SoFi

Personal loans are usually not considered income and are therefore not taxable. Rather, they are viewed as debt. There are, however, some exceptions to this rule which create situations in which a personal loan could be taxable.

Read on to learn the details about personal loans and their tax implications.

Are Personal Loans Considered Taxable Income?

As noted above, personal loans aren’t often considered taxable income. A loan comes to you as an infusion of cash, but it is technically cash that you have borrowed. And you will pay back all that you borrow, with interest, over the life of the loan. To better understand the status of personal loans, it helps to dig into the nitty gritty of how the government defines taxable income.

What Constitutes Taxable Income?

To understand why personal loans typically aren’t considered taxable income, it helps to know what taxable income is in the first place. Taxable income is money that’s been earned, such as your salary, investment income, and even lottery winnings. It can also be property, goods, or services. To figure out your taxable income, you take your gross income and subtract your exemptions and itemized or standardized tax deductions.

Definition and Examples

Taxable income falls under two main camps. Taxable income can include earned income, such as:

•   Wages

•   Salaries

•   Bonuses

•   Tips

It also includes “unearned” income, such as:

•   Taxable interest earned

•   Ordinary dividends

•   Capital gains distributions

•   Alimony payments

•   Social Security benefits

•   Inheritances

•   Property income

As you can see, income can come in many different forms. Generally speaking, most income is potentially taxable. It’s only non-taxable if it’s specifically exempted by law.

Pop quiz: Are personal loans considered income? Not usually. They are actually a form of debt.

Personal Loans and Taxation

Do you pay taxes on loans? Usually not. The Internal Revenue Service (IRS), does not and cannot tax personal loans under most conditions. That’s because a personal loan represents a kind of debt. The proceeds from this loan need to be repaid, and therefore the answer to “are personal loans taxable?” is not usually. It doesn’t matter how small or large a loan may be or what you use the proceeds for; it usually won’t be taxed.

What’s more, there’s also zero impact on taxation whether you’ve taken out an unsecured personal loan or a secured one.

To sum it up, your personal loan usually won’t impact your tax situation in any way. In most situations, you probably don’t need to note the loan on your tax returns. No additional forms need to be filled out and added to your return.

Recommended: Using a Personal Loan to Pay Off Credit Card Debt

When a Personal Loan May Be Taxable: Exceptions and Special Cases

While personal loans aren’t generally taxable, there is an exception. If the lender cancels the debt or gives you loan forgiveness, the amount cancelled or forgiven is considered cancellation of debt (COD) income.

While loan forgiveness isn’t too common, a portion of your personal loans can be nixed if you reach an agreement with the lender where you’re no longer responsible for paying back the remaining balance.

If you’re financially stretched thin and unable to repay the remainder of your loan, you can receive forgiveness in a couple of ways:

•   You could enter debt settlement, where you negotiate with your lender by paying less than the amount owed.

•   You could be cleared of your debt if your lender has a hardship program. If you meet the eligibility requirements, the lender might wipe part or all of your remaining debt.

There are a few instances where canceled debt usually isn’t taxable, however:

•   A loan that’s forgiven by a private lender, such as a friend or family member, is treated as a gift for tax purposes. This means that the amount forgiven is exempt from the gift and estate tax up to certain limits. In 2026, a maximum of $19,000 in gifts can be excluded from taxation for each donor-recipient pair.

•   Canceled debt from a Chapter 11 bankruptcy (which is a legal process, when a person or entity declares they cannot pay creditors)

•   Canceled debt from insolvency (defined as a financial state in which a person is unable to pay bills)

Recommended: Guide to Insolvency vs. Bankruptcy

Do You Need to Report a Personal Loan on Your Taxes?

Generally, you won’t need to report money you get from personal loans on tax returns — that is, unless it gets canceled or forgiven. In the case of canceled or forgiven debt, the IRS usually requires you to report the canceled amount to the IRS on Form 1099-C which is used for cancellation of debt (COD). To fill out the form, you’ll need to provide the following information:

•   Creditor’s name

•   Creditor’s address

•   Creditor’s tax ID (TIN)

•   Debtor’s name

•   Debtor’s address

•   Debtor’s tax ID (TIN, which may be a Social Security number)

•   Date of loan forgiveness

•   Amount cleared

•   Interest paid on the canceled debt

Recommended: Personal Loan Calculator

Avoiding Tax Pitfalls with Personal Loans

As mentioned, usually your personal loans won’t impact your tax situation in any way. Uncle Sam doesn’t need to know when you take out the loan or when you pay off your balance. Neither the lump sum you receive in the form of a personal loan nor the interest you pay factors into your taxes.

To steer clear of potential tax pitfalls, consider following this advice:

•   Don’t report the proceeds of the loan or how much you paid off in a given year. Remember: A key part of the definition of what is a personal loan is that it isn’t considered income. It’s money you owe and need to repay.

•   If part or all of the remaining balance of the loan is forgiven or canceled, you’ll likely need to pay taxes on the forgiven amount. A form 1099-C (COD) will need to be completed by the tax deadline for individual tax returns.

•   Know that if a forgiven personal loan was from a friend or family member and exceeds $19,000 you will need to report it.

•   Remember that if you filed Chapter 11 bankruptcy or are insolvent; you may not have to pay taxes on the forgiven loan.

•   If you have any questions, consult with a tax professional for guidance and one-on-one advice.

Can You Deduct Personal Loan Interest?

Personal loans aren’t usually taxable, and another aspect of personal loan tax implications is that the interest you pay on them isn’t tax-deductible either. This differs from the situation with mortgages and student loans, in which cases the interest is tax-deductible in certain situations.

Using a Personal Loan for Taxes: What to Consider

There is one way a personal loan might impact your taxes: If you owe federal, state, or local taxes and don’t have cash on hand to pay them, you can use a personal loan to pay off taxes. However, it’s a smart idea to explore other options, such as an IRS payment plan, as well. When comparing options, you’ll want to look at the personal loan interest rate, fees, monthly payment, and total cost of a personal loan to see if it fits your budget.

The Takeaway

For the most part, a personal loan doesn’t count as taxable income. It’s a debt, so you don’t have to fret over owing the IRS anything extra if you obtain a personal loan. There are a few exceptions, such as personal loans that are forgiven or canceled — whether by a private lender such as a family member or by a bank or other lending institution.

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

FAQ

Do I report a personal loan as income on taxes?

Personal loans don’t count as income, so they generally don’t need to be reported to the IRS for tax purposes. If a loan is forgiven or cancelled, you may need to report the amount as income, however, and it may be taxed.

What is the effect on my taxes if a personal loan is forgiven or canceled?

If a personal loan is forgiven or canceled, you’ll most likely need to pay taxes on the amount that’s forgiven or canceled. You’ll need to complete and submit a tax form 1099-C (Cancellation of Debt) form as part of this process. There are some exceptions to this, however, so delve into your specific situation, possibly with a tax professional, to understand it in detail.

Can interest paid on personal loans be tax-deductible?

The interest paid on a personal loan is not tax-deductible. With other kinds of loans, such as home mortgages and student loans, interest may be tax-deductible. This is not the case with personal loans.

Are personal loans ever considered income?

A personal loan could be considered income for tax purposes if some or all of the amount owed is forgiven or cancelled. If the loan is forgiven by a family member or friend, it is taxed as a gift. In 2026, the first $19,000 of a gift is not taxed for federal tax purposes. If the gift exceeds $19,000 you’ll need to report it.

Do you pay taxes on loan forgiveness?

The amount of a loan that is forgiven or canceled is treated as income for tax purposes in most situations. You’ll need to complete and submit a tax form 1099-C (Cancellation of Debt) form when you do your taxes. If the loan is forgiven by a friend or family member, it is treated as a gift. So if the amount forgiven exceeds $19,000 you will need to pay gift tax. If you need help understanding your individual personal loan tax implications, a meeting with a tax advisor can help.

Photo credit: iStock/shurkin_son

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOPL-Q226-025

Home equity loans, home equity lines of credit (HELOCs), and cash-out refinances are all borrowing options that allow you to access the equity you’ve built in your home. By tapping into home equity — the difference between your home’s current value and the amount still owed on the mortgage — you can secure funds to meet other financial goals, such as making home improvements.

While these three types of loans do have similarities, there are key differences in how each one works. Understanding the differences in a home equity loan vs. HELOC vs. cash-out refi can help you better determine which option is right for you.

Defining Home Equity Loan, HELOC, and Cash-Out Refi

To start, it’s important to know the basic definitions of home equity loans, HELOCs, and cash-out refinances.

Home Equity Loan

A home equity loan lets you borrow a lump sum that you’ll then repay over a set period of time in regular installments at a fixed interest rate. Generally, lenders will allow you to borrow up to 85% of your home’s equity.

This loan is in addition to your existing mortgage, making it a second mortgage. As such, you’ll usually make payments on this loan in addition to your monthly mortgage payments. To better understand what kind of payment may be due each month, consider using a home equity loan calculator.

HELOC

A HELOC is a line of credit secured by your home that you can access on an as-needed basis, up to the borrowing limit. The amount of the line of credit is determined by the mortgage lender and is based on the amount of equity you’ve built, though it can be up to 90% of the equity amount. Like a home equity loan, this is a second mortgage that you assume alongside your existing home loan.

How HELOCs work is somewhat like a credit card, in that it’s a revolving loan. For example, if you’re approved for a $30,000 HELOC, you can access it when you want, for the amount you choose (though there may be a minimum draw requirement). You’re only charged interest on and responsible for repaying the amount you borrowed.

Another point to keep in mind is that there’s a draw period of up to 20 years, during which you can access funds, and a repayment period of 10-20 years. During the draw period, the monthly payments can be relatively low because you only pay interest. During the repayment period, meanwhile, the payments can increase significantly because you have to pay both principal and interest.

Cash-Out Refinance

A cash-out refinance is a form of mortgage refinancing that lets you refinance your current mortgage for more than what you currently owe in order to receive extra funds. With a cash-out refinance, your current mortgage is replaced by an entirely new loan.

As an example, let’s say you own a home worth $200,000 and owe $100,000 on your mortgage at a high interest rate. You could refinance at a lower interest rate while at the same time taking out a larger mortgage. For instance, you could refinance the mortgage at $130,000. In this case, $100,000 would replace the old mortgage, and you would receive the remaining amount of $30,000 in cash.

Recommended: First-Time Homebuyer Guide

Home Equity Loans and HELOCs vs. Cash-Out Refi

Here’s a look at how a home equity loan vs. HELOC vs. cash-out refinance stacks up when it comes to everything from borrowing limit to interest rate to fees:

Borrowing Limit

With a home equity loan, lenders generally allow you to borrow up to 85% of your home’s equity. HELOCs allow you to tap a similar amount, sometimes as much as 90%. Cash-out refinances, meanwhile, have a slightly lower borrowing limit — up to 80% of your equity. The exception is a Veterans Affairs (VA) cash-out refi. This lets you borrow up to 100% per VA rules, although some lenders may impose a lower ceiling.

Interest Rate

With a HELOC, the interest rate is usually adjustable. This means the interest rate can rise, and if it does, the monthly payment can increase. Home equity loans, meanwhile, generally have a fixed interest rate, meaning the interest rate remains unchanged for the life of the loan. This allows for more predictable monthly payment amounts.

A cash-out refinance can have either a fixed rate or an adjustable rate. If you opt for an adjustable rate, you may be able to access more equity overall.

Type of Credit

Both home equity loans and cash-out refinances are installment loans, where you receive a lump sum that you’ll then pay back in regular installments. A HELOC, meanwhile, is a revolving line of credit. This allows you to take out and pay back as much as you need at any given time during the draw period.

Fees

With a home equity loan, HELOC, or cash-out refinance, you may pay closing costs. While HELOC closing costs may be similar to a home equity loan, you may incur other costs periodically as well, such as annual fees, charges for inactivity, and early termination fees.

When It Might Make Sense to Borrow

When comparing a home equity loan vs. HELOC vs. cash-out refi, it’s clear to see that they each have varying use cases. With a fixed interest rate, home equity loans can allow for predictable payments. Their lower interest rates can make them a good option if you want to consolidate higher-interest debt, such as credit card debt.

HELOCs, meanwhile, provide more flexibility, as you can take out only as much as you need, allowing you to continually access funds over a period of time. A cash-out refinance can be a good option if you want to receive a large lump sum of money, such as to pay off debt or finance a large home improvement project.

Which Option Is Better?

Like most things in the world of finance, the answer to whether a cash-out refinance vs. HELOC vs. home equity loan is better will depend on your financial circumstances and unique needs.

In all cases, you’re borrowing against the equity you’ve built in your home, which comes with risks. If you’re unable to make payments on your HELOC or cash-out refinance or home equity loan, the consequence could be selling your home or even losing it to foreclosure.

Scenarios Where Home Equity Loans Are Better

A home equity loan can be the right option in certain scenarios, including when:

•   You want fixed, regular second mortgage payments: A home equity loan will generally have a fixed interest rate, which can be helpful for budgeting, as monthly payments will be more predictable. You may appreciate this regularity for your second monthly mortgage payment.

•   You want to get a lump sum while keeping your existing mortgage intact: Unlike a HELOC, where you draw just as much as you need at any given time, a home equity loan gives you a lump sum all at once. Plus, unlike a cash-out refinance, you aren’t replacing your existing mortgage. That way, if the terms of your current mortgage are favorable, those can remain as is.

Recommended: The Different Types of Home Equity Lending

Scenarios Where HELOCs Are Better

In the following situations, a HELOC may make sense:

•   You have shorter-term or specific needs: Because HELOCs generally have a variable interest rate, they can be useful for shorter-term needs or for situations where you may want access to funds over a certain period of time, such as when completing a home renovation.

•   You want the option of interest-only payments: During the draw period, HELOC lenders often offer interest-only payment options. This can help keep costs lower until the repayment period, when you’ll need to make interest and principal payments. Plus, you’ll only make payments on the balance used. A HELOC interest-only repayment calculator can help you understand what those monthly payments may be.

Scenarios Where Cash-Out Refi Is Better

Cash-out refinances can make sense in these scenarios:

•   You need a large sum of money: If you need a large sum of money or you’re looking to improve your financial situation on the whole, a cash-out refinance can make sense.

•   You can get a lower mortgage rate than you currently have: If refinancing lets you secure a lower interest rate than your current mortgage offers, then that could be a better option than taking on a second mortgage, as you would with a home equity loan or HELOC. If interest rates have risen since you first took out your loan, however, a cash-out refi could mean paying more in interest over the life of the loan.

•   You want just one monthly payment: Because a cash-out refinance replaces your existing mortgage, you won’t be adding a second monthly mortgage payment to the mix. This means you’ll have only one monthly payment to stay on top of.

•   You have a lower credit score but still want to tap your home equity: In general, it’s easier to qualify for a cash-out refinance vs. HELOC or home equity loan since it’s replacing your primary mortgage.

The Takeaway

Cash-out refinancing, HELOCs, and home equity loans each have their place in your toolbox as a homeowner. All three options give you the ability to turn your home equity into cash, which can make it possible to achieve important goals, consolidate debt, and improve your overall financial situation.

Homeowners interested in tapping into their home equity may consider getting a HELOC or taking a cash-out refinance with SoFi. Qualifying borrowers can secure competitive rates, and Mortgage Loan Officers are available to walk borrowers through the entire process.

FAQ

Can you take out a HELOC and cash-out refi?

If you qualify, you can get both a home equity line of credit and a cash-out refinance. Qualified borrowers can use their cash-out refinance to help repay their HELOC.

Is it easier to qualify for a HELOC or cash-out refi?

It’s generally easier to qualify for a cash-out refinance. This is because the cash-out refi assumes the place of the primary mortgage, whereas a home equity line of credit is a second mortgage.

Can you borrow more with a HELOC or cash-out refi?

Ultimately, the amount you can borrow with either a cash-out refi or home equity line of credit (HELOC) will depend on how much equity you have in your home. That being said, a HELOC can offer a slightly higher borrowing limit than a cash-out refi, at up to 90% of a home’s equity as opposed to a top limit of 80% for a cash-out refinance.

Are HELOCs or cash-out refi tax deductible?

Interest on your cash-out refinance or home equity line of credit can be tax-deductible so long as you use the funds for capital home improvements. This includes projects such as remodeling and renovating.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOHE-Q126-080

On a salary of $100,000 per year, as long as you have minimal debt, you can afford a house priced at around $400,000 with a monthly payment of $2,338. This number assumes a 6.50% interest rate and a down payment of around $30,000.

The 28/36 rule is often used as a guide when deciding how much house you can afford. The rule stipulates that you should not spend more than 28% of your salary on overall housing costs and no more than 36% on housing costs and debt. On a salary of $100K with debts of about $250 per month, a house costing about $379,000 just fits into your budget.

However, how much home you can afford also depends on other factors, such as where you intend to live and how much you have saved as a down payment.

This article looks at how all of these factors affect your home purchase and gives some examples of how much home you can realistically afford on a salary of $100,000.

What Kind of House Can I Afford With $100K a Year?

Another rule of thumb often applied when buying a home is to not spend more than three times your annual income on a home. If you earn $100,000 a year, that would be $300,000.

A salary of $100,000 is well above the national median income (according to Census data, the national median income was $83,730 in 2024. That puts you in a good position if you want to buy a home, particularly if the cost of living is low in the area that you’re targeting. If you have substantial savings for a down payment and little debt, you’re even better positioned. Debt is important because lenders look at how much debt you have when they qualify you for a mortgage.

Your Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is the amount of income you receive relative to the amount you pay each month to cover your debt. You’re more likely to get better loan terms and have a lower monthly mortgage loan payment if you have less debt.

That’s why many experts also recommend the 28/36 rule. So if you earn $100K, your housing costs should be less than $28,000, or $2,333 a month, and your total debt and housing costs should not exceed $36,000, or $3,000 a month.

Your Down Payment

Unless you qualify for a zero-down USDA or VA loan, most lenders will expect a down payment of between 3% and 20%. The more you put down, the more house you can afford, but as you think about your down payment amount, make sure you reserve funds for closing costs, moving costs, and an emergency fund for unexpected expenses.

Home Affordability

Homes are more affordable in certain areas. Some areas have a higher cost of living and higher property taxes.

Your credit score will also affect how much home you can afford. If you have a high credit score, you’ll qualify for a lower-interest-rate loan. If you pay less interest, you can borrow more and still meet your monthly payments.

Depending on where you want to live, the housing market might dictate how big a home you can afford. House prices are affected by economic conditions, with higher employment rates and healthy economic growth giving buyers more purchasing power. If buyers have more purchasing power, they can afford bigger loans, and this will push up house prices.

💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

How to Afford More House With Down-Payment Assistance

Some people, such as first-time buyers or certain professionals, such as nurses and teachers, can qualify for down payment assistance from federal, state, and local government, private entities, and charitable organizations. Assistance might be in the form of a low-rate loan, cash grant, tax credit, or reduced interest rates.

Applying for down payment assistance can add weeks or months to your home-buying timeline. For more information, the U.S. Department of Housing and Urban Development (HUD) keeps a list of programs organized by state, county, and city.

Here are the typical down payment amounts for various types of mortgages:

•   Conventional mortgages require a 3% minimum down payment for first-time buyers.

•   FHA mortgages require 3.5% down.

•   VA mortgages require 0% down.

•   USDA loans require 0% down and serve low-income borrowers in rural areas.

Home Affordability Examples

Let’s take a look at some hypothetical examples for those wondering, “If I make $100K, how much home can I afford?” These examples assume an interest rate of 6.50% and average property taxes.

Example #1: Low Down Payment and Significant Debt

Gross annual income: $100,000
Down payment: $10,000
Monthly debt: $1000

Home budget: $238,441

Monthly mortgage payment: $2,031

Payment breakdown:

•   Principal and interest: $1,444

•   Property taxes: $248

•   Private mortgage insurance: $95

•   Homeowner’s insurance: $244

Example #2: Bigger Down Payment, Less Debt

Gross annual income: $100,000
Down payment: $40,000
Monthly debt: $300

Home budget: $333,212

Monthly mortgage payment: $2,566

Payment breakdown:

•   Principal and interest: $1,853

•   Property taxes: $347

•   Private mortgage insurance: $122

•   Homeowner’s insurance: $244

How to Calculate How Much House You Can Afford

You need a budget to find out how much house you can afford. Keeping a budget will show you how much you’re spending each month vs. how much income you have. Whatever you have left over after paying for essentials such as food, transportation, and utilities is how much you can afford to spend on housing.

You can also use a mortgage calculator to help you. Just plug in your own numbers to find out what your monthly payments would be.

💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

How Your Monthly Payment Affects Your Price Range

The more you can afford to pay each month for your mortgage and other housing expenses, the more house you can afford. However, if you have significant debt payments each month, or if you have a poor credit score that results in a higher interest rate for your loan, that will reduce the amount of loan you can afford and the price range.

Types of Home Loans Available to $100K Households

The four types of loans that are most common are conventional loans, FHA loans, USDA loans, and VA loans:

Conventional loans: These loans typically require a credit score of 620 or higher, but the down payment can be as low as 3%. Remember that a lower down payment means higher monthly payments because you’ll have to borrow more.

FHA loans: With an FHA loan, homebuyers with credit scores over 580 can borrow up to 96.5% of a home’s value. Homebuyers with lower credit scores, between 500 and 579, can still qualify for loans as long as they have a 10% down payment.

USDA loans: USDA loans are zero-down-payment financing for low-income borrowers in designated rural areas.

VA loans: VA loans also require no down payment and are available to qualified military service members, veterans, and their spouses.

The Takeaway

If you’re looking to buy a home and would like a more realistic idea of what you can afford, first find out how much you’re spending on necessities such as food, clothing, transportation, and most importantly, debt. What you have leftover is how much you can spend each month on housing expenses.

Once you have a grasp on your finances, you can use an affordability calculator to see how much of a house you can afford. The size of home that the amount will buy depends on the local housing market and the cost of living where you want to live.

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

FAQ

Is $100K a good salary for a single person?

A salary of $100k is above the national median income (according to Census data, the national median income was $83,730 in 2024). This is a good salary, but you may still struggle to buy a home in areas with high costs of living. The larger down payment you have and the better your credit score, the bigger house you may be able to buy.

What is a comfortable income for a single person?

A comfortable income for a single person is dependent upon where that person lives. The findings from a 2025 Smart Asset study using data from the MIT Living Wage Calculator show wide variance among states. According to the study, Hawaii is the most expensive state, requiring an annual salary of $124,467. Among the least expensive states is West Virginia, where a single adult can live comfortably on $80,829 a year.

What is a livable wage in 2026?

A livable wage will vary depending on where you live. According to World Population Review, this ranges from $31.01 per hour in Hawaii, the most expensive state, to $19.53 in West Virginia, the least expensive state.

What salary is considered rich for a single person?

According to a 2025 Smart Asset study, an income of $731,492 per year puts a person in the top 1% earnings category in the US. However, this category’s threshold may vary depending on where you live.

Photo credit: iStock/Prostock-Studio

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SOHL-Q126-221

Determining a good monthly retirement income isn’t one-size-fits-all. However, many financial experts suggest couples should aim for around 80% of their pre-retirement income to maintain a comfortable lifestyle. If you earn $100,000 in your final working years, for example, you’ll need around $80,000 annually or $6,667 monthly in retirement.

The exact monthly income you and your spouse or partner need, however, will depend on several factors, including your expenses, age, health, and desired lifestyle. Below, we explore these key considerations to help you estimate your ideal monthly retirement income and explore where that money might come from.

How Being a Couple Affects Your Income Needs

Being part of a couple can significantly impact retirement income needs, making it different from retirement planning as an individual.

While some expenses may double — such as food, travel, and health insurance — others can be shared, leading to cost savings. For example, housing, utilities, and transportation often remain similar whether supporting one person or two. That means a couple may not need twice the income of a single retiree to maintain a comfortable lifestyle.

That said, couples typically need to plan for a longer period of retirement, since one partner generally outlives the other. This requires careful long-term planning to ensure both partners are financially secure throughout retirement.

💡 Quick Tip: Want to lower your taxable income? Start saving for retirement with a traditional IRA. The money you save each year may be tax deductible depending on your situation (and you don’t owe any taxes until you withdraw the funds, usually in retirement).

What to Consider When Calculating Your Monthly Income

There are many misconceptions about retirement spending. Some couples assume that their expenses will drop significantly after retiring, but that’s not always the case. Here are some key factors to consider when calculating your monthly income needs.

Spending May Not Be as Low as You Think

Many couples anticipate that their living costs will go down after retirement, since they’ll spend less on commuting, professional clothing, and lunches out. Expenses like payroll taxes for Social Security and retirement account contributions also go away after retirement. However, these savings can potentially be offset by increased spending in other areas, like health care, travel, leisure activities, gifts for grandkids, or home renovations. Retirees may also find themselves spending more on hobbies and dining out as they have more free time.

It’s important to calculate your current monthly expenses and then consider which ones may go down or up when you stop working to get an accurate sense of your monthly income needs.

Spending Doesn’t Stay Steady the Whole Time

It’s a common retirement mistake to assume spending will be fixed once you enter the retirement phase of your life. In reality, spending patterns typically take on a U-shaped curve over the course of retirement. Expenses tend to be highest in the first several years, due to increased spending on travel, hobbies, and activities couples may have put off while working.

Spending then generally declines as retirees get older and less active, only to rise again due to higher health care costs and (possibly) long-term care expenses. You’ll want to be sure your retirement income plan accounts for all of these different phases of retirement.

Expenses May Change When One of You Dies

When one spouse passes away, the surviving partner often experiences a significant shift in their financial needs. Some expenses like housing may stay the same, while others — such as food, travel, or entertainment — may decrease. In addition, the surviving spouse might lose one source of Social Security or pension income, potentially straining finances. As a result, it’s important to plan for income flexibility.

Essential vs Discretionary Expenses

When calculating your monthly retirement income needs, it’s key to differentiate between essential and discretionary expenses.

•   Essential expenses are the non-negotiable costs necessary to maintain your basic lifestyle and standard of living in retirement. Examples include housing, utilities, groceries, healthcare, and transportation.

•   Discretionary expenses are optional expenses that enhance your quality of life but are not strictly necessary. These can be adjusted or reduced if your income fluctuates or unexpected costs arise. Examples include: travel/vacations, entertainment, dining out, hobbies and recreation, charitable donations and gifts, and subscriptions and memberships.

By separating needs from wants, you can develop a realistic budget, adjust discretionary spending if your income fluctuates or unexpected costs arise, and increase your chances of a financially secure and enjoyable retirement.

Planning for Inflation and Health Care Costs

Inflation significantly impacts financial needs in retirement by eroding the purchasing power of your income and savings over time. As prices rise, the same amount of money buys fewer goods and services, potentially forcing you to withdraw more from your savings each year to cover expenses. It’s important to factor in a realistic inflation rate when calculating retirement needs.

Health care costs also tend to increase over time, both due to inflation and the fact that medical needs generally increase as you get older. Without proper planning, you may find that premiums, out-of-pocket expenses, and services not covered by Medicare can deplete your retirement savings.

Common Sources of Income in Retirement

Building multiple income streams can help ensure a stable and sustainable retirement. Here are the most common income sources for retirees:

Social Security

For many American couples, Social Security is a key retirement income stream. In February 2026, the average Social Security monthly check for retired workers was projected at $2,076.41, according to the Social Security Administration’s (SSA) Monthly Statistical Snapshot. For a couple, this could amount to approximately $4,153 per month. However, benefits vary based on your earnings history and the age at which you start claiming.

Retirement Savings

Retirement savings accounts, such as 401(k)s and IRAs, are structured to provide additional income for couples after they leave the workforce. Financial planners often recommend using the 4% rule as a guideline for drawing down your retirement savings. This guideline is based on a 30-year retirement and designed to help ensure you don’t outlive your savings.

To follow the 4% rule, you add up all of your combined retirement savings, then aim to withdraw 4% of that total during your first year of retirement. For example, if you have $1 million in savings, you would withdraw $40,000 per year or around $3,333 monthly. The following year, you would adjust that 4% to account for inflation. So if inflation was 2%, you would give yourself a 2% raise.

While the 4% rule can be a helpful guideline, you may need to adjust your spending rate based on your situation, age, and the performance of your investments.

In addition, as you save for retirement, a retirement calculator can give you a sense of how much you should be regularly putting toward retirement savings to meet your goals for those later years.

Annuities

An annuity is a financial product sold by insurance companies that can offer an income stream in retirement and/or increase retirement savings. With an income annuity, you make a lump sum investment then receive a payout for life or a set period of time. With a tax-deferred annuity, you accumulate tax-deferred savings, while also having the option to receive income in the future. This makes annuities attractive for couples looking for potential income after retirement.

Other Savings

The other savings category includes money you have in savings accounts, certificates of deposit (CDs), and nonretirement brokerage accounts. These funds can serve as backup or supplemental income. While they don’t offer the tax advantages that come with retirement accounts, they provide liquidity and flexibility, which can be helpful for managing unexpected expenses.

💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

Pensions

A pension is an employer-based plan that pays out a specified amount of income on a regular basis (typically monthly) to an employee after they retire. It’s generally funded by the employer during the employee’s working years, and those funds are usually invested so they can grow over time. If a worker stays with that employer for a certain period of time, they are eligible to receive payouts from their pension plan when they retire.

Pensions are not as commonly offered as they used to be, however, having largely been replaced by 401(k)s and other defined contributions plans. If neither you nor your spouse have ever worked for a company that offered a pension, you won’t be able to rely on this as a source of income after retirement.

Reverse Mortgages

A reverse mortgage enables eligible homeowners to tap their home equity to earn income in retirement. The most common type of reverse mortgage is called a Home Equity Conversion Mortgage (HECM). HECMs allow homeowners aged 62 and older to borrow against the equity in their home without making monthly payments. The loan is typically repaid when the borrower sells the home, moves out permanently, or dies.

While reverse mortgages can boost monthly retirement income, they have some significant downsides, including fees and interest, which are added to the loan balance each month. And either you or your heirs will eventually have to pay the loan back, usually by selling the home. It’s important to consider the pros and cons carefully before taking out a reverse mortgage.

How to Plan for Retirement as a Couple

Planning for retirement as a couple is an ongoing process that ideally begins decades before you actually retire. Some of the most important steps in the planning process are:

•   Figuring out your target retirement savings number

•   Investing in tax-advantaged retirement accounts

•   Paying down debt

•   Deciding when you’ll retire

•   Deciding when to take Social Security benefits

•   Developing an estate plan

•   Planning for long-term care

Working with a financial advisor can help you to create a plan that’s tailored to your needs and goals.

Recommended: Can a Married Couple Have Two Roth IRAs?

Strategies for Generating Passive Income in Retirement

Passive income helps reduce reliance on withdrawals from retirement accounts, allowing your savings to last longer. Here are two effective strategies for couples:

Rental Properties and Real Estate Investment

Investing in real estate, such as single family rentals or duplexes, can generate steady income in retirement. While property management may require effort, many retirees hire managers or invest in Real Estate Investment Trusts (REITs) to avoid day-to-day responsibilities, making this a type of passive investment.

In addition to cash flow, investing in real estate can add diversification to your portfolio and may come with tax benefits. As with any other investment, however, there are potential risks with passive real estate investing. For example, there’s a chance that property values can decline or an investment doesn’t earn the expected profits.

Dividend Stocks and Interest-Bearing Accounts

Dividends and interest can provide a modest — but steady and reliable — cash flow in retirement.

•   Dividend stocks are shares in companies that distribute a portion of their profits to shareholders, typically on a quarterly, semiannual, or annual basis. Many retirees invest in established “blue chip” companies known for consistent payments. These investments can offer both income and potential portfolio growth. However, they also carry market risk, as stock values fluctuate with economic conditions.

•   Interest-bearing accounts, such as high-yield savings accounts, CDs, and money market accounts, provide a low-risk way to generate income. These accounts pay interest on deposited funds and are typically backed by FDIC insurance, offering a high level of safety. However, returns are often lower than what you could earn by investing in the stock market over the long term.

Maximizing Social Security Benefits

Technically, anyone who is employed for at least 10 years is eligible to begin taking Social Security benefits at age 62. But doing so reduces the benefits you’ll receive. To get the highest possible payment, you and your spouse would need to delay benefits until age 70. At that point, you’d each be eligible to receive an amount that’s equal to 132% of your regular benefit. Whether this is feasible or not can depend on how much retirement income you’re able to draw from other sources.

If one of you has earned significantly less than the other, you may be able to maximize Social Security benefits by taking advantage of spousal benefits. This benefit allows the lower-earning spouse to receive up to 50% of the higher-earning spouse’s Social Security benefits once they reach full retirement age (67 for those born in 1960 or later). However, the higher earning spouse must already be receiving benefits.

The Takeaway

A good monthly retirement income for a couple in 2026 will depend on a variety of factors, but you might aim to earn around 80% of your current monthly income. This amount can likely cover essential and discretionary spending while accounting for inflation, taxes, and unexpected health care costs.

To make sure you’ll have sufficient income in retirement, it’s important for couples to take a holistic view of their finances — combining Social Security, retirement savings, pensions, other savings, and passive income sources — to build a sustainable plan.

With smart planning, clear communication, and diversified income strategies, you and your life partner can enjoy a secure and fulfilling retirement together.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

FAQ

What is the average retired couple income?

The median household income for retired couples aged 65 and over is $56,680 per year, or about $4,723 per month, according to the most recent (2024) data from the U.S. Census Bureau. This includes income sources like Social Security, pensions, savings, and investments. However, actual income can vary widely depending on lifestyle, geographic location, and retirement planning.

What is a good retirement income for a married couple?

A good retirement income for a married couple is typically around 80% of their pre-retirement income to maintain a comfortable lifestyle. For example, if a couple earned $100,000 annually before retiring, a target retirement income would be about $80,000 per year.

This rule of thumb assumes that some expenses (such as payroll taxes for Social Security, retirement account contributions, and work-related expenses) go away after retirement. However, some couples may find that their expenses don’t significantly decline if they travel extensively or take up expensive hobbies or leisure activities.

How much does the average retired person live on per month?

According to the U.S. Bureau of Labor Statistics, retirees spent an average of $59,616 in 2024. That breaks down to monthly spending of just under $5,000 per month. However, many factors can impact a particular household’s spending and the amount of money they need to feel secure.

How can couples manage retirement income tax efficiently?

Couples can manage retirement income tax efficiently by diversifying their sources of income in retirement and planning withdrawals strategically.

When you’re saving for retirement, you might use a mix of tax-deferred retirement accounts, like traditional Individual Retirement Accounts (IRAs) and 401(k)s, and accounts that allow tax-free withdrawals in retirement, like Roth IRAs. This allows for greater control over taxable income.

Once you retire, consider withdrawing funds strategically. For example, if your taxable income is low in a given year, you might withdraw from tax-deferred accounts. If your income is high, you may be better off pulling from tax-free sources like a Roth IRA.

What are some common mistakes couples make when planning for retirement?

Common mistakes couples make include underestimating healthcare costs, failing to plan for longevity, and relying too much on one income source (like Social Security). Many couples also overlook inflation’s impact on fixed incomes and/or retire too early without sufficient savings.

Proper planning, ongoing financial reviews, and professional guidance can help avoid these pitfalls and ensure a secure retirement.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.