Your 2022 Tax Season Prep List

Tax Preparation Checklist 2025: Documents You Need to Gather

Yes, it’s that time again: Tax Day is approaching. When April 15th rolls around, it’s the deadline for filing returns.

This isn’t a task you want to leave for the night before. Taxes can be complex, and it can be time-consuming to complete even a fairly simple return. Preparing in advance can be an excellent idea.

Whether you plan to file on your own or use a professional tax service, you will need to gather a number of forms and documents. This checklist will help you pull together the information and paperwork you need to make the process go that much more smoothly.

The Basics of Filing Taxes

In a nutshell, filing your taxes tracks your income, taxes already deducted during the year, any credits and deductions, and other factors that impact what you may owe.

Below, you’ll learn about what documents you need to file your income taxes. The Internal Revenue Service (IRS) collects taxes from any business or individual that receives a regular monthly income. There are currently seven different tax brackets that divide individuals according to their annual earnings.

Of course, each person’s situation is unique, with different earnings, deductions, and circumstances that may impact how much they owe (or get refunded, in some cases). You can explore an in-depth guide to the 2025 tax season for more details, but now, consider the information you’ll need to collect before you can finalize your return.

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Personal Information

First on your tax prep checklist is to gather some basic information about yourself and (if applicable) your spouse and children. This includes:

•   Your Social Security or tax ID number

•   Your spouse’s Social Security or tax ID number and birthdate

•   Any identity protection PINs issued to you or family members by the IRS

•   Your bank account number and routing number for the deposit of any refund you may be due or payment you owe, it you choose to pay that way

•   Any foreign residency and reporting details, if that applies to you.

Dependents’ Information

If you have dependents, you’ll want to gather similar details about them, as above. The IRS defines a dependent as a qualifying child (who is either under age 19 or under age 24 if they’re a full-time student), or could be any age if considered to be permanently disabled. A qualifying relative can be a relative (say, a sibling or parent) who, if they have income, does not provide more than half of their own annual support. (One note: A spouse cannot be claimed as a dependent.)

In addition to dates of birth and Social Security or tax ID numbers, you will need records of child care expenses (and providers’ tax ID numbers), if applicable; details of earnings of dependents; and potentially form 8332 relating to custodial agreements for children, as needed. (You’ll learn a bit more about possible family-related tax deductions and credits below.)

Sources of Income

Next on the tax preparation checklist is to gather paperwork about your sources of income. Typically, this means W-2 and/or 1099 tax forms.

•   For full-time employees, this will often be a W-2 form.

•   For those who are self-employed (such as freelance and contract workers), 1099s will be needed. These are forms that document payment of funds from different entities.

•   If you received payments for goods and services from an app or online platform, you might receive a 1099-K form if your earnings cross a certain threshold.

•   If you received unemployment compensation (or any state or local income tax refunds), you’ll want to make sure you have a 1099-G reflecting these earnings.

•   If you’ve earned interest or dividends, or sold investments, you will want to collect your 1099 forms that track these amounts.

•   You will also need to pull together any 1099 forms that document Social Security or income from a pension, IRA, or annuity.

•   Other forms of income will need to be accounted for as well, including jury duty, pay, prizes, awards, gambling winnings, trust income, passive income (such as earnings on a rental property you own), and royalties, among others.

Types of Deductions

Now that you’ve covered what you earned on the tax document checklist, it’s important to track possible deductions, which can lower your tax burden. Essentially, when you take a deduction, you lower the amount of income that will be taxed.

Many of these deductions will involve 1098 documents. Here are some of the more common tax deductions possible:

•   Medical expenses: You may be able to deduct some medical expenses, so it’s wise to gather records of how much you paid. If your medical bills exceed 7.5% of your adjusted gross income, and you choose to itemize your deductions (rather than take the standard deduction), you may be able to deduct some of these expenses.

•   IRA contributions: You may be able to deduct your contributions to a traditional individual retirement account (IRA). However, the deduction may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds a certain level.

•   Mortgage and property Taxes: You may be able to deduct your property taxes and the interest you paid on your mortgage if you itemize, so be sure to gather your paperwork related to homeownership.

•   Charitable donations: If you itemize, you may be able to deduct any money or items you donated to a charity from your taxable income.

•   Car expenses: If you’re self-employed and use your car exclusively or partially for work, you may be able to write off all or some of your car expenses.

•   Educational expenses: Student loan interest (up to $2,500) is tax deductible. If you are self-employed, you may be able to deduct education expenses, provided the education improves your business or is required by law.

•   Home office costs: If you’re self-employed, you may be able to deduct expenses related to maintaining a home office.

•   State, local, and sales taxes: If you itemize, you may be able to deduct the state and local general sales tax you paid during the year, or the state and local income tax you paid during the year.

Tax Credits

Before you wrap up your tax prep checklist, you’ll want to collect any paperwork that could help you snag tax credits. As for deductions vs. tax credits, a deduction lowers your taxable income, while a credit gives you a dollar-for-dollar deduction in your tax liability. So if you can claim a $2,500 credit, that means your taxes owed are reduced by $2,500.

Here’s a look at some credits that can help you save on your taxes.

Student Credits

You may want to look into the following:

•   American opportunity tax credit: You may be able to receive up to $2,500 as a credit for qualifying educational expenses during the first four years of higher education.

•   Lifetime learning credit: You may be able to receive up to $2,000 per year as a credit for qualifying tuition and expenses.

Family and Dependent Credits

Consider whether you are eligible for the:

•   Child tax credit: This is worth up to $2,000 per qualifying child under age 17.

•   Child and dependent care credit: If you needed child or dependent care in order to work, you may be able to get back some of your expenses with this credit.

•   Earned income tax credit (EITC): For low- to middle-income workers, the EITC could be from $632 to $7,830, depending on qualifying factors.

•   Adoption credit: If an adoption was finalized in 2024, the adoptive parents may be eligible for a federal tax credit of up to $16,810.

Homeowner Credits

•   Home energy tax credits: You might be able to take a credit of up to 30% on the costs of clean, renewable energy systems/equipment for your home, up to a limit.

Missed Deadline Penalties

Here’s another reason to prioritize this tax preparation checklist: If you don’t have your documents gathered and your return prepared, you might file late…or not be filing at all.

There are various penalties involved if you don’t make the filing deadline and/or you don’t pay the taxes you owe on time. Here’s how they break down:

•   If you owe taxes and don’t file on time, the penalty is 5% of taxes owed for every month your return is late. The penalty won’t exceed 25% of your unpaid taxes.

•   If you file more than 60 days after the filing due date, the minimum penalty is $510 (for 2024 tax returns filed in 2025) or 100% of your unpaid tax, whichever is less.

•   If you file your taxes (or request an extension) on time but don’t pay the taxes you owe, the late payment penalty is 0.5% of taxes owed for every month the payment is late. The penalty won’t exceed 25% of your unpaid taxes.

•   For any months in which both the late-payment and late-filing penalties apply, the late-filing penalty is reduced by 0.5% to 4.5%.

Interest also accrues on unpaid taxes, adding to the cost. Since all of this can cost you money and create considerable stress, it’s a good idea to get a head start so you have your tax prep documents together and can file on time.

The Takeaway

Filing taxes can be complicated and require gathering various forms and figures. It’s wise to start early and collect information related to your income, dependents, and possible deductions and credits.

Additionally, being prepared in advance to receive any refunds or make any potential subsequent tax payments is important. It can be wise to have a checking and savings account that earns you interest while making it simple to track your cash.

​​

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


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


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

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

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

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

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

*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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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

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11 Tips for Saving Money While in the Military

11 Money Management Tips for Military Members

Are you a member of the military? Whether you’re on active duty or a veteran, serving in the Reserve or National Guard, you have unique opportunities to build financial security. Taking advantage of things like military discounts and special mortgage loans can help you save money. There are also a number of other actions military members and their families can take to protect and grow their finances. Here’s what you need to know.

Key Points

•   To make the most of your money while serving, set up a budget, open a savings account, and automate savings.

•   Utilize military discounts and shop on base to reduce expenses.

•   Use VA home loans for low-interest rates and no down payment.

•   Explore educational benefits like the GI Bill and military student loan forgiveness.

•   Learn about tax breaks and life insurance options available to military personnel.

The Importance of Saving Money in the Military

Saving money is always a good thing when planning for your future. Members of the military — whether single, in a relationship, or married with kids — may especially benefit from making some careful money moves now. This helps ensure that your finances are in good shape after the final deployment ends.

11 Tips for Military Members to Manage Their Money

Wondering how to save money while in the military? We’ve got 11 money management tips that you may find useful if you’re a military member thinking about your financial future.

1. Creating a Budget

Having a monthly budget is a good way to track your expenses against your income. While it may be tempting to spend all of your paycheck each week during deployment, you might want to consider funneling away some money into savings or retirement to help achieve long-term financial goals and build wealth. A budget can help you do this, whether you use a journal, a spreadsheet, or an app to keep tabs on your money.

Budgeting for beginners can be overwhelming, but it’s an important step. Seeing your finances laid out in a clear budget makes it easier to determine how much you can afford to set aside from your paycheck, whether it’s to pay down debt or build your savings.

Recommended: 50/30/20 Budget Calculator

2. Opening a Savings Account

As part of your budget, it’s a good idea to open a savings account, if you don’t already have one. You can set aside money here for everything from a down payment on a house after your service to a new car to a wedding. If you intend to leave money in the account for the duration of your deployment, it’s especially wise to find a high-yield savings account that pays an above-average interest rate on your deposits.

3. Automating Your Savings

Once you have a savings account, you might benefit from automating your savings, if your financial institution offers this. When you set up automatic transfers from checking to savings, the money gets whisked away before you see it sitting there, connected to your debit card, and tempting you to spend it.

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4. Avoiding Overspending

An important reason to create a budget is to avoid overspending, especially with credit cards. When you build a budget, you’ll be able to identify how much you can safely spend each month while working toward your goals. Whether actively deployed or in between deployments, it’s a good idea to rein in any unnecessary expenses and recognize common reasons for overspending.

Before making a major purchase, you might try the 30-day rule: Wait a full 30 days to see if the urge to buy the item passes. If it does, you’ve avoided an unnecessary expense.

5. Utilizing Military Resources (Like Military Discounts)

How else to save money in the military? Many retailers, restaurants, and services offer discounts to members of the military, usually if you provide military identification. While military discounts may seem small, they can add up over time. They can be especially helpful when making larger purchases, like a new car.

Some businesses extend military discounts to spouses as well. If you are deployed with a spouse back home, make sure your partner knows to ask about military discounts when shopping as well.
Wondering how to find the best military discounts? One route is to check out Military.com’s discount page and subscribe to their deals and discounts newsletter.

6. Shopping on Base

Shopping on base can be a great way to scale back your expenses as a member of the military. For example, gas is typically cheaper on base, and you can usually get great discounts on groceries by shopping at the commissary because it doesn’t charge a sales tax.

Recommended: Feeling Guilty About Spending Money?

7. Investing in Education

If you want to pursue education after your service, check out the GI Bill. This bill can help veterans pay for college, graduate school, and training and certification programs. Head to the VA website to find out how you can take advantage of this education assistance and potentially save money by being in the military.

You can also see if you qualify for military student loan forgiveness.

8. Taking Advantage of Veterans Administration (VA) Home Loans

Buying a home can be a stressful experience, from saving for a down payment to getting approved for a mortgage loan to making an attractive offer fast enough to actually get the house you want.

As a servicemember, veteran, or surviving military spouse, you likely have unique access to a Veterans Administration (VA) home loan through private lenders.

When you purchase a home using a VA home loan, you typically don’t need a down payment, you’ll get a low interest rate, you won’t have to pay for private mortgage insurance, and closing costs are limited. And this isn’t a one-time deal: You can use a VA home loan for multiple homes over the course of your life.

9. Getting a Life Insurance Policy

The U.S. Department of Veterans Affairs offers Servicemembers’ Group Life Insurance (SGLI). In fact, if you qualify as a servicemember, the VA automatically signs you up (but note – it isn’t free!). You can update the life insurance coverage as you see fit, change your beneficiaries, and extend coverage beyond your service, all by logging in with your CAC or DS Logon.

Learn more on the official SGLI page . But remember: SGLI is not your only life insurance option during and after your service. You might find better terms by shopping around for other life insurance policies.

10. Learning About Tax Breaks

The IRS offers unique tax benefits to members of the U.S. Armed Forces. These include tax breaks, tax deadline extensions, free tax help from volunteers, and more. If you’re unsure of how your service affects your tax situation, browse the free IRS resources or work with a certified tax professional.

Recommended: Tax Write-Offs for Young Adults

11. Planning for Retirement

Retirement may seem like a long way off, especially if you have just enlisted. But it’s a good idea to start planning for retirement early to maximize your income in retirement. A popular option for members of the military is the Thrift Savings Plan (TSP), a federally sponsored retirement and investment plan. This plan is akin to an employee-sponsored 401(k). Some members of the military supplement this coverage with other retirement plans.

The Takeaway

Managing your money wisely while serving in the military can set you up for a secure future. Smart moves to make during your service include setting up a budget, saving for future expenses and retirement, and taking advantage of military discounts and programs designed exclusively for servicemembers.

If you’re looking for a new banking partner, see what SoFi has to offer. When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

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

FAQ

Is it easy to save money in the military?

Saving money while in the military can be easy if you take advantage of several helpful military programs, including VA home loans, military discounts, federally sponsored retirement plans, and even cheaper gas and groceries on base.

What expenses do military members have?

Members of the military may incur the same expenses as the average person, including housing, food, and clothing. However, in addition to a servicemember’s paycheck, the Department of Defense also offers allowances that members of the military can use for basic necessities, which can help lower daily expenses.

How much do military members earn?

Members of the military make different amounts depending on their rank and years of service. However, servicemembers’ full payment includes not only their basic pay and military benefits but also military allowances, which go toward the cost of basic necessities like food and housing. Military members, whether servicemembers or officers, can earn additional pay through the Department of Defense’s Special and Incentive Pays program.


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SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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

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

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

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

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

*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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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What Are Green Banks?

What Is Green Banking?

Green banking is a branch of the financial industry that focuses on promoting environmentally-friendly practices. Similar to sustainable investing, green banks emphasize the importance of reducing negative environmental impacts as they go about their business.

The latest data indicates that global warming is likely increasing, and, in response, so is the market for renewable energy sources and other green solutions. The emergence of green banking may also reflect this rising interest in being more eco-conscious.

Read on for a closer look at what green banking is and how it works, plus some examples of green banking.

Key Points

•   Green banking focuses on environmentally-friendly financial practices.

•   These banks fund clean energy projects using both public and private investments.

•   These also focus on ways to reduce a bank’s environmental footprint.

•   Other objectives include financing green jobs and expanding solar power.

•   Over 20 U.S. green banks have driven significant clean energy investments.

What Are Green Banks?

There is no standard way to define what a green bank is. According to the Environmental Protection Agency (EPA), green banks are public, semi-public, or nonprofit financial institutions that use public and private funding to pursue clean energy projects. More broadly speaking, green banks are mission-driven. They work to further environmentally sound goals alongside financial goals. Those objectives can include:

•  Financing projects that will create green jobs

•  Expanding solar power

•  Lowering energy costs

•  Reducing greenhouse gas emissions

•  Building green infrastructure

•  Closing funding gaps for green energy retrofitting projects

•  Advancing sustainability

As of 2023, there were over 20 financial institutions in the U.S. operating as green banks, according to the Green Bank Consortium. Collectively, those banks have helped to drive $9 billion in clean energy investment over the past 10 years, using only $2 billion in public funds.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 3.80% APY, with no minimum balance required.

How Do Green Banks Work?

Broadly speaking, green banks work by adhering to practices that promote sustainability. Sustainable banking encompasses two different things:

•  Green banking

•  Sustainable finance

So what does that mean? When you’re talking about green banking, you’re referring to implementing practices that are designed to reduce a bank’s environmental footprint.

Sustainable finance, on the other hand, involves the use of financial products to support or encourage environmentally-friendly behavior.

Green banks work by incorporating aspects of sustainability into their operations. That spans everything from the products and services the bank offers to its IT strategy to the way it hires and retains employees. It may encompass socially responsible investing as well.

It’s important to note that it can be easy to confuse banks that are authentically green with financial institutions that engage in greenwashing. Greenwashing happens when companies have the appearance of being environmentally-friendly or sustainable, based on their marketing claims, but in reality are not. It may require a bit of consumer research to make sure you can differentiate what is a green bank and what isn’t.

Recommended: A Guide to Ethical Shopping

Sustainable Banking Examples

The number of green banks in the U.S. is still relatively low, and they don’t exist in every state yet. You may not see them among your local retail banks. However, there are some notable examples of financial institutions that are focused on sustainable banking. These include:

California Infrastructure and Economic Development Bank

The California Infrastructure and Economic Development Bank (known as IBank) offers a variety of paths to sustainable banking. The bank offers infrastructure loans, bonds, small business financing, and climate financing in order to create jobs, bolster the economy, and improve quality of life for Californians. IBank financing has provided $1 billion in infrastructure loans within the state over the last 10 years.

Connecticut Green Bank

Connecticut Green Bank is the nation’s first green bank, established in 2011. The bank evolved from the Connecticut Green Energy Fund and bases its business model on the use of sustainable financing to maximize the use of public funds. As of 2022, the bank and its partners have helped $2.26 billion in capital to find its way into clean energy projects across the state.

NY Green Bank

NY Green Bank is a state-sponsored financial institution operating in New York that works with the private sector to increase investments into clean energy markets. The bank is specifically interested in projects that are both financially sound and focus on creating energy savings or clean energy that helps reduce greenhouse gas emissions. Many of the bank’s funding projects revolve around the expansion of solar energy.

Recommended: How Are Local Small Banks Different from Large Banks?

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Advantages and Disadvantages of Green Banks

Green banks and sustainable banking aim to play a role in environmental preservation. However, they aren’t the same thing as your standard brick-and-mortar or online bank. While you may never use a green bank directly, it’s important to understand how they can still affect you. Here’s what to know about the advantages and potential downsides associated with sustainable banking.

Banking Advantages

Banking Disadvantages

•   Green banks help to advance the use of clean energy technology.

•   Clean energy projects funded by sustainable banking can help to increase job growth and promote economic development.

•   Green banking can attract large-scale private investment, which can help to accelerate clean energy projects.

•   Green banks are not widespread, and their reach may be limited.

•   Sustainable banking is still a relatively new subset of the banking industry, which can translate to higher credit risk.

•   Banks that engage in greenwashing can taint the image of sustainable banking and lead investors to look elsewhere.

The Future of Green Banking

Predicting the future of sustainable banking is difficult, though signs indicate a growing interest in green banks might help create a cleaner environment. At the federal level, for instance, the passage of the 2022 Inflation Reduction Act notably included a provision allowing for the establishment of a national green bank. In August 2024, the first U.S.-based national green bank opened. It’s being run by the nonprofit Coalition for Green Capital using over $5 billion in funding from the Inflation Reduction Act.

Globally, sustainable banking is increasingly in the spotlight in emerging markets. There’s growing interest in the positive environmental gains that may be made through green banking. That said, there are still questions about how to encourage sustainable finance in economies that are still developing. This could in turn lead to more global collaboration among banks in furthering sustainable finance worldwide.

One potential result of sustainable banking: There may be greater carryover in the traditional banking sector. For example, there may be a push for banks to offer personal or small business banking products and services that have a sustainable or green angle. Green loans and mortgages could end up being another byproduct of enhanced attention on sustainable finance.

As the spotlight on green banking grows, you may begin to notice changes at the retail banking level. For example, Citigroup issues an annual report on its ESG (Environmental, Social and Governance) program results. And it’s not just traditional banks showing dedication to this topic; online banks are part of the effort, too. In March 2022, SoFi announced the launch of its ESG Committee to help formulate strategies for positive environmental, social, and governance impacts.

Recommended: Online vs. Traditional Banking: What’s Your Best Option?

The Takeaway

Many people are adopting a greener lifestyle and finding ways to reduce their carbon footprint. Where you choose to bank could make a difference in your efforts if you’re keeping your money at a financial institution that advocates sustainability. Green banking is the term used to describe financial institutions that try to both make their business practices more sustainable as well as invest funds towards eco-conscious goals. This segment of the market may well grow in the years ahead.

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


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

FAQ

What is sustainable banking?

Sustainable banking encourages environmentally-friendly practices, products, and services. A sustainable bank or green bank may be committed to specific environmental goals, such as reducing greenhouse gas emissions, promoting the advancement of clean energy, or funding green building projects.

How can banks be more sustainable?

Banks can encourage sustainability by reviewing their environmental footprint and addressing areas that could improve. The types of changes banks can implement may be large or small, but the end goal is fostering a cleaner environment. Reducing paper waste, for example, is one simple way to be more sustainable.

Which banks are green banks?

There are a handful of banks operating in the U.S. that are designated as green banks, according to the Green Bank Consortium. Whether a bank is considered “green” or not can depend on the type of certifications they hold. Examples of green banks include IBank, Connecticut Green Bank, and NY Green Bank.


Photo credit: iStock/baona

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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

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

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

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

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

*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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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21 Items You Can Recycle and Make Money

21 Items That You Can Recycle for Money

Most of us are aware that diverting waste from landfills is a “green” practice that can benefit the planet. But did you know that recycling everyday items — from metal cans to cooking oil — can also put some green in your wallet?

With a little time, effort, and know-how, you can recycle the following 21 items to generate some extra cash. After all, one person’s trash can be another person’s treasure. Read on to learn more.

Key Points

•   Recycling everyday items like cans, bottles, and electronics can earn money while benefiting the environment.

•   Items such as cooking oil, hair, and gift cards can also be recycled for cash, providing additional income opportunities.

•   Non-financial benefits of recycling include reducing landfill waste, preventing pollution, and conserving natural resources, contributing to environmental sustainability.

•   Companies like TerraCycle offer fundraising opportunities that involve recycling trash, which can benefit schools and nonprofits.

•   Selling used items like clothes, toys, and bed sheets online or at consignment shops can provide extra income, promoting a circular economy.

Is Recycling Financially Worth It?

The practice of waste diversion can help reduce our growing trash problem and be well worth it for businesses and local governments. But whether it’s worth it as a way of making money from home (or mostly from home) will depend on several factors.

You may need to do the following:

•   Seek out a recycling center or collection point.

•   Prepare the items for recycling (washing, sorting) according to the center’s specifications.

•   Make a tax-deductible donation vs. receiving a cash payment.

Recycling can be a positive way to earn a bit of extra money during your off-hours from your full-time job. If you are a freelancer, you’ll need to determine whether the time spent is worth it, as it might take away from higher-paying hourly work.

Recommended: 39 Passive Income Ideas to Build Wealth

How Much Do You Get Per Item You Recycle?

Recycling can become a green way to earn money, but it can be a challenge to estimate how much you’ll make.

Redemption centers for clothes, glass bottles, or scrap metal pay varying amounts from state to state. For example, in New York State, you can get 5 cents for every returned aluminum can, while Michigan offers 10 cents per can.

You can do a little research to determine where you’ll get the most cash for what’s otherwise considered trash and which items yield the most money back.

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

21 Everyday Items That You Can Recycle for Money

Whether your goal is downsizing your life and decluttering, making additional dollars, or both, purging your household of unused items can lead to a cleaner environment and fuller piggy bank.

Wondering what you can recycle for money? Here are 21 ideas:

1. Cans

On the list of what to recycle for money, aluminum beverage cans are typically near the top. They are light and easily compacted and can often be redeemed at your local supermarket for five or 10 cents a piece.

Beyond bagging up the recyclable cans in your home, you can collect them from your workplace, friends, and family members. Or you might find many after an event, such as a block party or community concert.

2. Glass Bottles

As with cans, you can collect around five to 10 cents for each glass bottle you return to a store. Retailers may require you to empty and rinse them before returning.

3. Plastic Bottles

Another item to recycle for money: plastic bottles, which are everywhere. Did you know that an estimated 2.5 million of them are being thrown away every hour in the United States? You can earn around five to 10 cents for every plastic bottle recycled, depending on where you live.

4. Scrap Metal

Another item that can be recycled for money is scrap metal. It’s one of the more lucrative items to sell. At some scrap yards, you can get over $2 per pound for copper and 40 to 70 cents per pound for aluminum. To find it, look for local construction sites where workers might appreciate your hauling it away. You can also check local community boards, such as Freecycle and Craigslist.

5. Cardboard

Many of us get a lot of home deliveries, resulting in numerous boxes waiting to be recycled. You can get cash for your cardboard, around $46 – $62 per bale or about 42 cents to 62 cents per pound.

You might not be capable of storing (or baling) large amounts of cardboard. But you can research local places that will buy cardboard boxes in relatively small quantities. There are websites, like BoxCycle, that will buy your cardboard and reuse it.

If you reach out to friends, family, offices, and restaurants, you can accumulate a decent sized bundle to tie up and sell. You might also check any local college campuses after move-in day.

6. Junk Cars

If you want to cash in on your rusty pickup truck, a scrap yard might pay for it, perhaps basing the price on the metal they can recycle from it. There are also a lot of companies that will buy your car regardless of its condition. Do an online search, and review the possibilities. You may also find charities that you know and like that will pick up your car and provide you with a receipt for the donation. This could result in a significant tax savings if you itemize and include it in your charitable contribution deduction.

7. Clothes

Perhaps it’s time to clean out your closet to make some cash. You can sell your gently used clothes for quick cash. Websites (such as Poshmark, thredUP, eBay, and Etsy), in-person consignment stores, and hybrid businesses such as The RealReal are just some of the options.

8. Cooking Oil

When you’re considering what you can recycle to make money, cooking oil likely doesn’t come to mind. But if you own or run any type of restaurant, there are companies that will pay for rancid or used cooking oil. It can be reused as biofuel.

9. Hair

Hair can be a surprisingly lucrative thing to repurpose. Wig makers and hair extension companies may pay $150 to $600 for long, uncolored human hair. Typically, you need at least 10 inches to sell. In addition to searching for wig and extension businesses online, you might even find buyers on CraigsList and Ebay.

10. Makeup Containers

Many beauty supply stores will take back your old lipstick, eyeshadows, and other makeup containers. They’ll recycle it properly and, in many cases, give you cash-back reward points towards a product purchase.

11. Gift Cards

Sometimes, a well-meaning person will give you a gift card you have no intention of using. If you have unused gift cards lying in a drawer, there are websites, like CardCash and Raise, that will buy them from you or provide a marketplace where you can sell them.

These websites generally collect a fee, however — you won’t get what your card was worth. But better to collect some cash than have the card collect dust in a drawer.

Recommended: Gift Cards vs. Prepaid Debit Cards

12. Electronics

Some electronics contain hazardous materials and can’t be disposed of in your regular trash or recycling. But that doesn’t mean that taking care of e-waste is a losing proposition. Certain companies will offer money for your old electronics — computers, rechargeable batteries, and calculators, to name a few. Apple may let you trade in a laptop, tablet, or other devices for a credit, or recycle it for free.

Just make sure the company isn’t greenwashing, a practice whereby companies profess to be environmentally friendly with their e-waste, but actually aren’t. Do a bit of research before you hand off your electronics.

13. Cell Phones

Need more inspiration for things you can recycle for money? There are financial (on top of environmental) benefits to not just tossing your old phone. Many cell phone providers like AT&T and Verizon will give you a gift card or vouchers for a phone you’re no longer using. These can be used toward purchasing a new product.

Recommended: Tips for Overcoming Bad Financial Decisions

14. Car Batteries

Has your car battery stopped working? This is another item you may be able to recycle and make money. There are auto part stores and junk yards that will give you cash for your car battery — anywhere from $7 to $30 dollars. Some auto part retailers will give a store credit toward future purchases.

15. Ink Cartridges

There are many office supply stores, including Staples and Office Depot, that will recycle your used ink and toner cartridges and offer cash-back rewards.

There may be limits on how many ink cartridges you can bring back per month and certain spending requirements in order to qualify for the rewards.

16. Wine Corks

Do you love drinking wine? If so, don’t toss the corks when you open a bottle. Some craft enthusiasts, manufacturers, and other businesses are willing to buy popped wine corks. Artistic types can turn them into anything from picture frames to wall art and beyond. By listing yours on sites like Ebay and Craigslist, you can get about 5 cents per cork.

💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 3.80% APY, with no minimum balance required.

17. Holiday Lights

Those strands of holiday lights that once brought you cheer can now bring you cash. You can box up and ship your old, broken lights to Holiday LEDS and receive 10% off your next purchase.

18. Toys

You can earn money selling gently used toys to consignment shops, second-hand shops, and online. You’ll give your budget a boost and bring joy to another child.

19. Bed Sheets

Here’s another way to recycle and earn some cash: If you recently upgraded your mattress from, say, a full to a king, you can sell your used bed sheets, as well as your towels, curtains, and other fabrics, on sites such as Facebook Marketplace and Ebay.

Recommended: 37 Places to Sell Your Stuff

20. Tennis Balls

Around 125 million tennis balls get tossed out as garbage in the U.S. every year, but you might be able to make some money on them. One savvy person packaged gently used tennis balls in a four-pack muffin container and wound up earning thousands of dollars for a local charity. See if you can try your own version of her clever idea.

21. Trash

While this way to recycle and earn cash may not directly benefit your bank account, it’s a good one to know about. Small businesses, schools, and nonprofits with a lot of garbage can turn it into a fundraising opportunity. Companies such as TerraCycle will donate money to your cause for every piece of trash, often including hard-to-recycle items. There are paid and sponsored opportunities, and your school could earn $50 for every five shipments you send them.

The Takeaway

With a little research and effort, you can turn your used and unwanted items into extra money. Recycling items can be a big win for your pocketbook and the planet. Whether you focus on collecting cans, unwanted clothes, cardboard, or corks, you can wind up with some extra cash while doing good.

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


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

FAQ

How many items are recycled a year?

America recycles around 69.1 million tons of material a year. Paper makes up about 66.5% of recycled materials, followed by metals (12.6%), wood (4.5%), plastics (4.5%), and glass (4.4%).

What can you recycle for money?

There are lots of items you can recycle for money: cans, metal, old cars, used clothing, electronics, and even human hair and cooking oil.

What are the non-financial benefits of recycling?

Even if you don’t get paid, recycling reduces the amount of waste sent to a landfill, prevents pollution, and conserves energy and natural resources.


Photo credit: iStock/Eric Panades Bosch

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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

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

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

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

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

*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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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What Are Estimated Tax Payments?

Guide to Estimated Tax Payments

If you are self-employed or receive income other than a salary or employment wages, you could be responsible for making estimated tax payments.

You might think of these estimated taxes as an advance payment against your expected tax liability for a given year. The IRS requires certain people and businesses to make quarterly estimated tax payments (that is, four times each year).

Not sure if you are required to make estimated tax payments or how much you should pay? Here’s a closer look at this topic, which will cover:

•   What are estimated tax payments?

•   Who needs to make estimated tax payments?

•   What are the pros and cons of estimated tax payments?

•   How do you know how much you owe in estimated taxes?

What Are Estimated Tax Payments?

Estimated tax payments are payments you make to the IRS on income that is not subject to federal withholding. Ordinarily, your employer withholds taxes from your paychecks. Under this system, you pay taxes as you go, and you might get money back (or owe) when you file your tax return, based on how much you paid throughout the year.

So what is an estimated tax payment designed to do? Estimated tax payments are meant to help you keep pace with what you owe so that you don’t end up with a huge tax bill when you file your return. They’re essentially an estimate of how much you might pay in taxes if you were subject to regular withholding, say, by an employer.

Estimated tax payments can apply to different types of income, including:

•   Self-employment income

•   Income from freelancing or gig work (aka a side hustle)

•   Interest and dividends

•   Rental income

•   Unemployment compensation

•   Alimony

•   Capital gains

•   Prizes and awards

If you receive any of those types of income during the year, it’s important to know when you might be on the hook for estimated taxes. That way, you can avoid being caught off-guard during tax season.

💡 Quick Tip: Tired of paying pointless bank fees? When you open a bank account online you often avoid excess charges.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 3.80% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


How Do Estimated Tax Payments Work?

Estimated tax payments allow the IRS to collect income tax, as well as self-employment taxes from individuals who are required to make these payments. When you pay estimated taxes, you’re making an educated guess about how much money you’ll owe in taxes for the year.

The IRS keeps track of estimated tax payments as you make them. You’ll also report those payments on your income tax return when you file. The amount you paid in is then used to determine whether you need to pay any additional tax owed, based on your filing status and income, and the deductions or credits you might be eligible for.

Failing to pay estimated taxes on time can trigger tax penalties. You might also pay a penalty for underpaying if the IRS determines that you should have paid a different amount.

Who Needs to Pay Estimated Tax Payments?

Now that you know what an estimated tax payment is, take a closer look at who needs to make them. The IRS establishes some rules about who is liable for estimated tax payments. Generally, you’ll need to pay estimated taxes if:

•   You expect to owe $1,000 or more in taxes when you file your income tax return, after subtracting any withholding you’ve already paid and any refundable credits you’re eligible for.

•   You expect your withholding and refundable credits to be less than the smaller of either 90% of the tax to be shown on your current year tax return or 100% of the tax shown on your prior year return.

•   The tax threshold drops to $500 for corporations.

Examples of individuals and business entities that may be subject to estimated tax payments include:

•   Freelancers

•   Sole proprietors

•   Business partners

•   S-corporations

•   Investors

•   Property owners who collect rental income

•   Ex-spouses who receive alimony payments

•   Contest or sweepstakes winners

Now, who doesn’t have to make estimated tax payments? You may be able to avoid estimated tax payments if your employer is withholding taxes from your pay regularly and you don’t have significant other forms of income (such as a side hustle). The amount the employer withholds is determined by the elections you make on your Form W-4, which you should have filled out when you were hired.

You can also avoid estimated taxes for the current tax year if all three are true:

•   You had no tax liability for the previous tax year

•   You were a U.S. citizen or resident alien for the entire year

•   Your prior tax year spanned a 12-month period

Pros and Cons of Estimated Taxes

Paying taxes can be challenging, and some people may dread preparing for tax season each year. Like anything else, there are some advantages and disadvantages associated with estimated tax payments.

Here are the pros:

•   Making estimated tax payments allows you to spread your tax liability out over the year, versus trying to pay it all at once when you file.

•   Overpaying estimated taxes could result in a larger refund when you file your return, which could be put to good use (such as paying down debt).

•   Estimated tax payments can help you create a realistic budget if you’re setting aside money for taxes on a regular basis.

And now, the cons:

•   Underpaying estimated taxes could result in penalties when you file.

•   Calculating estimated tax payments and scheduling those payments can be time-consuming.

•   Miscalculating estimated tax payments could result in owing more money to the IRS.

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

Figuring Out How Much Estimated Taxes You Owe

There are a few things you’ll need to know to calculate how much to pay for estimated taxes. Specifically, you’ll need to know your:

•   Expected adjusted gross income (AGI)

•   Taxable income

•   Taxes

•   Deductions

•   Credits

You can use IRS Form 1040 ES to figure your estimated tax. There are also online tax calculators that can do the math for you.

•   If you’re calculating estimated tax payments for the first time, it may be helpful to use your prior year’s tax return as a guide. That can give you an idea of what you typically pay in taxes, based on your income, assuming it’s the same year to year.

•   When calculating estimated tax payments, it’s always better to pay more than less. If you overpay, the IRS can give the difference back to you as a tax refund when you file your return.

•   If you underpay, on the other hand, you might end up having to fork over more money in taxes and penalties.

Paying Your Estimated Taxes

As mentioned, you’ll need to make estimated tax payments four times each year. The due dates are quarterly but they’re not spaced apart in equal increments.

Here’s how the estimated tax payment calendar works for 2025:

Payment Due Date
First Payment April 15, 2025
Second Payment June 15, 2025
Third Payment September 15, 2025
Fourth Payment January 15, 2026

Here’s how to pay:

•   You’ll make estimated tax payments directly to the IRS. You can do that online through your IRS account, through the IRS2Go app, or using IRS Direct Pay.

•   You can use a credit card, debit card, or bank account to pay. Note that you might be charged a processing fee to make payments with a credit or debit card.

•   Certain IRS retail locations can also accept cash payments in person.

Keep in mind that if you live in a state that collects income tax, you’ll also need to make estimated tax payments to your state tax agency. State (and any local) quarterly estimated taxes follow the same calendar as federal tax payments. You can check with your state tax agency to determine if estimated tax is required and how to make those payments.

The Takeaway

If you freelance, run a business, or earn interest, dividends, or rental income from investments, you might have to make estimated tax payments. Doing so will help you avoid owing a large payment on Tax Day and possibly incurring penalties. The good news is that once you get into the habit of calculating those payments, tax planning becomes less stressful.

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FAQ

What happens if I don’t pay estimated taxes?

Failing to pay estimated taxes when you owe them can result in tax penalties. Interest can also accrue on the amount that was due. You can’t eliminate those penalties or interest by overpaying at the next quarterly due date or making one large payment to the IRS at the end of the year. You can appeal the penalty, but you’ll still be responsible for paying any estimated tax due.

What if you haven’t paid enough in estimated tax payments?

Underpaying estimated taxes can result in a tax penalty. The IRS calculates the penalty based on the amount of the underpayment, the period when the underpayment was due and not paid, and the applicable interest rate. You’d have to pay the penalty, along with any additional tax owed, when you file your annual income tax return.

How often do you pay estimated taxes?

The IRS collects estimated taxes quarterly, with the first payment for the current tax year due in April. The remaining payments are due in June, September, and the following January. You could, however, choose to make payments in smaller increments throughout the year as long as you do so by the quarterly deadline.


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