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A health savings account (HSA) allows you to save money for healthcare expenses on a tax-advantaged basis. If you have multiple HSAs, it could make sense to combine them into a single account for easier financial management.

The steps to consolidate HSA accounts are fairly straightforward, though there are some tax considerations to know. Here’s an in-depth look at how to combine HSA accounts and why you might choose to do so.

Understanding HSA Consolidation

When you combine HSA accounts (which are only available to those with high-deductible health plan, or HDHP), you transfer the funds from each account into a single HSA. More specifically, you would typically open a new HSA and then arrange for the money in your existing HSAs to be moved to the new account. It’s similar to merging bank accounts if you’re combining, say, multiple high-yield savings accounts or checking accounts.

You’re not required to withdraw any money when consolidating HSAs, nor do you lose any of the tax benefits of health savings accounts by doing so. And as a refresher, HSAs offer these tax advantages:

•  Tax-deductible contributions

•  Tax-free earnings

•  Tax-free withdrawals when the money is used to pay for qualified healthcare expenses

Once you turn 65, you can use the money for anything you want, even if it’s not healthcare-related, just as you might with funds in a standard savings account. You will, however, have to pay income tax on non-medical withdrawals.

Recommended: Savings Account Calculator

Benefits of Consolidating HSA Accounts

Here are some reasons why you might want to combine multiple HSA accounts into a single entity.

•  You prefer to have fewer accounts to manage.

•  You could reduce some or all management fees by moving your HSA funds elsewhere.

•  You would like a different range of investment options for your HSA contributions.

•  You want to simplify healthcare expense tracking and year-end tax filing.

If you’ve ever struggled with managing multiple bank accounts, then you might see the advantage of combining HSAs.

Here’s one more reason to consolidate. There’s no tax penalty if you combine accounts using what’s known as a trustee-to-trustee transfer. With this arrangement, you direct the company that currently holds your HSA funds to transfer them directly to your new HSA provider.2

If you were to rollover your funds (another possible method of moving HSA money), that would mean you would take a distribution and then deposit it. This can be a taxable and reportable event if you conduct more than one check-based rollover every 12 months, which likely means they’re not a good method for consolidating multiple accounts. Also, if the funds are distributed in this way, they must be deposited in a new HSA account within 60 days of receiving the distribution. Otherwise, again, the transaction could be taxable.

Steps to Consolidate Your HSA Accounts

Combining HSA accounts is similar to completing a 401(k) rollover or combining IRA accounts. If you’ve done either of those before, you should already have an idea of what to expect.

That said, here’s how to consolidate HSA accounts in five simple steps, conducting what you may hear referred to as a trustee-to-trustee transfer. This means the funds involved never pass through your hands but move between financial institutions.

1. Review Your Current HSA Accounts

Before you can initiate a transfer, you need to know what you have. Make a list of your HSAs, including:

•  Which custodian or trustee holds them

•  Your account number

•  Your current balance

You may also want to review the fees you’re paying for each one and the returns your HSA investments are generating. That can help you decide if it makes sense to consolidate all your HSAs or just some of them.

2. Choose a Target HSA Provider

If you know which HSAs you want to consolidate, it’s time to look for a new provider. The options include banks, insurance companies, and brokerages.

As you compare HSA providers, look at:

•  Investment options, including the risk profile and historical returns

•  Fees, including investment fees such as expense ratios and separate account management fees

•  Investment minimums, if any

You may want to read reputable, verified reviews of HSA providers to learn what current or past customers do and don’t like about them. For example, a provider may offer an outstanding range of investment options but fall short when it comes to customer service.

Recommended: Does Changing Banks Impact Your Credit Score?

3. Initiate the Transfer Process

Once you’ve selected a new provider, you’ll need to open an HSA account with them. You’ll use the new account number to direct your current HSA provider on where to send the money.

Once your account is open, you can move on to the next step which is completing a transfer request form. This is one of the key steps to transfer money between banks or brokerages when moving HSA funds.

4. Complete Required Transfer Paperwork

Your new HSA provider should give you a transfer request form that you’ll fill out and send to your current custodians. Each provider’s form may vary, but typically, you’ll need to include your:

•  Name

•  Employer name, if your plan is sponsored by your employer

•  Date of birth

•  Social Security number

•  Contact information, including your address, phone number, and email address

•  Transferring custodian’s name and address

•  The account number of the HSA you’re transferring funds from

•  The account number of the HSA you’re transferring funds to

In a way, it’s similar to opening a bank account. You’re just providing a little more information.

You’ll also need to specify how much of your HSA balance you want to transfer. You can choose a full or partial amount. Finally, you’ll need to sign and date your form.

You’ll repeat this process using a form for each HSA that you want to transfer funds from. When your current providers receive the forms, they’ll cut a check to your new provider to complete the transfer.

5. Follow Up on the Transfer

How long you’ll wait for your HSAs to be consolidated will depend on the speed at which your current and new HSA providers move. It could take anywhere from two to five weeks or longer for the process to wrap up.

Your new HSA provider should send you a confirmation once the transfer is complete, but you can always reach out to ask for a status update. You’ll also need to follow up with your old custodians to make sure the account is closed and find out whether you owe any account closure fees.

Considerations Before Consolidating

Before you move ahead with consolidation, ask yourself what you hope to gain. Perhaps your goal is to save money on fees (which is also a reason some people switch their traditional bank accounts to online banking). In that case, it’s important to do your research on your new provider to make sure you’ll actually pay less in fees.

Also, consider whether you’ll be able to continue making new contributions to your HSA. If you’re consolidating accounts because you’ve retired, for example, then you can’t make any new contributions to an HSA if you’re no longer enrolled in your high-deductible health plan. So if you’re on Medicare, you will not be able to contribute to your HSA funds.

Potential Challenges in HSA Consolidation

It’s possible you could hit some snags when consolidating HSAs, so it helps to be prepared. Here are some of the main issues to watch out for:

•  Transfer fees. Your current HSA provider may charge transfer fees and/or account closure fees to finalize your consolidation. If so, it helps to know what those are beforehand and how you’re expected to pay them.

•  Processing times. There’s no set timeline for HSA transfers. You can help minimize the possibility of delays by filling out your transfer request paperwork accurately and following up with your providers to make sure your documents have been received.

•  Access limitations. Your new or current custodian may direct you to hold off on tapping into your HSA funds while the transfer is in progress. That could present a logistical challenge in the short term if you need to fill prescriptions or cover other healthcare expenses. It can be wise to ask in advance about these potential access issues so you can prepare as needed.

In a way, the process for HSA consolidation is not that different from what to expect if you switch banks. You might just be waiting a little longer for the change to be finalized.

After Consolidation: Managing Your Single HSA

Once you combine HSA accounts, it should be easier to manage your savings. Here are some tips for staying on top of your newly-consolidated health savings account.

•  Keep track of withdrawals, including what you spent the money on, the amount, and the date.

•  Track your contributions if you’re still making them so you don’t exceed the annual contribution limit. The HSA contribution limits for 2025 are $4,300 for individual coverage and $8,550 for family coverage. Those 55 and older who are not enrolled in Medicare can contribute an additional $1,000. For 2026, the limits are $4,400 for self-only coverage and $8,750 for family coverage. Those 55 and older who are not enrolled in Medicare can contribute an additional $1,000.

•  Review your investments at least once a year to check their performance and the fees that you’re paying.

•  Consider talking to a financial advisor about how to make the most of your HSA for maximum tax benefits.

Recommended:Guide to Closing a Bank Account

Tax Implications of HSA Consolidation

If you’re completing a trustee-to-trustee transfer, there’s no immediate tax impact. You would, however, be subject to IRS tax rules when it’s time to make withdrawals from those accounts. Again, withdrawals for qualified medical expenses are always tax-free.

Where you can potentially owe taxes is when consolidating HSA accounts is if you choose an indirect rollover, as noted above. With an indirect rollover, your current HSA provider cuts a check to you. You then have 60 days from the date the check was issued to deposit the check into your new HSA, and you can only do this once a year.

If you don’t follow these guidelines, your funds would likely be considered a distribution, which would be taxable, with an additional penalty for those under 65 if not used for medical purposes.

The Takeaway

Consolidating HSA accounts could make sense if you’d like an easier way to keep track of your healthcare savings or if you’re looking for lower fees and better investments. Understanding what’s required can help you navigate the consolidation process with minimal hiccups.

Simplifying your financial life is what SoFi is all about.

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

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

FAQ

How long does the HSA consolidation process typically take?

The HSA consolidation process can typically take a few or several weeks, but it may vary depending on how fast your current and new providers operate. You may need to do some strategic planning to make sure you don’t need to withdraw any funds for healthcare expenses while transfers are in progress.

Can I consolidate an HSA from a previous employer?

Yes, you can consolidate HSA accounts from one or more previous employers. It could make sense to do so if you’d like just one account to manage. You’d need to know which custodian holds your old HSAs so you can complete the process, including sending each of them transfer request forms.

Will consolidating my HSAs affect my contribution limits?

Moving existing funds between HSAs does not count toward your annual contribution limits. However, new contributions are limited to $4,300 for self-only coverage and $8,550 for family coverage in 2025. For 2026, the limits rise to $4,400 and $8,750, respectively. Those 55 and over who are not enrolled in Medicare can contribute an additional $1,000 as a catch-up contribution in both 2025 and 2026. HSA contribution limits are adjusted annually for inflation.

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

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

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

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

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

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

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

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

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

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In addition to spoiling them with toys and ice cream, many grandparents also want to help secure a solid financial future for their grandkids. That can mean setting up a custodial account, considering tax-advantaged savings options, and exploring other ways to start building a child’s wealth.

Below, you’ll learn about the different ways to save money for your grandkids, plus the pros and cons of each.

Why Open an Account for Grandchildren?

Sure, your grandkids might prefer a new video game or Lego set, but you’ll do them a favor, today and tomorrow, by opening a savings account for them. Here are a couple of good reasons to open a savings account for your grandchildren.

Teaching Financial Literacy Early

Money management skills are crucial, but personal finance education can be virtually nonexistent during school. It’s not typical for schools to teach kids how to balance a checkbook, how to invest in stocks, how to save for a down payment on a house, and how to file taxes.

Thus, it’s up to parents — and grandparents — to equip the next generation with financial literacy. Opening an account for your grandchildren can help teach them concepts such as interest, budgeting, and investing.

Getting a Head Start for College and Life

While teaching children how to manage money can give them a head start on the path to financial wellness, so too can providing them with a nest egg that can grow over time through various savings and investing accounts. Consider these options:

•   When you open a savings account for grandchildren early on, they could wind up having a sizable chunk of cash in young adulthood to put toward their first car or even a house down payment.

•   A 529 college savings plan could help them avoid taking on too much debt from student loans.

•   Retirement accounts, such as a Roth IRA, can help them achieve their retirement goals, even if those are more than half a century away. Remember, the earlier someone starts investing, the more they stand to earn in the long run.

Types of Accounts to Consider

Grandparents have many options when it comes to opening an account for their grandchildren, including:

Savings, CDs, and Bonds

Many banks and credit unions offer savings accounts designed for kids. Do a quick search for “best savings accounts for grandchildren” or you could start by seeing if your own bank offers such an account.

Having money in savings at an early age will let your grandkids benefit from compounding interest, especially if you find a high-yield savings account for kids.

You can also consider opening a certificate of deposit (CD) or purchasing savings bonds for your grandchildren. CDs are savings accounts that typically provide a higher interest rate than a standard savings account in exchange for keeping your money in the account for a fixed period of time. Savings bonds, issued by the U.S. Department of Treasury, are a very low risk, longer-term investment that provides interest in return for lending the government money.

With both of these options, the money is less liquid, but if the CD or bond matures when your grandchild is older, they stand to have a reliable source of funds they can use in future years.

Custodial Accounts (UGMA/UTMA)

Beyond savings accounts for grandchildren, you can consider helping your grandkids actually start investing with a custodial account, through the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA). Once your grandchild is between 18 and 25 (the exact age varies by state), they’ll take control of the account.

These accounts are taxable (meaning you will owe taxes on interest earned) and have no contribution limits. They’re an easy way to purchase stocks, mutual funds, and other securities for your grandchild — and you can even transfer your own securities into the custodial account.

529 College Savings Plans

The cost of college tuition continues to skyrocket, meaning it’s never too early to start saving. There are several benefits of a 529 college savings plan: While the contributions to this qualified tuition plan aren’t tax-deductible, your grandchild’s distributions from the account tax-free at the federal level, as long as the money is used for qualifying expenses.

A 529 college savings may have “college” in the name, but your grandchild can also use it for other higher education programs, such as a trade or vocational school. You can also roll over 529 funds into a Roth IRA if your grandkids don’t use all (or any) of the funds.

Contributions to a grandchild’s 529 account are not deductible on your federal income tax return. However, many states offer either a deduction or credit for this kind of contribution.

Another consideration: Contributions to 529s are subject to annual gift tax exclusion limits, which are $19,000 for individuals and $38,000 for married couples in 2025 and 2026. If you were to put more than that into a 529 for a grandchild, you would need to file a gift tax return (though this does not mean you’ll owe any gift tax).

IRAs for Minors

Similar to custodial investment accounts, you can open custodial retirement accounts for your grandchildren, including a traditional IRA and a Roth IRA. While your grandkid won’t benefit from this account for decades, starting them early on the path to retirement savings means they could have considerably more money to work with when they reach retirement age.

However, it’s important to note that opening an IRA requires the child to have earned income in a given year. For teens, this can make sense. For a newborn, it is unlikely to be a viable option.

When making contributions to an IRA for a grandchild, note that the amount you deposit is subject to the annual federal gift tax exclusion limit.

Choosing the Right Account

Not sure how to choose the right savings account for your grandchildren? Here are some things to consider:

Comparing Interest Rates and Fees

If you’re opening a savings account, compare interest rates — you want an account with a high yield so that the money compounds more quickly over time. For example, currently the average interest rate for standard savings accounts is 0.45%, while the figure for high-yield savings accounts (often from online-only banks) can be several times that number.

For custodial accounts, you’ll want options with low or no fees. It can be wise to shop around and see what options you have from different banks and brokerage firms.

Recommended: How Old Do You Have to Be to Open a Bank Account?

Accessibility and Withdrawal Rules

Certain accounts allow your grandchildren to access funds sooner, while others (like IRAs) have strict rules about when they can withdraw funds and what the funds can be used for (as is the case with 529 plans). Think about the specific timeline and use case you envision for your grandchildren. Sometimes, opening more than one type of account makes sense, depending on how many goals you want to enable for your children’s kids.

Tax Implications and Benefits

Some accounts have tax-deductible contributions; others have tax-free withdrawals. For example, withdrawals from a 529 account are not usually taxable, provided they are used for qualified educational expenses. With a Roth IRA, withdrawals made after your child is older than 59 ½ (as hard as that may be to imagine) are not taxable. With a traditional IRA, taxes are paid when the money is withdrawn, usually in retirement, and are taxable.

Speaking with a financial advisor can help you understand the tax implications of each type of account you’re considering to better understand what you might pay — and what your grandchild might pay.

Setting up and Contributing to the Account

Ready to open a savings account for your grandchildren? Here’s how it works:

Opening and Funding the Account

Follow the bank’s or investment firm’s guidelines for opening the account. You will likely need some specific information from the grandchild’s parents to open the account. You’ll also need to deposit money into the account to start the nest egg. Custodial accounts may even let you transfer your own assets into the account.

Automatic Transfers and Recurring Contributions

If you’d like, you may be able to set up recurring transfers into the account. Perhaps you want a recurring transfer every holiday season or on your grandchild’s birthday. Work with the financial institution to set up these contributions — and perhaps find out how other loved ones might be able to contribute as well.

Monitoring and Managing the Account

After opening an account, it’s important to monitor it and see how the funds grow over time. Just as importantly, once your grandchild is a little older, it’s a good idea to sit down and review the account with them:

•   If it’s a savings account, walk them through how compound interest works.

•   If it’s a 529 plan, talk to them about college costs and how student loans work.

•   If it’s a custodial account, talk to them about the basics of investing and the importance of saving for retirement.

The Takeaway

It’s never too early to start thinking about your grandchild’s future. Savings accounts, 529 plans, and custodial accounts offer several ways for you to give them money that will help them with college, general expenses, and even retirement.

While saving for grandkids is important, it’s also crucial that you take care of your own finances.

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

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

FAQ

What are the contribution limits for custodial accounts?

There are no contribution limits for UGMA/UTMA custodial accounts, but you can only contribute up to a certain amount to avoid gift-tax implications (this changes each year). Contribution limits apply for custodial IRAs just as they would for regular IRAs.

Can grandparents open a 529 plan for grandchildren?

Yes, grandparents can open a 529 plan for grandchildren. If the grandchild’s parents have already set up a 529 plan, grandparents can also contribute to that plan directly. This will simplify account management and withdrawals for the recipient of the funds.

What happens to the account if the grandchild doesn’t need the funds?

If a grandchild doesn’t need funds from a 529 plan for college, they can still use them for trade or vocational schools or roll them into an IRA. Grandparents can also reassign the 529 plan to another grandchild.

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Photo credit: iStock/gorodenkoff

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

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

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

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

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

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

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

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

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

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The earned income tax credit directly reduces the amount of income tax owed by lower-income working taxpayers. Depending on a tax filer’s number of children, tax filing status, and income, the tax credit can be in the thousands.

Here’s what you need to know about the 2025 EITC tax refund schedule and the 2026 EITC numbers.

What Is the Earned Income Tax Credit (EITC)?

The earned income tax credit, also known as the earned income credit (EIC), is a credit that low- to moderate-income workers can claim on their tax returns to reduce federal income tax owed.

Singles or married couples must have some form of earned income to qualify. Above a certain income level, they aren’t eligible for the credit. The number of qualifying children is also a key component of the tax credit.

The credit ranges from $649 to $8,046 for the 2025 tax year (taxpayers filing by April 15, 2026).

For those filing federal returns in 2026, the maximum allowable adjusted gross income (AGI) is $68,675 for a married couple filing jointly who have three or more children. Tables with amounts for the tax credit and maximum AGI are in the next section.

At the very least, the EITC reduces the amount of tax owed. At best, low-income people who have little or no income tax liability can receive the total credit in the form of a tax refund.

How Does the Earned Income Tax Credit Work?

The EITC is a fairly complicated credit, even for taxpayers who are not filing taxes for the first time. In fact, the IRS sees errors in roughly 33% of tax returns claiming it. Online tax filing software can help. The IRS also offers an “EITC Assistant” calculator.

The amount of the credit depends on the tax filer’s number of qualifying children, filing status, and earned income or AGI. (AGI is defined as gross income — including wages, dividends, capital gains, business income, and retirement distributions — minus adjustments to income, which can be student loan interest, contributions to a retirement account, educator expenses, or alimony payments.)

Investment income must be $11,950 or less in 2025 and $12,200 in 2026.

On your tax form, the credit is filed under the “payments” section, which is a way for the credit to be directly applied dollar for dollar to any income tax you owe.

Workers receive the credit beginning with their first dollar of earned income. The amount of the credit rises with earned income until it reaches a maximum level. Then it begins to phase out at higher income levels.

Taxpayers with earned income or AGI above a certain level won’t qualify for the tax credit at all. These amounts are listed below for tax years 2025 and 2026.

Tax Year 2025 EITC Tax Refund Schedule
Number of children or dependents	Maximum earned income tax credit	Maximum AGI for single, head of household, or widowed filers	Maximum AGI for married joint filers
0	$649	$19,104	$26,214
1	$4,328	$50,434	$57,554
2	$7,152	$57,310	$64,430
3 or more	$8,046	$61,555	$68,675

Phaseout amount begins at:

•   Single, head of household, or widowed: $10,620 for no children; $23,350 with qualifying children.

•   Married filing jointly: $17,730 for no children; $30,470 with qualifying children.

Tax Year 2026 EITC Tax Refund Schedule
Number of children or dependents	Maximum earned income tax credit	Maximum AGI for single, head of household, or widowed filers	Maximum AGI for married joint filers
0	$664	$19,540	$26,820
1	$4,427	$51,593	$58,863
2	$7,316	$58,629	$65,899
3 or more	$8,231	$62,974	$70,224

Phaseout amount begins at:

•   Single, head of household, or widowed: $10,860 for no children; $23,890 with qualifying children.

•   Married filing jointly: $18,140 for no children; $31,160 with qualifying children.

Looking for insights into your budgeting and spending? An online budget planner can help you keep tabs on where your money is coming and going.

Who Qualifies for the EITC?

To qualify for the EITC, you must have earned income and meet certain AGI requirements.

Types of income include:

•   W-2 wages from employment

•   Self-employment (or gig or freelance) earnings

•   Certain disability benefits

•   Benefits from a union strike

•   Nontaxable combat pay

You do not have to include income from the following sources:

•   Social Security

•   Child support or alimony

•   Unemployment benefits

•   Pensions or annuities

•   Interest and dividends

•   Pay as a prison inmate

What Are ‘Qualifying Children’?

To claim a child for the EITC, a qualifying child must have a valid Social Security number, meet the four tests of a qualifying child, and cannot be claimed by more than one person.

The four tests for a qualifying child are:

•   Age: A qualifying child can be of any age if they are permanently and totally disabled; under age 19 at the end of the year and younger than you; or under age 24 at the end of the year and a full-time student for at least five months of the year and younger than you.

•   Relationship: A qualifying child can be a son, daughter, stepchild, adopted child, foster child, brother, sister, half brother, half sister, stepsister, stepbrother, grandchild, niece, or nephew.

•   Residency: The child lived with you in your home for more than half the year.

•   Joint return: The child is not filing a joint return with anyone, such as a spouse, to claim any tax credits like the EITC.

Recommended: 13 Steps to Prepare for Tax Season

Can You Claim the EITC If You Have No Children?

It is possible to claim the EITC if you have no children, but the income threshold is very low and the credit is small.

For tax year 2025, the maximum credit is $649 for filers without children. The maximum adjusted gross income is $19,104 for taxpayers filing as single, head of household, or widowed and $26,214 for married couples filing jointly.

For tax year 2026, the maximum credit is $664. The income figures are in the table above.

Requirements include:

•   A valid Social Security number

•   Not filing Form 2555 (foreign earned income)

•   Main home is in the U.S. for more than half the year

•   Not claimed as a dependent or qualifying child on another tax return

•   You are at least 19 (or 24 if you were at least a part-time student for at least five months of the year, or at least 18 if you are a former foster child after turning 14 or a homeless youth)

There are also special qualifying rules for clergy, members of the military, and taxpayers and their relatives who receive disability payments.

Recommended: Do You Qualify for the Home Office Tax Deduction?

How the EITC Can Affect When You Receive Your Refund

Your tax refund may be delayed if you claim the EITC and file early in the year. The IRS is required to wait until mid-February to issue refunds when the EITC is claimed.

In general, expect a tax refund by March 3, assuming there were no issues with your tax return and you opted for direct deposit, the IRS says.

Common Errors to Avoid When Claiming the EITC

The IRS lists five snags to avoid when claiming the earned income credit.

1.    Your child doesn’t qualify: The IRS states that most errors occur because the child doesn’t meet the four requirements relating to relationship, residency, age, and filing status.

2.    More than one person claimed the child: Only one person can claim the qualifying child. If the child counts as a qualifying child for more than one person (such as separated or divorced parents), the IRS has some guidelines on how to choose which person can claim the qualifying child.

3.    Social Security number or last name doesn’t match card: The Social Security number and name must be exactly how they appear on the Social Security card.

4.    Married and filed as single or head of household: Taxpayers cannot claim the EITC if they are married and file as single or head of household.

5.    Over- or underreported income or expenses: Be sure to include all types of income from IRS Forms W-2, W-2G, 1099-MISC, 1099-NEC, and other income unless it’s one of the exceptions listed above.

The Takeaway

The EITC offers income tax relief for lower-income workers. If you think you might qualify, look at the EITC tax refund schedules, seek tax help if you need to, and file electronically for a speedier refund. While filing taxes isn’t most people’s idea of fun, an online money tracker can make keeping your financial house in order much easier.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

When should I expect my EITC refund?

According to the IRS, a refund with an EITC will arrive around March 3 if you filed electronically and elected for direct deposit, and there were no issues with your return. By law, the IRS cannot issue a tax refund with an EITC before mid-February.

Most taxpayers of all stripes who file electronically should get a refund within 21 days, according to the IRS.

Will there be an EITC in 2026?

Yes, there is an EITC for 2026. It rises to a maximum of $8,231for the 2026 tax year.

Will tax refunds be bigger in the 2025 tax year?

It’s possible. Many taxpayers could see bigger refunds this year, thanks to inflation-related adjustments to the tax brackets and standard deduction amounts.

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

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

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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There are many important decisions to make when starting a new job, including what to do with your old 401(k) account. Depending on the balance of the old account and the benefits offered at your new job, you may have several options, including keeping it where it is, rolling it over into a brand new account, or cashing it out.

A 401(k) may be an excellent way for workers to build a retirement fund, as it allows them to save for retirement on a tax-advantaged basis, and many employers offer matching contributions.

A Quick 401(k) Overview

A 401(k) is a type of retirement savings plan many employers offer that allows employees to save and invest with tax advantages. With a 401(k) plan, an employer will automatically deduct workers’ contributions to the account from their paychecks before taxes are taken out.

In 2025, employees can contribute up to $23,500 a year in their 401(k)s, and employees aged 50 and older can make catch-up contributions of $7,500 a year for a total of $31,000. In 2026, employees can contribute up to $24,500 annually in their 401(k)s, and those 50 and older can contribute a catch-up of $8,000, for a total of $32,500. Also in both 2025 and 2026, those aged 60 to 63 may contribute an additional $11,250 instead of $7,500 and $8,000, for an annual total of $34,750 and $35,750, respectively.

Employees will invest the funds in a 401(k) account in several investment options, depending on what the employer and their 401(k) administrator offer, such as stocks, bonds, mutual funds, and target date funds.

The money in a 401(k) account grows tax-free until the employee withdraws it, typically after reaching age 59 ½. At that point, the employee must pay taxes on the money withdrawn. However, if the employee withdraws money before reaching 59 ½, they will typically have to pay 401(k) withdrawal taxes and penalties.

Some employers also offer matching contributions, which are additional contributions to an employee’s account based on a certain percentage of the employee’s own contributions. Employers may use 401(k) vesting schedules to determine when employees can access these contributions.

Generally, the more you can save in a 401(k), the better. If you can’t max out your 401(k) contributions, start by contributing at least enough money to qualify for your employer’s 401(k) match if they offer one.

What Happens to Your 401(k) When You Quit Your Job?

When you quit your job, you generally have several options for your 401(k) account. You can leave the money in the account with your former employer, roll it into a new employer’s 401(k) plan, move it over to an IRA rollover, or cash it out.

However, if your 401(k) account has less than $7,000, your former employer may not allow you to keep it open. If there is less than $1,000 in your account, your former employer may cash out the funds and send them to you via check. If there is between $1,000 and $7,000 in the account, your employer may roll it into another retirement account in your name, such as an IRA. You may also suggest a specific IRA for the rollover.

With most 401(k) plans, if you have more than $7,000 in your account, your funds can usually remain in the account indefinitely.

Also, if you quit your job and you are not fully vested, you forfeit your employer’s contributions to your 401(k). But you do get to keep your vested contributions.

Is There Any Difference if You’re Fired?

If you are fired from your job, your 401(k) account options are similar to those if you quit your job. As noted above, you can leave the money in the account with your former employer, roll it into a new employer’s 401(k) plan, roll it over into an IRA, or cash it out. The same account limits mentioned above apply as well.

Additionally, if you are fired from your job, you may be eligible for a severance package, which may include a lump sum payment or continuation of benefits, including a 401(k) plan. But these benefits depend on your company and the circumstances surrounding your termination. And, like with quitting your job, you do not get to keep any employer contributions that are not fully vested.

How Long Do You Have to Move Your 401(k)?

If you leave your job, you don’t necessarily have to move your 401(k). Depending on the amount you have in the 401(k), you can usually keep it with your previous employer’s 401(k) administrator.

But if you do choose to roll over your 401(k) as an indirect rollover, you typically have 60 days from the date of distribution to roll over your 401(k) account balance into an IRA or another employer’s 401(k) plan. If you fail to roll over the funds within 60 days, the distribution will be subject to taxes and penalties, and if you are under 59 ½ years old, an additional 10% early withdrawal penalty.

Next Steps for Your 401(k) After Leaving a Job

As you decide what to do with your funds, you have several options, from cashing out to rolling over your 401(k)s to expanding your investment opportunities.

Cash Out Your 401(k)

You can cash out some or all of your 401(k), but in most cases, there are better choices than this from a personal finance perspective. As noted above, if you are younger than 59 ½, you may be slammed with income taxes and a 10% early withdrawal penalty, which can set you back in your ability to save for your future.

If you are age 55 or older, you may be able to draw down your 401(k) penalty-free thanks to the Rule of 55. But remember, when you remove money from your retirement account, you no longer benefit from tax-advantaged growth and reduce your future nest egg.

Roll Over Your 401(k) Into a New Account

Your new employer may offer a 401(k). If this is the case and you are eligible to participate, you may consider rolling over the funds from your old account. This process is relatively simple. You can ask your old 401(k) administrator to move the funds from one account directly to the other in what is known as a direct transfer.

Doing this as a direct transfer rather than taking the money out yourself is important to avoid triggering early withdrawal fees. A rollover into a new 401(k) has the advantage of consolidating your retirement savings into one place; there is only one account to monitor.

Keep Your 401(k) With Your Previous Employer

If you like your previous employer’s 401(k) administrator, its fees, and investment options, you can always keep your 401(k) where it is rather than roll it over to an IRA or your new employer’s 401(k).

However, keeping your 401(k) with your previous employer may make it harder to keep track of your retirement investments because you’ll end up with several accounts. It’s common for people to lose track of old 401(k) accounts.

Moreover, you may end up paying higher fees if you keep your 401(k) with your previous employer. Usually, employers cover 401(k) fees, but if you leave the company, they may shift the cost onto you without you realizing it. High fees may end up eating into your returns, making it harder to save for retirement.

Does Employer Match Stop After You Leave?

Once you leave a job, whether you quit or are fired, you will no longer receive the matching employer contributions.

Look for New Investment Options

If you don’t love the investment options or fees in your new 401(k), you may roll the funds over into an IRA account instead. Rolling assets into a traditional IRA is relatively simple and can be done with a direct transfer from your 401(k) plan administrator. You also may be allowed to roll a 401(k) into a Roth IRA, but you’ll have to pay taxes on the amount you convert.

The advantage of rolling funds into an IRA is that it may offer a more comprehensive array of investment options. For example, a 401(k) might offer a handful of mutual or target-date funds. In an IRA, you may have access to individual securities like stocks and bonds and a wide variety of mutual funds, index funds, and exchange-traded funds.

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The Takeaway

Changing jobs is an exciting time, whether or not you’re moving, and it can be a great opportunity to reevaluate what to do with your retirement savings. Depending on your financial situation, you could leave the funds where they are or roll them over into your new 401(k) or an IRA. You can also cash out the account, but that may harm your long-term financial security because of taxes, penalties, and loss of a tax-advantaged investment account.

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.

Help build your nest egg with a SoFi IRA.

FAQ

How long can a company hold your 401(k) after you leave?

A company can hold onto an employee’s 401(k) account indefinitely after they leave, but they are required to distribute the funds if the employee requests it or if the account balance is less than $7,000.

Can I cash out my 401(k) if I quit my job?

You can cash out your 401(k) if you quit your job. However, experts generally do not advise cashing out a 401(k), as doing so will trigger taxes and penalties on the withdrawn amount. Instead, it is usually better to either leave the funds in the account or roll them over into a new employer’s plan or an IRA.

What happens if I don’t rollover my 401(k)?

If you don’t roll over your 401(k) when you leave a job, the funds will typically remain in the account and be subject to the rules and regulations of the plan. If the account balance is less than $7,000, the employer may roll over the account into an IRA or cash out the account. If the balance is more than $7,000, the employer may offer options such as leaving the funds in the account or rolling them into an IRA.

Article Sources

1. IRS. 401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000.

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