You don’t have to pay capital gains tax on investment profits while they are held in a traditional or a Roth IRA account. In most cases, the question of taxes comes into play when you withdraw money from a traditional or Roth IRA.
Each type of IRA is subject to a different set of tax rules, and it’s essential to know how these accounts work, as the tax implications are significant now as well as in the future.
IRAs, Explained
An Individual Retirement Account (IRA) is a tax-advantaged account typically used for retirement savings. There are two main types of IRAs — traditional IRAs and Roth IRAs — and the tax advantages of each are quite distinct.
Generally speaking, all IRAs are subject to contribution limits and withdrawal rules, but Roth IRAs have strict income caps as well as other restrictions.
It’s important to know that you can only contribute earned income to an IRA; earned income refers to taxable income like wages, tips, commissions. If you earn less than the contribution limit, you can only deposit up to the amount of money you made that year.
One exception is in the case of a spousal IRA, where the working spouse can contribute to an IRA on behalf of a spouse who doesn’t have earned income. Like ordinary IRAs, spousal IRAs can be traditional or Roth in style.
Traditional IRAs
All IRAs are tax advantaged in some way. When you invest in a traditional IRA, you may be able to take a tax deduction for the amount you contribute in the tax year that you make the contribution.
The contributions you make may be fully or partially tax-deductible, depending on whether you or your spouse are covered by a workplace retirement plan. If you’re not sure, you may want to check IRS.gov for details.
The money inside the account grows tax-deferred, meaning any capital appreciation of those funds is not subject to investment taxes, i.e. capital gains tax, while held in the account over time. But starting at age 59 ½ , qualified withdrawals are taxed at regular income tax rates.
If you think about it, this makes sense because you make contributions to a traditional IRA on a pre-tax basis. When you take withdrawals, you then owe income tax on the contributions and any earnings.
With some exceptions, early withdrawals from a traditional IRA prior to age 59 ½ are subject to income tax and a 10% penalty.
Roth IRAs follow a different set of rules. You contribute to a Roth IRA with after-tax money. That means you won’t get a tax deduction for contributions you make in the year that you contribute.
Your contributions grow inside your Roth IRA tax-free, along with any earnings. When you reach retirement age and start to make withdrawals, you won’t owe income tax on money you withdraw because you already paid tax on the principal (i.e. your original contribution amounts) — and the earnings are not taxed on qualified withdrawals.
Get a 1% IRA match on rollovers and contributions.
Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1
1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.
What Are Capital Gains Taxes?
Capital gains refer to investment profits. In a taxable investment account you would owe capital gains tax on the profits you made from selling investments: e.g., stocks, bonds, real estate, and so on.
You don’t owe capital gains tax just for owning these assets — it only applies if you profit from selling them. Depending on how long you held an investment before you sold it, you would owe short- or long-term capital gains.
Retirement accounts, however, are subject to their own set of tax rules, and traditional and Roth IRAs each handle capital gains taxes differently.
Are Gains Taxed in Traditional IRAs?
Traditional IRA plans, as noted above, are tax-deferred, which essentially means that investment profits are not subject to capital gains tax while they remain in the account. Given this, the sale of individual investments like stocks inside an IRA is not considered a taxable event.
However, with tax-deferred accounts like traditional IRAs, you do have to pay ordinary income tax on withdrawals (meaning, you’re taxed at your marginal income rate).
So when you take withdrawals from a traditional IRA, you will owe income tax on the amount you withdraw, including any investment gains (i.e., earnings) in the account.
Are Gains Taxed in Roth IRAs?
The same principle applies to Roth IRAs, even though these are after-tax accounts: You don’t have to pay taxes on investment income or any assets that you buy or sell inside your Roth IRA.
Because you contribute to a Roth IRA with after-tax money, your money grows tax-free inside your IRA. Also, the earnings in the account grow tax-free over time and those gains are not taxed within the account.
In addition, qualified withdrawals of contributions and earnings from a Roth IRA are tax free. But remember: early or non-qualified withdrawal of earnings from a Roth IRA would be subject to taxes and a penalty (with some exceptions; for details see IRS.gov).
Roth IRA Penalties
Because you contribute to a Roth IRA with after-tax money, you can always withdraw your contributions (meaning your principal) without paying any tax or penalties.
If you wait to withdraw money from your Roth IRA until you reach age 59 ½, you can also withdraw your earnings without tax or penalties — as long as you’ve had the account for at least five years.
If you withdraw Roth IRA earnings before age 59 ½ or before you’ve held the account for five years, you may be charged a 10% early withdrawal penalty, though there are IRA withdrawal rules that may help you avoid the penalty in certain situations.
Are Gains Taxed in 401(k)s?
An IRA and a 401(k) work in a similar way when it comes to capital gains tax. Just as there are traditional and Roth IRAs, there are also traditional and “designated” Roth 401(k) plans, and they work similarly to their corresponding IRA equivalents.
So, generally speaking, you do not owe any capital gains tax on the sale of any investments held inside either type of 401(k) account.
Opening an IRA With SoFi
Most people are familiar with the basic tax advantages of using an IRA to save for retirement. Traditional IRAs are tax-deferred accounts and may provide a tax deduction in the years you make contributions. Roth IRAs are after-tax accounts that can provide tax-free income in retirement.
But the fact that you don’t have to pay capital gains tax is also worth noting. With both a traditional IRA and a Roth IRA, buying and selling stocks or other investments is not considered a taxable event. That means that you will not owe capital gains tax when you sell investments inside your IRA.
Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
Help grow your nest egg with a SoFi IRA.
FAQ
Are Roth IRAs subject to capital gains tax?
No, buying and selling stocks or other investments inside a Roth IRA is not considered a taxable event. This means that you will not owe capital gains tax for buying or selling investments inside your Roth IRA. And because contributions to Roth IRAs are made with after-tax money, you also won’t owe income tax on qualified withdrawals.
Do you have to pay taxes if you sell stocks in a Roth IRA?
Selling stocks inside a Roth IRA is not considered a taxable event. So whether you regularly buy and sell stocks inside your Roth IRA, or just have unrealized gains and losses, you won’t need to worry about capital gains tax.
What happens when you sell a stock in your Roth IRA?
Buying and selling stocks inside an IRA is not considered a taxable event. So you won’t owe capital gains tax on stock you sell, but you also won’t be able to offset gains with a loss you capture from a stock sale inside your IRA.
Photo credit: iStock/designer491
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
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.
Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. 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.
Managing money in college isn’t easy, but building strong financial habits now can make a huge difference in the long run. With the cost of tuition, textbooks, and daily expenses, it’s important to make smart financial decisions to avoid unnecessary debt and stress. Whether you’re living on campus or commuting, these 11 tips will help you stay in control of your finances, save money, and build a secure financial future.
Key Points
• Create a budget to track income and expenses.
• Open both a savings account and a checking account for better money management.
• Automate bill payments and savings transfers.
• Build an emergency fund for unexpected costs.
• To save money, buy used text books and take advantage of student discounts.
1. Create a College Budget
One of the most important financial habits you can develop in college is budgeting. A basic budget helps you track your income and expenses so you don’t overspend. To get started, simply list out how much you have to spend for the semester, including all sources of income, such as financial aid, income from a part-time job, and any parental support. Then subtract all your essential expenses, such as tuition, books, food, and housing. What’s leſt over can be used for nonessential (aka “fun”) spending and savings.
To make sure you don’t overspend on discretionary purchases, consider putting a budgeting app on your phone. These tools track your spending in real time and can help ensure you don’t run out of funds before you get to finals.
2. Open a Checking and a Savings Account
Even if you don’t have a lot of extra cash, it’s worth having a savings account along with a checking account. This allows you to separate everyday spending from money you want to save for a future expense, say a trip to Cabo for spring break.
When shopping for a bank or credit union, you’ll want to look for one that offers no-fee student accounts and a high-interest savings option to maximize your earnings. In addition to local institutions, you might also expand your search to online banks. While these banks don’t operate branches, they typically partner with large ATM networks, making it easy to access your funds at school as well as when you travel home without getting hit with a fee. Some offer student accounts and potentially better deals than traditional banks.
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.
3. Automate Bill Payments and Transfers
If you’re new to paying bills, it’s easy to forget about due dates, especially if you are focused on doing class assignments or studying for an upcoming exam. But missing a billing deadline means you could rack up late fees (and potentially damage your credit). A simple solution is to set up automatic payments for recurring expenses like rent, utilities, and student loans. To avoid overdrafts, be sure you have enough in your checking account to cover the bills when they come due.
Now that you have a savings account (see tip #2), also consider setting up an automatic transfer from checking to savings for a set amount on the same day each month. It’s fine to start small — even siphoning $25 into savings each month can add up over time. Many banks also offer features that round up your purchases and deposit the spare change into your savings account, which is another way to save without even thinking about it.
4. Build an Emergency Fund
Unexpected expenses, such as a trip to urgent care or a car repair, can quickly derail your college finances. Having an emergency fund can help you cover these costs without relying on credit cards. You might aim to save at least $500 initially, then gradually increase it over time. Even setting aside a small amount each month can make a big difference. Consider keeping your emergency fund in a high-yield savings account so it grows over time while remaining easily accessible.
5. Take Advantage of Student Discounts
Being a college student comes with some financial perks, including discounts on a wide range of goods and services. Many major companies offer student deals on transportation, entertainment, digital music subscriptions, laptops, car insurance, and more. Websites like UNiDAYS and Student Beans also provide access to exclusive deals. All you typically need to qualify for the student rate is a .edu email account.
Shops and eateries located on and around campus also tend to offer student discounts. It’s a good idea to keep your student ID handy and always about any potential discounts before you make a purchase. Using student deals can significantly reduce your expenses and help stretch your college budget further.
6. Start Building Your Credit
Having good credit can help open doors after you graduate. Your scores can come into play when applying for loans, renting an apartment, or even getting a job. Fortunately, there are a number of ways to start building your credit while you’re still a student. Here are some to consider:
• Apply for a student credit card and use it responsibly. That means keeping your credit balance low and paying it off in full (and on time) each month
• If you’re new to credit, consider becoming an authorized user on a parent’s credit card or getting a secured credit card.
• If you have student loans, you might start making small payments of $25 to $50 per month while you’re still in school to pay down interest and have some positive repayment history on record.
7. Get a Part-Time Job
Getting a part-time job while you’re in school can help cover your expenses and/or build your savings. It can also give you valuable work experience that could give you a leg up when searching for employment after graduation. Many universities offer work-study programs or on-campus jobs that fit around your class schedule. If you prefer more flexibility, you might look into freelancing, tutoring, or gig economy jobs like rideshare driving or food delivery. You might also check online platforms for remote job opportunities, such as being a virtual assistant or helping a business manage their social media accounts.
Scholarships are not a one-time thing you can only apply for when you’re in high school, before you start college. Hundreds of companies and organizations offer scholarships for both new and returning students that may be awarded based on merit or financial need. In fact, dedicating some time to finding and applying for scholarships each year could net some significant cash. Some helpful resources:
If you find scholarships you are eligible for, be sure you apply for them by the deadline.
9. Save on Textbooks
Textbooks can take a major bite out of your college budget, but buying used or renting can save you hundreds of dollars each semester. There are numerous websites with low prices on used textbooks (such as Chegg, AbeBooks, and Amazon); many also offer 30- to 180-day rentals. Also look into purchasing the e-book version of a textbook, which typically costs a lot less than the hard copy. If you have friends who are taking the same class the next semester (or vice versa), consider splitting the cost of the required textbooks with them.
A lot of employers provide 401(k) plans or other savings options, even while you’re still in college. If your employer offers a matching contribution, it’s wise to take advantage of this opportunity — it’s essentially free money. Enrolling in the plan can also help you learn about different types of investments, such as stocks, bonds, and mutual funds. If your employer doesn’t offer a plan, you might consider investing independently through a brokerage account, Traditional IRA, or Roth IRA. Each of these options has its own benefits and drawbacks, and understanding them early on can set you up for long-term financial success.
11. Take a Personal Finance Course
Your degree program may not be in finance or even math, but that doesn’t mean you can’t take a personal finance course as an elective. Ask your college advisor if there are any courses in personal finance available through the school to help you learn the basics of budgeting, borrowing, and investing.
If your school doesn’t offer classes in personal finance basics, you can teach yourself online. Some websites (like this one!) are designed to help improve your financial literacy with helpful articles and videos. You can also find personal finance courses that you can take online; consider taking one in between semesters or over the summer.
The Takeaway
College is a time of learning and growth, and developing smart money habits now can set you up for a secure future. By budgeting, saving, building credit, and seeking out cost-saving opportunities, you can manage your finances responsibly and minimize debt while you’re a student. This can help you save money and establish a strong financial foundation for life after college.
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.
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.
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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
With nearly 40 million residents, California is the most populated state in the U.S. It also boasts a robust economy and a gross domestic product (GDP) that is actually larger than many countries, including France and the United Kingdom. Whether you’re just starting out or looking for a change, California offers a wealth of job opportunities, along with average wages that often run higher than the national numbers. Read on to learn which jobs sit highest on the salary ladder in the Golden State.
Key Points
• California offers some of the highest salaries in the nation.
• Health care professionals top the list of highest earners in the state.
• Anesthesiologists lead with an average salary of $452,930.
• Surgeons and cardiologists have average salaries exceeding $340,000.
• Other professions that make the top 20 include airline pilots, CEOs, IT managers, and lawyers.
Top-Paying Jobs in California
While California offers job opportunities in a wide variety of sectors, health care jobs offer the highest mean (or average) salaries in the state, according to recent data from the U.S. Bureau of Labor Statistics’ State Occupational Employment and Wage Estimates report. Jobs in the airline, business, tech, and legal fields also rank high on the list. If a good salary is important to you, check out this list of the 20 highest-paying jobs in California.
💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.
1. Anesthesiologist
Average salary in California: $452,930
National average salary: $339,470
Educational requirements: To become an anesthesiologist, you need a four-year bachelor’s degree, followed by four years of medical school and a four-year residency program.
Anesthesiologists specialize in administering anesthesia to manage pain and ensure patient safety during surgeries. Their duties include selecting and administering medications, monitoring vital signs of the patient during procedures, and adjusting anesthetics as needed. They also collaborate with other physicians and surgeons and communicate with patients about pain management plans.
2. Cardiologist
Average salary in California: $389,120
National average salary: $423,250
Educational requirements: To become a cardiologist, you need a four-year bachelor’s degree, followed by four years of medical school, a three-year residency, and a three-year fellowship. To specialize further, you may need to complete a one-year advanced practice fellowship.
Cardiologists specialize in treating conditions affecting the heart and blood vessels, such heart disease, arrhythmias, and high blood pressure. To make a diagnosis, they may give physical exams and order tests such as an electrocardiogram (EKG). They also prescribe medicines, advise on diet and lifestyle changes, and can perform nonsurgical procedures (such as implanting a pacemaker or inserting a cardiac catheter).
Educational requirements: To become an orthopedic surgeon, you need a four-year bachelor’s degree, followed by four years of medical school and typically a five-year residency. To specialize in a particular area (such as pediatric orthopedics), you also need to complete a one- to two-year fellowship.
Orthopedic surgeons specialize in diagnosing and treating conditions that affect the musculoskeletal system, which includes joints, bones, ligaments, muscles, and tendons. They treat injuries like fractures and dislocations, manage chronic conditions like arthritis, and perform surgeries such as joint replacements. They also recommend nonsurgical treatments like physical therapy to restore mobility and function.
4. Surgeon
Average salary in California: $340,260
National average salary: $343,990
Educational requirements: To become a surgeon, you need a four-year bachelor’s degree, followed by four years of medical school and a three- to eight-year surgery residency. Surgeons may also opt to complete a one- to three-year fellowship.
Surgeons perform operations on patients with injuries or illnesses. Their duties include reviewing X-rays, discussing procedures with patients, preparing for surgery, and completing surgeries with the help of other medical and surgical professionals. They also monitor and follow-up with patients after the surgery.
5. Ophthalmologist
Average salary in California: $324,270
National average salary: $312,120
Educational requirements: To become an ophthalmologist, you need a four-year bachelor’s degree, followed by four years of medical school and three to eight years of post-graduate training, including an internship and residency in ophthalmology.
Ophthalmologists diagnose and treat conditions that affect the eyes and vision. They perform routine eye exams, prescribe eyeglasses and contact lenses, and prescribe medications to treat eye conditions. They also perform surgeries to correct vision and treat eye conditions such as cataracts and glaucoma.
Educational requirements: To become a dermatologist, you need a four-year bachelor’s degree, followed by four years of medical school and a four-year residency. To specialize in a particular area (such as dermatopathology or pediatric dermatology), you also need to complete a one- to three-year fellowship.
Dermatologists are doctors who specialize in diagnosing and treating skin, hair, and nail conditions. They manage issues like acne, eczema, psoriasis, and skin cancer. They perform skin screenings, prescribe medications, and perform minor surgical procedures on the skin, such as biopsies and mole removal. They may also assist patients with cosmetic issues and concerns.
7. Psychiatrist
Average salary in California: $288,270
National average salary: $256,930
Educational Requirements: To become a psychiatrist, you need a four-year bachelor’s degree, followed by four years of medical school and a four-year residency. To pursue a subspecialty (such as addictions or geriatric psychiatry), you must also complete a one-year fellowship.
Psychiatrists are medical doctors that specialize in diagnosing and treating mental health disorders. They work closely with patients to address a wide range of mental health issues, from anxiety to severe psychiatric conditions. Treatments they offer may include medication, therapy, and behavioral interventions. They also monitor their patients over time, making adjustments to treatment as necessary.
8. Airline Pilot
Average salary in California: $286,040
National average salary: $250,050
Educational Requirements: To become an airline pilot, you typically need a minimum of 1,500 hours of recorded flight time. This includes at least 100 night hours, 500 cross-country hours, and 50 multi-engine hours. You may also have to pass a medical exam to prove they have the strength and stamina demanded by the job. All pilots must also have a Federal Aviation Administration (FAA) license.
An airline pilot flies a commercial aircraft that carries passengers and cargo from one location to another. In addition to operating planes safely, airline pilots have a range of other responsibilities. These include developing flight plans, conducting pre- and post-flight checks, monitoring equipment, communicating with air traffic control, coordinating with flight attendants, and filing status reports after each trip.
9. Obstetrician and Gynecologist (OB-GYN)
Average salary in California: $285,470
National average salary: $278,660
Educational Requirements: To become an OB-GYN, you need a four-year bachelor’s degree, followed by four years of medical school and a four-year residency.
OB-GYNs, also known as obstetrician gynecologists, specialize in female reproductive health. They provide a range of services, including obstetrics (care during pregnancy, childbirth, and postpartum) and gynecology (care for a woman’s reproductive organs and health). They play a key role in promoting women’s health across all life stages.
10. Chief Executive Officer (CEO)
Average salary in California: $281,030
National average salary: $258,900
Educational requirements: To become a CEO, you typically need a four-year bachelor degree. Many aspiring CEOs also pursue a master’s degree in business administration or their desired field, which typically takes two years to complete.
A chief executive officer, or CEO, is the top-ranking executive within an organization and is responsible for leading the company. Their duties include setting strategic goals, overseeing operations, communicating between board members and other company executives, and making key decisions that impact the company’s financial health and success.
💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.
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.
11. Internal Medicine Physician
Average salary in California: $275,110
National average salary: $245,450
Educational requirements: To become an internist, you need a four-year bachelor’s degree, followed by four years of medical school and a three- to four-year residency. To pursue a subspecialty (such as gastroenterology or infectious diseases), you also need to complete a two- to three-year fellowship.
Internists, also known as internal medicine physicians, specialize in providing general medical care for adult patients. Their duties include conducting physical exams, ordering bloodwork and other tests, analyzing data to make diagnoses, and prescribing medications and treatments. Internists also counsel patients about lifestyle changes that can lead to better health.
12. Pathologist
Average salary in California: $264,450
National average salary: $270,560
Educational requirements: To become a pathologist, you need a four-year bachelor’s degree, followed by four years of medical school and a three- to four-year residency. Many pathologists also pursue an additional one- to two-year fellowship in a pathology subspecialty.
Pathologists are doctors who specialize in examining tissue to diagnose diseases and determine how illnesses and injuries occurred. Their duties include collecting specimens, studying samples in the lab, and identifying the particular bacteria or virus that resulted in a patient’s symptoms. They also write reports and communicate their findings to the patient’s physician.
13. Radiologist
Average salary in California: $261,020
National average salary: $353,960
Educational requirements: To become a radiologist, you need a four-year bachelor’s degree, followed by four years of medical school and a four- to five-year residency. To pursue a subspecialty (such as musculoskeletal radiology or neuroradiology), you also need to complete a one- to two-year fellowship.
Radiologists are doctors who read and interpret images from diagnostic imaging procedures, such as X-rays, CT scans, MRIs, and ultrasounds. They use imaging results to diagnose disorders and injuries, and to help determine the best treatment. They communicate their findings to physicians and sometimes to patients and families. Some radiologists also treat conditions with radiation and perform image-guided procedures such as biopsies.
Educational requirements: To become a family medicine physician, you need a four-year bachelor’s degree, followed by four years of medical school and a three-year residency.
Family medicine physicians are generalists who provide comprehensive health care for people of all ages. Also known as primary care doctors, they provide or prescribe treatment, medications, and vaccinations; order and interpret tests; educate patients; and refer patients to specialists when needed for further diagnosis or treatment.
15. Nurse Anesthetist
Average salary in California: $250,920
National average salary: $214,200
Educational requirements: To become a nurse anesthetist, you need a four-year bachelor’s degree, followed by a master’s degree from a nurse anesthesia education program. The program must be accredited by the Council on Accreditation of Nurse Anesthesia Educational Programs (COA) and can take 24 to 51 months to complete.
Nurse anesthetists are registered nurses who specialize in anesthesia and provide care for patients before, during, and after surgical and other procedures. Their duties include preparing patients for anesthesia, administering anesthesia, maintaining anesthesia during surgery, and managing recovery. Nurse anesthetists may work alone or with a team of health care providers.
Educational requirements: To become a physician, you need a four-year bachelor’s degree, followed by four years of medical school and a three- to eight-year residency. Subspecialization requires additional training in a fellowship of one to three years.
Physicians are medical professionals who diagnose and treat injuries and illnesses and help patients maintain their health. They examine patients; take medical histories; prescribe medications; and order, perform, and interpret diagnostic tests. Some also perform surgery, close wounds, and administer other medical procedures. Many also advise patients on diet, lifestyle, and preventive health care.
17. Dentist
Average salary in California: $249,610
National average salary: $244,470
Educational requirements: To become a dentist, you need a four-year bachelor’s degree, followed by four years of dental school to get a Doctorate of Dental Surgery (DDS) or a Doctorate of Dental Medicine (DMD). For some specialties, dentists must receive additional training through a two- to three-year residency program.
Dentists are health care providers who specialize in oral health. They diagnose, treat, and prevent issues related to teeth, gums, and mouth, such as cavities and gum disease. They perform procedures like fillings, extractions, root canals, and may provide cosmetic services like whitening or veneers. They also educate patients on proper oral hygiene to maintain good oral health.
18. Oral and Maxillofacial Surgeon
Average salary in California: $221,820
National average salary: $334,310
Educational requirements: To become an oral and maxillofacial surgeon, you need a four-year bachelor’s degree, followed by four years of dental school and a four-year residency program.
An oral and maxillofacial surgeon is a medical doctor who diagnoses and treats conditions and injuries of the face, mouth, jaw, neck, and head. They use dental, medical, and surgical skills to perform a variety of specialized procedures, including dental implants, facial trauma repair, cosmetic facial enhancements, and cleft lip and palate surgery.
Educational Requirements: To become a computer and information systems manager, you need a four-year bachelor’s degree in a field such as computer science, information systems management or information. You typically also need a master’s degree, which generally takes two years.
A computer and information systems manager, also called an information technology manager (IT manager), oversees an organization’s technology needs. Their role is to make sure the company’s tech systems are secure, efficient, and aligned with business goals. They lead IT teams, manage budgets, evaluate emerging technologies, troubleshoot system issues, and ensure data security.
20. Lawyer
Average salary in California: $213,860
National average salary: $176,470
Educational requirements: To become a lawyer, you need to get a four-year bachelor’s degree followed by three years of law school.
Lawyers provide legal advice and represent clients in legal matters. They interpret laws, draft legal documents, negotiate settlements, and provide guidance on various issues like contracts, disputes, or criminal charges. Some lawyers offer a broad range of legal services, while others specialize in specific areas, such as criminal law, corporate law, or family law.
The Takeaway
California is home to some of the most lucrative career opportunities in the nation, offering competitive salaries across industries like health care, technology, business, and air transportation. While these roles often demand extensive education and training, the rewards can be well worth the investment. Whether you’re drawn to the state for its economic prospects or its vibrant lifestyle, exploring high-paying careers in California can open doors to a fulfilling and financially secure future.
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’s the highest paying job in California?
In California, health care roles consistently rank among the highest-paying jobs. Anesthesiologists, cardiologists, and surgeons are at the top, with anesthesiologists earning an average salary of $452,930. These roles require extensive education and specialized training, reflecting the significant responsibilities and expertise required.
What is a good salary in California?
A “good” salary in California varies depending on location and lifestyle. Given the state’s high cost of living, particularly in metropolitan areas, a salary above the national average is often necessary. Research suggests that, on average, you need to earn just over $143,000 a year to be happy in California.
What are some of the fastest-growing jobs in California?
California is seeing rapid growth in several sectors, especially health care and technology. Jobs like nurse practitioners, physical therapists, medical and health services managers, solar photovoltaic installers, and data scientists are among the fastest-growing jobs in the Golden State.
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/.
A financial or money vision board can serve as a regular visual reminder of what you’re hoping to achieve. Creating a money vision board can help you stay motivated if you have some big (or small) financial milestones you’re working toward. That might mean culling images and quotes about owning your first home to inspire you, or it could be pictures of the trip to Hawaii you’re saving for.
Visualization can help you develop the mindset and focus you need to crush your money goals. Here’s advice on how to create a financial vision board.
Key Points
• To create a money vision board, start by defining specific financial goals such as debt repayment, home savings, or retirement planning.
• Choose between a digital or physical board, using appropriate platforms or materials.
• Select images and words that align with your financial aspirations and organize them inspirationally.
• Regularly review and update the board to reflect achieved goals or financial changes.
• Place the money vision board in a visible location to stay motivated and focused on financial goals.
Understanding Money Vision Boards and Their Purpose
A vision board is a collection of images, quotes, phrases, and words that reflect what you want your ideal life to look like. A money or financial vision board (sometimes called a wealth vision board) is specifically related to what you’d like to achieve financially.
In theory, visualization is meant to help you harness the mental power to reach savings goals. The idea is that if you can visualize yourself doing something in your head, that can help you to do it in real life.1
Using a vision board for money goals could help you overcome mental roadblocks that may have prevented you from achieving them. For example, say you’ve always struggled to save money. You might use a savings vision board to picture what your life would look like when you’re in the habit of setting aside money regularly.
Steps to Create Your Financial Vision Board
Creating a money vision board is a fairly simple process. You first decide what goals to include in your board and then find images that reflect the lifestyle you’re working toward.
Defining Your Financial Goals
The first step in this process is creating your vision board financial goals. When it comes to setting financial goals, the more detailed you can be, the better.
Ask yourself what you want to achieve with your money. If nothing is coming to you, here are some money vision board ideas to get your creativity flowing.
• Establish a savings account to serve as an emergency fund and contribute to it regularly
• Start an online business so I can quit my job
• Max out my 401(k) every year
• Retire at age 50 and travel full-time
The beauty of a financial vision board is that you can shape it around whatever goals speak to you the most. Your vision board can include small and big goals (say, buying a new phone or buying a house) or long and short-term financial goals. It’s entirely up to you to decide what your ideal financial future looks like.
Once you have some ideas for your financial vision board, it’s time to start curating your images. How you complete this step will depend on whether you’re creating a physical or digital vision board.
If you’re creating a digital money vision board, then you might draw your images from:
• Pinterest
• Instagram and other social media platforms
• Digital magazines
• Free stock photography websites
• Search engines
Choose a spot to organize your image files in one place. You may download them to a specific folder on your computer or phone, or upload them to an online vision board platform.
If you prefer a physical vision board, you’ll need something to attach your images to. That could be a piece of cardstock, poster board, cardboard; anything that’s firm enough and large enough to hold your collage will do. You’ll also need scissors and glue.
Where can you look for images? Magazines are an excellent resource but you may also thumb through books or use personal photos you’ve taken. You could also print out images you find online.
What should you be looking for? Consider using these tips to decide which images to collect.
• Pick anything that speaks to you, even if you’re unsure whether the image will make it to your final collage.
• Be open to different image sizes, colors, and content. Words and phrases can work well, too.
• Once you’ve collected all your images, look at each one and ask yourself how it connects to your goals.
• Choose the images that resonate most with your overall vision.
Now, how should you arrange your images and words? It’s entirely up to you. You might group images according to whether they relate to a short-, mid-, or long-term goal. Or you might group them by color to create a harmonious aesthetic. Whatever appeals you and makes your financial goals visible will do.
If you need some financial vision board examples, a simple online search can turn up plenty of results that you can use as inspiration.
Earn up to 3.80% APY with a high-yield savings account from SoFi.
No account or monthly fees. No minimum balance.
9x the national average savings account rate.
Up to $2M of additional FDIC insurance.
Sort savings into Vaults, auto save with Roundups.
Key Elements to Include in Your Money Vision Board
Every vision board is different, but they share some things in common. The basic elements of a money vision board include:
• One or more clearly defined money goals that are personal and meaningful to you
• Images that are relevant to each of your financial goals
• Quotes, phrases, words, or affirmations that reinforce your goals and motivate you to pursue them
• A timeline or deadlines for realizing each goal that you’ve included
Some people like to include a photo of themselves and/or their family at the center of their money vision boards. This is just another way to reinforce the goals that you’ve set and remind yourself of the lifestyle or achievement that you’re dreaming of.
Is a digital or physical wealth vision board better? It’s a matter of preference.
• A digital board is portable and you can access it on the go. It’s also relatively easy to edit since you can add and remove images as you achieve older goals and set new ones.
• Physical vision boards may not be as easy to update but they can be more visible if you’re placing yours in a conspicuous spot. For example, you might hang your vision board above your desk if you have a home office or tack it to the front of the refrigerator.
With a digital vision board, you run the risk of it becoming an out-of-sight, out-of-mind situation if you’re not looking at it regularly. One fix for that could be to download your vision board as an image file and use it as a wallpaper for your devices.
Using Your Vision Board for Financial Motivation
Vision boards are meant to drive you to action and get you started on your goals. Here are some helpful tips for using your vision board to keep your eyes on the financial prize.
• Keep your vision board in a place that’s easily accessible and take time to look at it daily.
• Consider choosing one image each day to meditate on.
• Develop a mantra that you can associate with your vision board and goals and incorporate it into your meditation routine.
These types of activities keep the images you’ve chosen front and center in your mind.
What if you aren’t hitting your goals as quickly as you’d like? You can use your vision board to re-center and regain focus if you’re feeling unmotivated. And when you do reach a milestone that you’ve included on your vision board, be sure to celebrate it. (Within reason, that is. You don’t want to deplete your checking account.)
Updating and Evolving Your Money Vision Board
A money vision board isn’t meant to be static; it should reflect your goals and motivations as you move through different life stages and seasons. Updating your financial vision board can help you keep sight of your goals, even if what you’re working toward now is different from where you started. Some pointers:
• You may want to review your money vision board each time you achieve one of the goals you’ve included on it. Perhaps you hit the goal amount for the savings account that holds your emergency fund. It could be the right time for a reset.
• Another time to review your financial vision board could be when there’s a major change in your life that could impact your goals. For instance, if you get married, switch jobs, or have a baby, you may want to revisit your money vision board and update it. Or perhaps you received a major refund into your online bank account and are thinking about how to allocate it: That could be a time to rethink your financial vision board to encourage you as you get closer to your goal.
• At a minimum, it’s helpful to sit down with your board at least a couple or a few times a year to see how far you’ve come and gauge whether your goals have changed.
• The beginning of the year is a great time for a check-in if you use January as a jumping-off point for goal planning.
But any time of year can be the right time to review your vision board and make any changes that might be needed. If you feel motivated, it’s probably a sign that it’s time to dive in.
Most of us have goals that money will enable, from buying a home to retiring comfortably. A money or financial vision board is a visual representation of those goals that can help inspire you to actualize your aspirations. Whether you make a digital or physical one, it can help you contemplate and actualize your dreams.
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 often should I update my financial vision board?
It’s helpful to review your vision board at least a couple of times a year, though you may schedule reviews more often if you’re making steady progress toward your goals. Reviewing your money vision board is a chance to make sure your goals still fit where you are now and where you’d like to be. If your goals no longer align or you’ve been able to cross some of them off your list, you can update your vision board to reflect that.
Can I create a money vision board with my partner or family?
You might create a money vision board with your partner or family if you have shared financial goals. For example, you might work with your partner or spouse to create a vision board centering around your joint goal of buying a home. Or you might help your kids create money vision boards of their own if they have goals they’d like to achieve.
Are there apps for creating digital money vision boards?
Digital vision board apps and graphic design platforms are great for creating vision boards online. Canva, for example, offers vision board templates that you can customize. You could also use Photoshop or ProCreate to whip up a visually appealing money mood board.
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.
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.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
The kiddie tax is a tax rule designed to prevent parents from shifting investment income to their children to take advantage of lower tax rates. Introduced in 1986, it ensures that unearned income from a child’s investments, such as dividends and interest, is taxed at a higher rate once it exceeds a certain threshold.
Understanding how the kiddie tax works is important for parents of children under age 24 who may be earning money from their own savings and investments. What follows is a simple breakdown of the kiddie tax rules, including who is subject to kiddie tax and how to keep your child’s unearned income below the kiddie tax threshold.
Key Points
• The kiddie tax prevents parents from shifting investment income to children to take advantage of lower tax rates.
• If a child’s unearned income exceeds the kiddie tax threshold, it’s taxed at the parents’ tax rate rather than the child’s tax rate.
• The kiddie tax threshold is $2,600 for 2024 and $2,700 for 2025.
• Unearned income includes dividends, interest, and capital gains.
• Tax-efficient investment strategies can help minimize the impact of the kiddie tax.
Definition and Purpose of the Kiddie Tax
The kiddie tax applies to unearned income of children under age 24 (with some exceptions). Unearned income refers to any income that is not acquired through work, and includes income received through investing, such as capital gains distributions, dividends, and interest.
Kiddie taxes were introduced in 1986 as part of the Tax Reform Act to prevent parents from transferring wealth to children as a tax loophole.2 Before the kiddie tax, wealthy families could transfer income-producing assets or make large stock gifts to their children, who were in lower tax brackets, thereby reducing their overall tax liability. The kiddie tax rule ensures that high levels of unearned income are taxed at a rate comparable to the parents’ tax rate rather than the child’s lower rate.
Who Is Subject to the Kiddie Tax?
The kiddie tax applies to children aged 18 and younger, as well as full-time students who are aged 19 to 23, whose unearned income is higher than an annually determined threshold. For 2024, the kiddie tax threshold is $2,600; for 2025, the threshold is $2,700.
If a child meets the above criteria, any unearned income that exceeds the annual threshold will be taxed at the parents’ higher marginal tax rate rather than the child’s lower rate.
An exception to this investment tax rule is a child aged 18 or a full-time student aged 19 to 23 with enough earned income (from working) to cover more than half the cost of their support. Those under 24 who file tax returns as married filing jointly or who are not required to file a tax return for the tax year (due to income below the filing threshold) are also exempt.
It’s also important to note that the kiddie tax does not apply to a child’s earned income; their wages, salaries, or tips are taxed at the child’s own tax rate.
The kiddie tax is calculated based on the child’s unearned income. This generally includes interest, dividends, capital gains, taxable scholarships, trust distributions, and income from gifts or inheritances. It also includes any taxable welfare or Veterans Affairs benefits distributed to a child.
Here’s how the kiddie tax rate applies for tax year 2024 (filed in 2025):
• The first $1,300 in unearned income qualifies for the kiddie tax standard deduction and is tax-free.
• The next $1,300 in unearned income is subject to the child’s tax rate.
• Unearned income above $2,600 is taxed at the parents’ marginal tax rate.
The kiddie tax threshold increases for for tax year 2025 (filed in 2026):
• The first $1,350 in unearned income is tax-free.
• The next $1,350 in unearned income is subject to the child’s tax rate.
• Unearned income above $2,700 is taxed at the parents’ marginal tax rate.
Marginal tax rates for parents range from 10% to 37% for the 2024 and 2025 tax years.
Recent Changes to Kiddie Tax Laws
The kiddie tax first emerged as part of the Tax Reform Act of 1986 as a way to ensure that wealthy parents could not significantly reduce tax obligations by shifting large amounts of investment income to their children. The rule stipulated that all unearned income above a certain threshold is taxed at the parent’s marginal income tax rate rather than the child’s tax rate.
In 2017, the Tax Cuts and Jobs Act made an adjustment to the kiddie tax rule effective for tax year 2018: It substituted the tax rates that apply to trusts and estates for the parents’ tax rate. However, this made the kiddie tax significantly more costly to certain families, including Gold Star children that receive survivor benefits.
In response, Congress included a provision in the Setting Every Community Up for Retirement Enhancement Act (SECURE Act), which became law in 2019, to revert the kiddie tax to the old rules, where unearned income is taxed at the parents’ marginal tax rate rather than the trust tax rates. This change was retroactive to the 2018 tax year, allowing affected taxpayers to amend prior-year returns (if desired).
Since then, no major revisions have been proposed or enacted regarding the kiddie tax, though that’s always subject to change.
To reduce potential kiddie tax liability, parents can implement several tax-planning strategies:
• Track your child’s investment income throughout the year: If their earnings or gains get close to the threshold, you may be able to sell losing stocks to trigger a capital loss. This strategy, known as tax-loss harvesting, could help offset the gains and potentially allow your child to avoid a kiddie tax hit.
• Invest in tax-efficient accounts: Consider placing your child’s assets in tax-advantaged accounts like 529 college savings plans or Roth IRAs for kids (if they have earned income), where investment gains grow tax-free.
• Explore municipal bonds: Interest earned from municipal bonds is generally tax-free at the federal level and may also be exempt from state and local taxes.
• Shift investments to growth stocks: For tax-efficient investing, you might choose growth stocks that focus on appreciation rather than paying dividends. This can defer taxable income until your child sells the investment (likely at a lower tax rate).
• Encourage earned income: The kiddie tax does not apply to a child who is age 18 to 23 if their earned income exceeds 50% of their support for the year.
Reporting Kiddie Tax on Your Tax Return
To report and pay the kiddie tax on a child’s unearned income, you can have your child file their own tax return using IRS Form 8615. Or, if your child’s gross income is less than $13,000 in 2024 (less than $13,500 in 2025), you may be able to include your child’s unearned income on your own tax return using IRS Form 8814. This simplifies tax filing but may result in a higher overall tax burden if it increases your adjusted gross income.
It can be a good idea to consult an accountant or tax professional to determine the best approach for your situation.
The Takeaway
The kiddie tax serves as an important safeguard against income shifting by taxing a child’s unearned income at their parents’ tax rate when it exceeds a certain threshold. Understanding the limits that may apply to your child’s unearned income and how the kiddie tax is calculated can help you understand their tax liabilities, as well as tax-efficient strategies that may be employed.
Determining the tax rules and obligations your family may be subject to can be complicated, however, so it can be a good idea to consult with a tax or financial advisor.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).
Take a step toward reaching your financial goals with SoFi Invest.
FAQ
What types of income are subject to the kiddie tax?
The kiddie tax applies to a child’s unearned income, which includes interest, dividends, capital gains, taxable scholarships, trust distributions, and income from gifts or inheritances. It does not apply to earned income from wages, salaries, or self-employment.
If a child’s unearned income exceeds the annual threshold ($2,600 for tax year 2024; $2,700 for tax year 2025), the excess is taxed at the parents’ marginal tax rate. This prevents parents from transferring income-producing assets to children to reduce their tax liability.
Are there any exemptions to the kiddie tax?
Yes, the kiddie tax only applies to a child’s unearned income, which may include income from savings and investments above a certain threshold. Earned income from a part- or full-time job or self-employment is not subject to the kiddie tax. Other exceptions include a child with earned income totaling more than half the cost of their support or who is not required to file a return for the tax year (due to income below the filing thresholds).
At what age does the kiddie tax no longer apply?
The kiddie tax no longer applies once a child turns 19, or 25 if they are full-time students, by the end of the tax year. After that cut-off age, all income — both earned and unearned — is taxed at regular individual rates. This means that investment income will be taxed based on the child’s own tax bracket rather than their parents’ rate.
Photo credit: iStock/Morsa Images
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
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.
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.