, researchers, teachers, and volunteers. It’s usually meant to help offset expenses for a specified period of time, such as one year or one semester.

Typically, stipends are used in internships or apprentice situations, where the recipient of the stipend is receiving training that benefits them more than an employer.

However, some employers may offer stipends to their employees as one-off payments to help offset work-related expenses, such as travel/commuting, meals, home office expenses, cell phone, professional training, or education.

A salary, on the other hand, is an annual amount agreed upon between a company and an employee that is paid out in regular increments, either monthly, bi-monthly, bi-weekly, or weekly.

A salary may also include benefits such as vacation, insurance, and other benefits within the overall compensation package.

Recommended: What is a Good Entry Level Salary?

Who Receives a Stipend?

Historically, stipends were primarily used as part of an internship or fellowship package. These days, however, it’s not uncommon for employers to use a stipend as a “fringe benefit” added to your overall compensation package.

The stipend may be earmarked for certain expenses and your employer may ask for specific records or notekeeping to access it. Fringe benefit stipends may include:

• Transportation stipends

• Travel stipends

• Education stipends

• Clothing stipends

• Entertainment stipends

• Food stipends

The type of stipends offered usually depends on the nature of your work. For example, if you have to travel frequently for your job, your employer may give a travel stipend to allow you to have flexibility in making your travel plans.

Are Stipends Taxable?

Stipend checks aren’t considered wages so you won’t pay Social Security or Medicare taxes on them. However, you may still have to pay some taxes on a stipend.

If you are offered a stipend for an internship or work in academia, it might be called a “living” stipend, which means it is being given to you to help pay for expenses.

Though taxes will not be taken out, this stipend is likely considered taxable income and you will need to set aside some of your stipend money to pay any taxes owed at the end of the year.

In some academic settings, however, a stipend may be considered a scholarship, and earmarked for educational purposes only (rather than living expenses). In this case, the stipend may not be taxable.

If you’re offered a stipend for academic work, it can be a good idea to speak with a financial professional or your financial aid office to understand how the stipend is meant to be used and how it will be treated tax-wise.

Stipends offered by companies to their employers may or may not be taxable—-it depends on how the company structures the stipend.

In order to keep a stipend non-taxable, a company must set up a reimbursement plan in which employees complete expense reports proving that all business-related expenses are being reimbursed through the payment of the stipend.

For example, if you’re given a travel stipend to go to a client meeting, then the stipend may not be taxable if you provide adequate expense documentation of how the stipend was used and how each payment was an acceptable business expense.

If expenses are not documented — or if the stipend is a “perk” of working at the company, such as a commuting stipend or stipend for in-office meals — then the stipend may be taxable.

If your company is offering you a stipend, it can be a good idea to ask your employer, as well as a tax professional, about any tax implications.

How to Use a Stipend

If you accept an internship or other position that offers a stipend to help cover expenses, it can be a good idea to consider how the money will be spent and set up a budget for basic living expenses.

Unlike a salary or wages, you may need to make a stipend stretch several months. A good first step is to assess your monthly expenses, including:

• Housing

• Food

• Transportation

• Amount set aside for potential taxes

• In case of emergency expenses

A stipend is not generally expected to cover all of the expenses you may incur, so you may need to find ways to stretch your money, such as moving in with a friend or relative, or bring in extra income by getting a side gig or part-time job.

Recommended: Why Having Emergency Savings Should Be a Financial Priority

Can You Negotiate a Stipend?

There may be some wiggle room, but how much (if any) will depend on several factors, including what the stipend is for, the field you’re in, and the reason for asking for an increased stipend.

For example, if you are a student who received a stipend to do international research, you may find that the cost of travel and lodging is more than the organization or school offering the stipend anticipated. This could be something you could bring to the organizer’s attention, to see if there’s any wiggle room in allocating more dollars.

In addition to assessing your expenses (to see if the stipend will be enough), you may also want to look at similar positions and review what their stipends are. If other positions are offering more, you may want to consider asking for that amount.

In some cases, however, a school, organization, or company may not have wiggle room to access more money and may offer the same stipend to interns or apprentices across the board.

Doing some research and framing the conversation respectfully can be helpful as you navigate the next steps and whether or not the stipend package makes sense for your financial needs.

The Takeaway

A stipend is a predetermined amount of money that is often paid to certain individuals, such as trainees, interns, and students, to help offset some of their expenses.

A stipend can make certain stepping stones toward a degree or job more attainable and affordable.

However, stipends can have financial implications if you’re not aware of how the stipend may be taxed and what records are necessary for any incurred expenses during the stipend.

As you plan for life with a stipend, it can be a good idea to set up a budget and track your expenses to make sure you don’t run out of money mid-program.

With a SoFi Money® cash management account you can easily track your weekly spending right in the dashboard of the SoFi app.

Make it easy to manage your finances with SoFi Money.

Photo credit: iStock/Mykola Sosiukin


SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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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What Tax Bracket Am I In?

There are seven federal tax brackets for 2021, ranging from 10% to 37%. Generally, the more you earn, the higher your tax rate, and the more money you will owe the IRS in taxes.

How much you’ll pay in federal tax on your 2021 income (due in 2022) will depend on which bracket your income falls in, as well as your tax-filing status–which is whether you’re single, married filing jointly, married filing separately, or a head of household.

When people look at tax charts, however, they often assume that having an income in a particular tax bracket (such as 12% or 22%) means that all of your income is taxed at that rate.

Actually, tax brackets are “marginal,” which means only the part of your income within each range (or “bracket”) is taxed at the corresponding tax rate.

Read on to learn which tax bracket you are in, how to use the 2021 tax chart to figure out how much you will owe, plus tips for how to lower your tax bracket.

2021 Tax Brackets

Below are the tax rates for the 2022 filing season. Dollar amounts represent taxable income earned in 2021. Your taxable income is what you get when you take all of the money you’ve earned and subtract all of the tax deductions you’re eligible for.

Not sure of your filing status? This interactive IRS quiz can help you determine the correct status. If you qualify for more than one, it tells you which one will result in the lowest tax bill.

For Unmarried People

Tax rate of:

•  10% for people earning $0 to $9,950

•  12% for people earning $9,951 to $40,525

•  22% for people earning $40,526 to $86,375

•  24% for people earning $86,376 to $164,925

•  32% for people earning $164,926 to $209,425

•  35% for people earning $209,426 to $523,600

•  37% for people earning $523,601 or more

For Married People Who Are Filing Jointly

Tax rate of:

•  10% for people earning $0 to $19,900

•  12% for people earning $19,901 to $81,050

•  22% for people earning $81,051 to $172,750

•  24% for people earning $172,751 to $329,850

•  32% for people earning $329,851 to $418,850

•  35% for people earning $418,851 to $628,300

•  37% for people earning $628,301 or more

For Married People Who Are Filing Separately

Tax rate of:

•  10% for people earning $0 to $9,950

•  12% for people earning $9,951 to $40,525

•  22% for people earning $40,526 to $86,375

•  24% for people earning $86,376 to $164,925

•  32% for people earning $164,926 to $209,425

•  35% for people earning $209,426 to $314,150

•  37% for people earning $314,151 or more

For Heads of Household

Tax rate of:

•  10% for people earning $0 to $14,200

•  12% for people earning $14,201 to $54,200

•  22% for people earning $54,201 to $86,350

•  24% for people earning $86,351 to $164,900

•  32% for people earning $164,901 to $209,400

•  35% for people earning $209,401 to $523,600

•  37% for people earning $523,601 or more

Recommended: How Income Tax Withholding Works

How Do Tax Brackets Work?

The federal government uses a progressive tax system, which means that filers with higher incomes pay higher tax rates.

The tax system is also graduated in such a way so that taxpayers don’t pay the same rate on every dollar earned, but instead pay higher rates on each dollar that exceeds a certain threshold.

For example, if your taxable income is $50,000 for 2021, not all of it is taxed at 22%. Some of your income will be taxed at the lower tax brackets, 10% and 12%.

According to the 2021 tax brackets (the ones you’ll use when you file in 2022), an unmarried person earning $50,000 would pay:

10% on the first $9,950, or $995

12% on the next $30,575 ($40,525 – $9,950 = $30,575), or $3,669

22% on the next $9,475 ($50,000 – $40,525 = $9,475), or $2,084.50

Total federal tax due would be $995 + $3,669 + $2,084.50, or $6,748.50

This doesn’t take into account any deductions. Many Americans take the standard deduction (rather than itemize their deductions).

For income earned in 2021, the standard deduction is $12,550 for unmarried people and for those who are married, filing separately; $25,100 for those married, filing jointly; $18,800 for heads of household.

In addition to federal taxes, filers may also need to pay state income tax. The rate you will pay for state tax will depend on the state you live in. Some states also have brackets, and a progressive rate. You may also need to pay local/city taxes.

How to Lower Your 2021 Tax Bracket

You may be able to lower your income into another bracket (especially if your taxable income falls right on the cut-off points between two brackets) by taking tax deductions.

Tax deductions lower how much of your income is subject to taxes. Generally, deductions lower your taxable income by the percentage of your highest federal income tax bracket. So if you fall into the 22% tax bracket, a $1,000 deduction would save you $220.

Tax credits, such as the earned income tax credit, or child tax credit, can also reduce how you pay Uncle Sam–but not by putting you in a lower tax bracket.

Tax credits reduce the amount of tax you owe, giving you a dollar-for-dollar reduction of your tax liability. A tax credit valued at $1,000, for instance, lowers your total tax bill by $1,000.

Many people choose to take the standard deduction, but a tax expert can help you figure out if you’d be better off itemizing deductions, such as your mortgage interest, medical expenses, and state and local taxes.

Whether you take the standard deduction or itemize, here are some additional ways you may be able to lower your tax bracket:

•  Making year-end charitable contributions. For 2021, the IRS will allow people to deduct up to $300 in cash donations to qualifying charities, even if they don’t itemize their deductions (i.e., take the standard deduction).

•  Delaying income. For example, if you freelance, you might consider waiting to bill for services performed near the end of the 2021 until January 2022.

•  Making contributions to certain tax-advantaged accounts, such as health savings accounts and retirement funds, keeping in mind that there are annual contribution limits.

•  Deducting some of your student loan interest. Depending on your income, you may be able to deduct up to $2,500 in student loan interest paid in 2021.
It can be a good idea to work with a CPA (certified public accountant) or tax advisor to see if you qualify for these and other ways to lower your tax bracket.

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

The Takeaway

The government decides how much tax you owe by dividing your taxable income into chunks–also known as tax brackets– and each chunk gets taxed at the corresponding tax rate.

There are seven federal tax brackets for the 2021 tax year: 10%, 12%, 22%, 24%, 32%, 35% and 37%.

The benefit of a progressive tax system is that no matter which bracket you’re in, you won’t pay that tax rate on your entire income.

Depending on your financial situation, you can use both tax deductions and credits to lower the amount you pay Uncle Sam each year.

Knowing your tax bracket can help you get an idea of how much you will owe on your 2021 income.

If you think you might get hit with a sizable tax bill in 2022, you may want to look into changing your paycheck withholdings or, if you’re a freelancer, making quarterly estimated tax payments.

You may also want to start putting some “tax money” aside each month, so you won’t have to scramble to pay any taxes owed when you file in April.

With a SoFi Money® cash management account, you can separate your savings from your spending while earning competitive interest on all your money.

Explore how SoFi Money® can help you meet your financial goals.



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Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.
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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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Paying for College: A Parent’s Guide

Parents can and do find ways to pay for their child’s college, but it often involves sacrifice and planning. Two keys: Save early and consistently.

Starting as soon as possible and making regular deposits into whatever vehicle you choose can help smooth out the ups and downs of the stock market.

Consistently making equal payments also makes the task of saving easier.

How Much Will I Need to Save?

The answer to this question is subjective. Do you plan to try to cover 100% of your child’s college costs, or will student loans, if needed, be palatable? Will your child likely qualify for need-based or merit aid? Might your high achiever be eligible for a college on the list of schools from Amherst to Yale that meet all demonstrated need?

Have you carved out your own retirement savings plan and an emergency fund and focused on paying down your own debt? It’s smart financial planning to get your house in order first, so you can save for your offspring’s college.

The cost of attendance, or “sticker price,” on every college website that estimates the total cost of a year of school can cause, well, sticker shock. But most students do not pay sticker price. They pay the net price, that number less scholarships, grants, and financial aid.

The College Board reports that the average published tuition and fees for full-time students for 2020-21 are:

•  Public four-year college, in-state student: $10,560

•  Public four-year college, out-of-state student: $27,020

•  Private nonprofit four-year college, any student: $37,650

The estimated average net tuition and fee price paid by first-time full-time in-state students enrolled in public four-year institutions was $3,230 in 2020-21; and at private nonprofit colleges, $16,000, according to the College Board.

Remember that the above numbers cite tuition and fees, not the total cost of attendance, which also includes the estimated annual cost of room and board, books, supplies, transportation, loan fees, miscellaneous expenses (including for a personal computer), and eligible study-abroad programs.

The upshot: Anticipating the cost of attendance of various colleges, your family’s eligibility for merit and need-based aid, and borrowing tolerance can help you prepare.

If you put a number on a savings target, another key question is: How can I start saving for college?

What Are Some Strategies for Saving?

Here are a few options to consider:

Automating savings. You could set up automatic transfers to a designated college savings account, so you won’t even have to think about it. You can transfer from your checking account or, if it’s an option, opt to direct deposit a portion of your paycheck directly to your savings account.

Putting windfalls to work. Another way to boost savings comes from the planned and unplanned windfalls in life. Getting a tax refund or receiving an inheritance? Keeping an eye out for unexpected money can help you achieve your savings goals.

Pruning expenses. If you haven’t already trimmed your expenses, you can use the natural course of time to turn expenses into savings. For example, once your child no longer needs diapers, you can put that cost toward college savings. When they no longer need day care, you could funnel what you were paying into your account. If piano lessons end, it’s yet another chance to increase how much you can save.

Finding scholarship matches. Once children get closer to high school graduation, you can help them find scholarships. FastWeb and Scholarships.com are two popular sites among many that will help you search for opportunities. Many allow you to set up a profile for your child that may include interests, intended majors, and even preferred schools—data points that will be used to help match your child with scholarships.

It’s usually more cost-effective to save than borrow, of course. Every dollar you borrow can cost you more than that dollar, when you add interest.

Many parents use a mix of sources to fund their children’s education. For example, you could save a third of your target, pay a third during your child’s time in college, and borrow the last third.

Which Savings Plan Is Right for Me?

If you have your target goal and a plan to make regular contributions, you’re ready to weigh which investment vehicles will fit your needs. Here are some common savings tools.

529 Plans

The 529 college savings plan is a tax-advantaged account to save for higher education costs, and it has become popular with parents saving for college. Anyone, even non-family members, can set one up and make contributions on behalf of a beneficiary.

Contributions to 529s are made with after-tax dollars, but they grow tax-free, and capital gains are tax-free as long as withdrawals are used to pay for qualified education expenses. Any withdrawals that are not used for higher education expenses may be subject to penalties and taxes.

Another caveat: If your child doesn’t go to college, the funds still need to be spent on education to avoid taxes and penalties. But you have the ability to change the beneficiary of a 529 account to another family member.

This means that if your oldest child does not use the funds for college, you can change the beneficiary on the 529 to a sibling or even a family member in the next generation. Even better news, if your child receives a scholarship for college, you can withdraw the amount of the scholarship from the 529 plan penalty-free. If you decide to withdraw it for another purpose, you’ll pay a 10% penalty , plus regular income taxes.

Annual contributions to a 529 plan are not limited, but any amount you give the beneficiary will be part of your annual $15,000 gift tax exclusion. The IRS will let you (and your spouse, if you elect to split gifts) make five years of contributions at once without paying gift taxes.

Many states offer these plans, so you’ll want to start by finding out if your state offers any tax incentives to participate in your own state’s sponsored plan. If you discover that your state does not offer additional tax benefits for contributions, you can shop around for the lowest fees.

Then there are 529 prepaid tuition plans , offered by a dwindling number of states, that allow parents, grandparents, and others to prepay tuition and mandatory fees at today’s rates at eligible colleges and universities.

Most state prepaid tuition plans require you or your child to be a resident of the state offering the plan when you apply. Most allow the funding to be transferred to a sibling.

Qualified distributions from prepaid 529 plans are exempt from federal income taxes and might also be exempt from state and local taxes.

The Private College 529 , not run by a state, offers guaranteed prepaid tuition at many participating colleges and universities, with no residency requirements.

Coverdell Education Savings Account

A Coverdell education savings account can also be used to pay for qualified education expenses.

The annual contribution limit is just $2,000. Contributions are made with after-tax dollars, but they grow tax-free, and withdrawals for qualified expenses are tax-free.

The account is limited to certain incomes. You can use a variety of investments to grow the account.

UTMA and UGMA Accounts

A Uniform Transfers to Minors Act or Uniform Gift to Minors Act custodial account can be set up to pay any expense that benefits a minor.

When your child reaches the age of majority, 18 or 21, depending on the state, they will be able to use the money for whatever they want, so many parents are wary of using these to plan for college.

The flip side is your child won’t be limited to just paying for education expenses and can use the money for living arrangements, a car, or other necessary purchases.

There are no contribution limits for UTMA and UGMA accounts, and they can be funded with any combination of cash and investments. Annual gift tax exclusions apply.

Because contributions are made with after-tax dollars, there are no taxes on withdrawals, but there may be taxes on capital gains.

What About Student Loans?

While your student may have to take out federal student loans to make it to graduation day, you can also shoulder some of the load.

Parent PLUS loans can be one way to help your child afford college. They are student loans offered by the U.S. Department of Education, and parents become the borrower. You can borrow up to the amount of education expenses not covered by other financial aid. It’s easier to qualify if you don’t have an “adverse credit history.”

Parent PLUS loans have a fixed interest rate, currently 6.28% , with a typical term of 10 years that may be extended to 25 years. However, unlike federal student loans, Parent PLUS Loans come with a fairly high origination fee—it’s currently 4.228%.

Even with savings, federal student loans, grants, and scholarships, your child may still have unmet needs. Private student loans, offered by private lenders, are often used to fill those gaps.

SoFi offers private parent student loans, when you, the parent, take responsibility for the loan. SoFi also offers undergrad private student loans that allow a cosigner. If you cosign, you and the student are responsible for the loan.

It’s important to know that federal student loans come with benefits, including income-driven repayment options and student loan forgiveness, that private lenders do not offer.

The Takeaway

Paying for a child’s college education involves two key things: saving early and consistently. Most students will still end up borrowing in order to pay for the many expenses of higher education.

When it comes time to fund the college journey, keep SoFi Private Student Loans in mind. They come with a fixed or variable rate and no origination or late fees. Private student loans may not have the same protections and benefits that come with Federal student loans and usually are not considered until all other financial aid options have been exhausted.

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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.
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.
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