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The summer months are one of the most popular times to travel. Families with young children are often locked into summer travel due to school schedules. Even some adults have work schedules that make summer the most convenient time to travel. The upshot: Without proper planning, summer travel can be crowded, chaotic, and expensive.

While there isn’t a magic “best” time to book summer travel, there are a few things that can help ensure smooth sailing.

Things to Keep in Mind When Booking Summer Travel

For many top destinations, summertime is considered the peak season, when availability is at its lowest and prices are at their highest. If your timing is flexible, traveling during “shoulder” season (between peak and off-peak) can be easier.

You’ll also want to consider whether you’re willing to travel during special events or holidays like the 4th of July, Memorial Day, Labor Day, etc. Although it’s tempting to take advantage of a long holiday weekend, that’s what millions of other travelers will also be doing. You’ll find that it’s cheaper and less stressful traveling on a non-holiday weekend. And if you are traveling with pets, make sure your destination is pet-friendly and explore if there are any pet fees for where you are staying.

When to Book Flights for Summer

When to book flights depends on whether you’re looking to book domestic or international flights.

(One way families can afford to travel more is by choosing a closer destination where you can drive instead of fly.)

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Domestic Flights

For domestic summer travel, keep an eye on flights for several months before your planned trip. Many travel booking sites allow you to see historical prices for certain dates and routes. That can help you determine if the current price is higher or lower than average.

Before you book any flights, make sure you understand the change or cancellation policy for your ticket, and whether it’ll cost you to rebook.

International Flights

Booking international flights for summer travel can be tricky. Usually, you’ll want to book an international flight sooner than a similar domestic flight. If you wait until the last minute, you could see the price rise dramatically. Not having booked a flight may also cause problems with your visa, should one be required for the country you’re visiting.

Booking Hotels for Summer: Advance vs Last-Minute

Deciding whether to book your hotel for summer travel in advance or at the last minute depends on your personal preference. If you’re a planner, you may want to lock down your itinerary by booking your hotel early. However, you may be able to save money on hotels by waiting until closer to your travel dates.

You can try to capture the best of both worlds by booking early and then regularly monitoring your reservation. Many hotels allow free cancellations on reservations until only a few days before check-in. So you can reserve in advance, and then if the price goes down, just cancel your booking and book again at the lower price. Using credit card miles or cash back can be another way to save money on your hotel booking.

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How Far in Advance to Book Rental Cars for Summer

If you are renting a car for your summer travel, you can often use the same trick. It is common for many car rental places to offer the ability to book your rental car and pay at the counter. This form of book now pay later travel allows you to lock in a low rate for your rental car and then cancel and rebook if the price goes down afterward.

When to Book a Summer Cruise

Prices for cruises vary drastically based on a number of factors. The time of year, the cruise’s duration, your cabin choice, and how soon the cruise departs can all play a role in determining how much you’ll pay.

Prices for cruises may be low several months before departure and gradually rise, but it’s also common for cruise lines to offer “last-minute” specials to fill rooms that might otherwise go empty. If your life situation is such that you can decide to cruise at the drop of a hat, you may be able to pick up a cheap summer cruise.

Best Time to Book Tours, Sites, and Activities for Summer

It can be hard to book various activities for your trips until you have firm flights and hotels booked. But once you know for sure where you’ll be and when, you can start booking tours, events, and activities. It’s generally a good idea to book these sooner rather than later, since preferred dates and times can fill up fast. Keep your travel fund stocked, so you have enough money in your budget to do everything on your bucket list.

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The Takeaway

The summer months are some of the most popular times for travel, due to work and school schedules. But traveling to places everyone else wants to go when everyone else wants to go there will often lead to high prices and less availability. Being as flexible as you can with both your destination and travel dates can help.

Another good summer travel tip is to book cancellable reservations. Then you can regularly monitor prices and rebook if your plans change.

FAQ

When is the best time to book a trip?

Prices and availability vary based on the destination and season. Your best bet is likely to book as early as you can to ensure you get the flight, hotel, and activities you want. If prices come down, you can always cancel and rebook. Just make sure you understand the change/cancellation policies.

What is the cheapest month to travel in the summer?

If your heart is set on a summer vacation but your budget is tight, you’ll get more for your money by traveling during the “shoulder season” — in early or late summer. Travel in September can be especially nice, because the crowds have dispersed and the weather is still summery (but no longer sweltering). If you’re heading to a summer resort town, just make sure that your favorite haunts — restaurants, activities, etc — don’t shut down after Labor Day weekend.

When is the best time to buy airline tickets to Europe 2023?

If you’re flying from North America, book your European airline tickets as early as possible. More people are expected to travel in 2023 than in previous years. That means flights may book up more quickly, and prices rise. Unlike with domestic travel, you likely won’t find many last minute deals to Europe.

Photo credit: iStock/gradyreese

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

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Have you ever wondered how much it costs to raise a child from birth to 18?

Are you sitting down?

Based on consumer surveys and other data, most estimates these days put the price of parenting just one child at $300,000 or more.

Your costs may vary significantly, of course, depending on where you live, your income, your marital status, and other factors. But it’s probably safe to say that raising a child to college age — and beyond — can deal a real wallop to the budget.

Read on for a breakdown of some of the costs prospective parents can expect.

How Much is the Cost of Raising a Child?

It’s hard to find an “official” calculation for the cost of raising a child.

For many years, parents and prospective parents could get an idea of the costs they faced from the Expenditures on Children by Families report published annually by the U.S. Department of Agriculture. But the USDA stopped updating the report in 2017, so the most recent information is for a child born in 2015.

Back then, the USDA estimated the cost of raising the younger of two children in a middle-income home with married parents would be approximately $233,610 in 2015 dollars.

Today, that number is a bit higher. A 2022 analysis conducted by the Brookings Institution found that parents can expect to spend at least $310,000 raising a child who was born in 2015. That’s for food, shelter, and other necessities, but not college, which for most students starts at age 18 or older.

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What Are Some Average Costs for Raising a Child to 18?

In 2015, the USDA divided the major infant-through-high-school expenses into the following categories:

•   Housing 29% of income

•   Food 18% of income

•   Child care and education 16% of income

•   Transportation 15% of income

•   Health care 9% of income

•   Miscellaneous 7% of income

•   Clothing 6% of income

But remember, those are the USDA’s numbers for one child in an average household with two kids, and those percentages have likely shifted in the past few years. You might end up with a similar allocation, or, based on your own circumstances and priorities, one that’s far different.

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Factors That Can Influence the Cost of Raising a Child in 2023

How much you pay to raise your family may be largely influenced by where you decide to live. In 2022, a mortgage payment was 31% of the typical American household’s income, based on data gathered by Black Knight. But that percentage may look different if you reside in a city or town where housing costs are much cheaper or far more expensive than average.

Child-care costs may vary widely as well, depending on the age of your child and the type of care you choose. Unless you can get Nana and Grandpa involved, be prepared for a hefty bill: 51% of parents who responded to Care.com’s 2022 Cost of Care Survey said they spent more than 20% of their household income on child care every year.

And those costs may not go down when a child reaches school age if he or she attends private school. According to the Education Data Initiative, the average annual tuition among the nation’s 22,440 private K-12 schools was $12,350 in 2021.

Your miscellaneous costs may also be different if your child is involved in sports or other activities that require expensive equipment, camps, or lessons.

Add to that potential healthcare costs, which could depend on the type of insurance you have and your child’s individual needs.

How to Budget for Baby

Considering all the costs involved, it may make sense to start transitioning your budget long before a baby actually arrives. Here are some things to consider if you decide to adjust your household budget categories to fit your growing family:

Stick to Your Savings Goals

You’ve probably heard it a thousand times: A baby will change your life — and your priorities. Still, your own financial security can help determine your child’s future, so it can help to stick with your savings goals, like building an emergency fund (you may need that money more than ever once you have a child), putting money away for a mortgage down payment, and investing for retirement. Then, if you still have room in your budget, you might consider including a 529 education savings account or some other type of investment plan for your child.

Pay Down Debt

The last thing you’ll want to worry about when you have a new baby is old debt. Paying interest on credit cards and other debt can eat away at any extra money you’re hoping to save for or spend on your child. A debt reduction plan like the popular snowball and avalanche strategies can help you focus on methodically dumping your debt and getting it done ASAP.

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Be Ready for First-Born Expenses

Just having a baby can be expensive. In 2022, the Peterson-KFF Health System Tracker estimated that the health costs associated with pregnancy, childbirth, and postpartum care for women enrolled in large group insurance plans came to almost $19,000 on average, and average out-of-pocket payments were almost $3,000. Then there’s the crib, car seat, clothes, formula, diapers, and other things you’ll need when you bring your baby home.

If you can adjust your budget to get ready for those upfront and monthly costs, you may have a better shot at keeping up with expected and unexpected bills later on.

Preparing for Changing Costs

Your budget is bound to evolve as your child gets older. The money you spend on diapers and formula in the first years will go toward buying new shoes, clothes, toys, team uniforms, and other expenses later on. (Maybe buying a car? Putting multiple kids through college? Paying for a wedding? Who knows?)

The good news is, these days, you can use a spending app to track exactly where your money is going and decide where you want it to go. So if your kiddo comes home from school one day and wants to switch from playing soccer to playing the piano, you can quickly rework your budget categories and see where you stand.

Can You Afford to Be a Parent?

Of course your beautiful baby will be worth every penny of the $300,000 (give or take) you’ll be spending over the next 18 years. Still, you may want to keep your financial readiness in mind as you think about when to have a baby.

Besides the basic costs, raising a child also can affect your finances if you decide to do in vitro fertilization (IVF), take an unpaid maternity leave, buy a more “reliable” car or a bigger home, or go part-time at work so you can be home after school.

Any planning you can do in advance and as you go to minimize the financial blow can benefit you and your child. (Not to mention the example it will set down the road, when you’re teaching your child about money management.)

Potential Opportunities to Save

Figuring out how to save money while raising kids isn’t easy. But there are some spending categories over which you can have some control, including:

Purchase Goods Secondhand

Kids grow out of everything so quickly. Borrowing some items from friends and family, or buying things secondhand, could be a big money-saver. If your sister wants to lend you her perfectly good (and safe) crib or car seat, let her! And don’t underestimate the quality and cuteness of the clothes you can find for little ones at yard sales, consignment shops, or online. There also may be bargains to be had when shopping for secondhand sports equipment and musical instruments.

Get Help with Child Care

There may be several ways you can save on child-care costs, including forming a co-op with other parents and taking turns watching each other’s children, or asking nearby family members to help out on a full- or part-time basis.

Embrace Meal Planning

When your kids get older, it may be tempting to stop for fast food on busy nights, especially if you don’t have any idea what you’re going to serve for dinner. By planning ahead, you may be able to reduce your grocery costs, the number of trips to the grocery store, and unplanned visits to the closest hamburger joint.

Cut Household Expenses

While you’re adjusting your budget for baby, think about little things you can do to cut down on spending and expenses. Could you adjust your thermostat to save a few bucks every winter and summer? Will you have time to watch all those cable channels and streaming services with a child in the house? Or can you clean the pool yourself, cut the grass, or wash your own car?

Find Free and Cheap Family Activities

Every activity you plan for your child doesn’t have to come with a big price tag. Going around the block with your kid in a stroller, wagon, or on the back of a bike can be the best kind of free fun. Want to see a movie? Check out the price of a matinee or other discounted screenings. Or buy a bottle of bubbles or a small swimming pool for a good time in the backyard.

The Takeaway

At $310,000, the estimated cost of raising a child from birth to 18 may be daunting. But if you plan in advance for those first major costs — and adjust your budget for changing priorities as your child grows — it may be easier to manage your finances during this exciting, expensive time in your life.

Using a money tracker app can be a good place to start. SoFi lets you know right where you stand, including what you spend and how to reach your financial goals.

FAQ

How much does it cost to raise a child in 2023?

Parents could expect to spend around $310,000 or more raising a child who was born in 2015, according to a 2022 analysis conducted by the Brookings Institution. Note that the cost of raising a child can vary significantly depending on where you live, your household income, your child’s health, and other factors — including if you’ll be paying for college, a wedding, or other big-ticket items.

How much do you spend on a child before they turn 18?

The cost of raising a child can vary from one household to the next, based on many factors. But it’s been estimated that the bill for an average U.S. family raising a child to 18 (without college) could be $310,000 or more.

How much money should you save for a baby?

The more you can put away before you have a baby, the better prepared you can be. Some things to focus on might include setting up or adding to your emergency fund, continuing to make contributions to your retirement plan, and, if you hope to move to a bigger home, coming up with the necessary down payment.

Photo credit: iStock/JohnnyGreig

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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

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.

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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Taxes are inescapable: You likely have income taxes withheld from every paycheck; if you’re a homeowner, you pay your property taxes; and yes, when you tap your card at the register, you pay that additional sales tax.

You may wonder why you have to fork over that extra bit of your hard-earned cash. This guide will help with that. Read on to learn:

•   What is sales tax?

•   How does it work?

•   What are the different kinds of sales tax?

•   How much is sales tax on average and in each state?

•   What are the pros and cons of sales tax?

What Is a Sales Tax?

Sales tax is a form of revenue for state and local governments. States and localities levy sales taxes on certain purchases of goods and services. For every eligible purchase you make, you’ll pay a sales tax — a percentage of the sale price.

State and local governments use the revenue generated from sales taxes to fund their budget. That means your tax dollars could pay for things like libraries, law enforcement, parks, infrastructure, and schools.

States and localities can charge separate sales taxes, though they don’t always do this. Five states currently do not charge sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon. Of those five, only one state (Alaska) has cities/counties that charge local sales taxes. States without sales taxes may generate revenue from other types of taxes, like income taxes and property taxes.

How Does Sales Tax Work?

Now that you know what sales tax is, consider this: How does sales tax work? As a consumer in the United States, prices on items in the store typically don’t display the sales tax. You’ll either need to do the math in your head (or using your phone) or wait until you get to the register to see how much you’ll owe in sales tax. When shopping online, e-commerce sites usually tabulate sales tax near the end of the transaction as well.

When you pay for the item (or service), the merchant (or service provider) collects the sales tax owed. Your job as a consumer is finished — but the business must then submit the taxes to the state and local governments. That means it’s on the business, not you, to keep records of sales taxes.

PRO TIP: Although you don’t submit the sales taxes to the government yourself, you may want to keep track of sales taxes paid throughout the year. Why? If you’re itemizing deductions when preparing your tax return, you can take the SALT deduction (sales and local taxes). You can choose to deduct your state and local income taxes or your state and local sales taxes, whichever delivers a bigger tax benefit.

Deductions can help to lower your taxable income and reduce your tax burden. Working with an accountant or using tax software can help you make sure you capture all appropriate deductions.

Types of Sales Tax

While you may be accustomed to thinking of sales tax as a single entity, there are actually three different kinds that you might encounter.

•   General sales tax: This is the amount added to everyday purchases, such as a new suitcase or some beach reads come summer. When most people wonder, “What are sales taxes?” this is likely the kind of surcharge that pops into their head.

•   Excise tax: You may also hear this referred to as “sin tax,” and it’s imposed on cigarettes, alcohol, and gambling, among other goods, activities, and services. These taxes are applied when the government may consider something potentially harmful.

•   Value-added tax (VAT): This is a tax that is imposed at various stages of production when an item or service is created. In the U.S., this tax isn’t levied separately; it’s rolled into the cost of a product. However, you may hear VAT referred to when you travel overseas, where this tax may be added onto the price of goods or services.

What Is the Average Sales Tax Percentage in the US?

The average sales tax percentage in the United States is 6.55% — but this number may not be what you find where you live. To calculate this number, we used 2022 data from the Tax Foundation, but these data points are subject to change as states and cities update their tax code.

In addition, this number represents a combination of the state sales tax and the average local sales tax rate for each state. Though it’s a good representation of local sales tax in a state, it may not be an actual tax rate being charged anywhere.

Here’s a table, based on that same data set, showcasing state sales tax rates, average local sales tax rates per state, and combined sales tax rates for each state and Washington, D.C.

Again, this table has a lot of caveats: The latest data comes from early 2022. Tax rates are subject to change, and the data has a lot of fine print, which you can find on the Tax Foundation website.

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Why Are Sales Taxes Different in Every State?

Sales taxes are levied at the state and local levels. Because each state is permitted to form its own tax code, sales taxes can vary depending on which state you live in or visit.

In many states, cities and counties can also leverage their own sales taxes.

How Is Sales Tax Calculated?

To see how sales tax is calculated, let’s look at an example. Suppose you want to buy a new shirt for $20. The combined (state and local) sales tax rate is 7.5%. At the register, you’d pay $21.50. The store keeps its $20, and the $1.50 (7.5% of the sale price) goes to the government.

Here’s that math broken down:

What Kinds of Items Are Taxed?

Almost all goods and services have sales taxes, though there are exceptions. For example:

•   States commonly do not charge sales tax on prescription drugs.

•   Most states don’t charge sales tax on food purchases, either. Those that do may offer a reduced tax amount on food.

•   Though it varies by state, some services — especially digital services — may currently be exempt from sales taxes.

In addition, certain items may have an excise tax, which is different from the typical sales tax rate. Common excise tax goods include alcohol, tobacco, and gasoline.

Worth noting: Many states have sales tax exemptions for Rx and OTC drugs, textbooks, and other items. States may also have sales tax holidays, when certain goods are sold tax-free (such as school supplies during the back-to-school season).

Recommended: Tax-Friendly States for Pensions and Social Security Income

Pros and Cons of Sales Tax

So what are the pros and cons of sales tax? Let’s break them down:

•   Pro: They’re easy to calculate. Compared to income taxes (from estimating tax withholdings to filing a tax return), the process of paying and collecting sales taxes is easy. It’s a flat rate, after all.

•   Con: It puts a heavier tax burden on low-income taxpayers. Income taxes in the U.S. are a progressive system: The more you make, the more you pay. Opponents of higher sales taxes — especially in states without income taxes — argue that this disproportionally puts the burden on low-income earners, since the sales tax rate is the same no matter how much money you have.

•   Pro: Sales tax provides revenue for your state and city. Sales taxes fund things like the fire department, parks, and road construction.

•   Con: Sales taxes take more money out of your pocket. If you already pay income and property taxes, shelling out more money to the government in addition to what you pay when you file your tax return might feel painful.

The Takeaway

Sales taxes are a common way for states and municipalities to generate revenue to fund programs and departments that serve the public. In most states, you pay a sales tax every time you purchase goods and services, though there are exceptions.

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FAQ

Do all states have sales tax?

All but five states currently have sales taxes. The five states without sales tax include Alaska, Delaware, Montana, New Hampshire, and Oregon. In Alaska, however, local municipalities can charge a sales tax.

Are states with zero sales tax cheaper?

States with zero sales taxes may seem cheaper on the surface, but to get a full picture, it’s important to look at the state’s income taxes, property taxes, and overall cost of living. For example, Oregon has no sales tax, but it has the fourth-highest income tax rate.

What is the purpose of sales tax?

States and localities rely on sales taxes to fund services for the public. This might include supporting police and fire departments, parks and recreation, libraries, schools, and infrastructure.

Photo credit: iStock/pixdeluxe

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

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

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On a credit scoring scale of 300 to 850, a credit score of 800 is considered exceptional. Having an 800 credit score has the potential to open up many doors for you financially, including competitive interest rates on loans, higher chances of approval and at better loan terms, and even access to premium credit cards.

As such, when you have a credit score of 800, it’s worth taking steps to ensure you maintain it — or if you’re ambitious, even improve it. That way, you can continue unlocking the benefits that a high credit score can offer.

What It Means to Have an 800 Credit Score

Your credit score is a three-digit number that’s an indicator of your creditworthiness. The higher the number, the more likely you appear to lenders as a responsible borrower who will pay back what’s owed on time.

Credit scoring models count an 800 credit score as being excellent. For instance, a 800 FICO credit score is considered “exceptional,” and VantageScore considers it in their “superprime” range.

These scoring models use your credit history to calculate your score — having such a high score means that you most likely haven’t missed any payments and have maintained a low credit utilization. It could also mean you’ve had a relatively long credit history and held a variety of types of credit and loan accounts — in other words, you’re well past the point of a starting credit score.

To stay at this point on the credit rating scale, you’ll need to keep exhibiting the responsible financial behaviors you’ve already displayed. Further improving it could be a matter of continuing these behaviors over a longer period of time. Or, you might look into your score to see if there’s any one area you can tweak to further improve your credit behavior.

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Is 800 a Perfect Credit Score?

No, 800 is not a perfect credit score. Both FICO and VantageScore scoring models have a maximum credit score of 850. That being said, an 800 credit score can be considered near-perfect.

Benefits of an 800 Credit Score

Having an excellent credit score comes with a few perks, such as increased odds of getting approved for lower interest rates and higher credit card limits, as well as offers for better loan terms.

Better Credit Offers

Lenders are more likely to approve consumers with excellent credit, and with more favorable terms, compared to someone with a minimum credit score for a credit card. If you have a high credit score, you’re a good candidate for better credit offers, such as personal loans with higher loan amounts and a wider selection of credit cards.

You also may be able to qualify for premium rewards credit cards. These cards tend to offer more benefits like airport lounge access, better earnings opportunities, and more.

Recommended: How to Avoid Interest On a Credit Card

Lower Interest Rates

Lenders generally are willing to lend to those with a credit score of 800 at lower interest rates than other applicants. That’s because people with a credit score in this range generally pose less risk to the lender. With a credit score of 800, you’ve already proven that you can handle loans responsibly.

Getting approved for lower interest rates helps you to save significant amounts of money over your lifetime. For instance, if your 800 credit score gets you a mortgage interest rate that’s 1% to 2% lower than someone with a fair credit score, that alone can save you tens of thousands of dollars over the life of your home loan.

Recommended: Tips for Using a Credit Card Responsibly

Higher Credit Limits

Not only will you be more likely to get approved for a credit card with an 800 credit score, but credit card issuers may offer you access to higher credit limits. Having increased spending power is great for when you need to make bigger purchases. It’s also helpful for keeping a low credit utilization, which in turn can help you maintain or even boost your credit score.

Since you’re also more likely to be eligible for rewards credit cards, each purchase can help you earn more in points or cash back — meaning, you can use your credit card to maximize your purchases. That deal becomes even better if you can pay off the entire balance each month so you’re not paying any interest.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

Monitoring and Managing Your Credit Score

Even if you have an excellent credit score now, it doesn’t mean it will stay that way forever. It’s important to regularly monitor your credit score so you know exactly where you stand.

There are free ways to check your credit score. Some credit cards will show you your score on your credit statements, and some banks offer this feature as well. If your score changes in any way, you can then figure out the types of financial behaviors that may have contributed to the change. Also don’t be surprised if you have different credit scores depending on where you look — this is because credit scoring models can vary in how they calculate scores.

Checking your credit report will also help you monitor and manage your credit score. That’s because the activity on your credit report affects how your credit score is calculated. You can check your credit report for free once a year through all three major credit bureaus: Experian, Equifax, and TransUnion.

By checking your credit report, you’ll be able to see if there is any information on there that may affect your score. If you spot any errors, it’s best to dispute them right away, especially if they’ll have a negative effect.

Factors That Can Damage Your 800 Credit Score

You’ve worked hard to build your credit score. To maintain it, you’ll want to avoid the following behaviors that could damage your 800 credit score. While it’s a long drop to a bad credit score from exceptional, it’s not a given that your good credit will last.

High Utilization Rate

Your credit utilization is the percentage of your available revolving credit that you’re using. The higher the percentage, the more it seems to lenders that you’re relying on too much credit, which could negatively impact your score.

To help maintain your credit score, try to keep your credit utilization to 30% or under. You can do that by paying down your balances, even making extra payments if you can. That way, your balance will be as low as possible before the credit card issuer reports it to the credit bureaus.

Late and Missed Payments

Your payment history is one of the biggest factors that affects your credit score. A late or missed payment could have a major effect on your credit score — even if you’ve paid consistently on-time beforehand.

If you’ve been a responsible borrower, you may be able to contact your creditor and ask to have the late payment removed from your credit report. That way, it won’t impact your score.

Credit Applications and New Credit Accounts

Each time you submit an application for a new loan or credit card, lenders will conduct a hard credit inquiry, which may temporarily affect your credit score. While one hard inquiry may not have major consequences, applying for multiple loan products at once could signal to lenders you’re stretched thin financially. Your score could take a dive, since it looks like you need to rely on credit.

To maintain your credit score, apply for new accounts sparingly. Or, if you’re shopping around for large loans like mortgages, applying for a few within a short span of time will typically show up as one hard inquiry on your credit report. This may prevent your applications from impacting your score as much.

Public Records Appearance

Public records such as bankruptcy can appear on your credit report. These negative remarks can damage your credit score. In some cases, you may have to explain to lenders in more detail about these public records.

Recommended: What is the Average Credit Card Limit?

The Takeaway

Having a 800 credit score means you have excellent credit. As such, lenders are more likely to offer you better rates and terms. Other benefits include saving money on interest and higher credit limits. Even with a high score, it’s still important to continually monitor your credit behavior to ensure you can maintain it.

Looking for a credit card that earns rewards? Consider the SoFi Credit Card, which offers cash-back rewards on qualifying purchases. You’ll also get access to other perks, such as the ability to lower your APR through on-time payments and cell phone protection.

FAQ

How long does it take to reach a credit score of 800?

How long it takes you to get an 800 credit score will depend on several factors, including your current credit score and how long your credit history is. You may be able to reach it faster if you exhibit responsible behavior, such as consistent on-time payments and the maintenance of a low credit utilization ratio.

What percentage of the population has a credit score of 800 and above?

According to the credit bureau Experian, 21% of consumers have a FICO score of 800 and higher, or in the “exceptional” range.

Why is it difficult to reach a credit score of 800?

It’s difficult to reach an 800 credit score because you’ll typically need a long credit history and to show responsible credit behavior consistently over a period of time.

What credit limit is possible with an 800 credit score?

The credit limit you’ll qualify for will ultimately depend on the credit card issuer. However, with an 800 credit score, you’ll generally get higher limits compared to someone with a lower score.

Photo credit: iStock/milan2099

¹See Rewards Details at SoFi.com/card/rewards.

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.

SoFi Credit Cards are 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.

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 .

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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Every year by April 15, give or take a day, most Americans file their tax returns. Income tax is exactly what it sounds like: Individuals and companies are typically required to pay taxes on their income, or the earnings and profits made during the previous year.

Figuring out the right amount to pay can take some time. When you or your tax preparer fills out your tax forms, you’ll find out if you’ve overpaid your taxes, meaning you’re entitled to a refund, or if you’ve underpaid, which means you’ll owe money to the government.

There are different types of income tax, but the one most people have to file is federal, which is done through the Internal Revenue Service (IRS), a bureau within the U.S. Treasury Department. Depending on where you live, you may also have to pay state or local income taxes as well.

Filing taxes can be confusing and complicated, but read on for a guide that will clarify:

•   What is income tax?

•   What are the different kinds of income tax?

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

•   How can you lower your taxable income?

What Are Income Taxes?

Income taxes are taxes that are collected by the government on income (aka money) earned by individuals and businesses. This can include salaries, tips, commissions, bonuses, investment income, interest earned, and other sources. Also know that what is an income tax can be assessed by a federal, state, and/or local government Some Americans may only pay federal taxes; others may be liable for those at a federal, state, and local level.

What are income taxes used for once they are collected? Taxes are typically earmarked to pay for public services, provide goods for citizens, and also go toward government needs. Infrastructure is a common use; that means things like building roads, improving education, and the like.

Income taxes may be collected at the federal, state, and local level, depending on where you live.

How Does Income Tax Work?

The amount of income tax you pay depends on how much money you’ve earned in the past year as well as other factors, such as whether you are single or the head of household. First, a bit more about what counts as taxable money:

•   Income that’s taxable includes your earnings from work, rental properties, or money made from stock investments.

•   Certain forms of income that are deemed nontaxable and may not have to be reported on your tax return. Some examples of nontaxable income are child support payments , financial gifts, alimony, and employer-provided health insurance.

The U.S. tax system is progressive, which means the greater your income, the higher your tax rate. The idea behind a progressive system is that people who earn more are able to pay more in taxes. So, depending where you fall income-wise, you’ll be taxed at a different rate.

Currently, there are seven tax brackets, ranging from 10% to 37%. Each bracket corresponds to specific income thresholds and are adjusted each year for inflation.

Tax season revolves around filing Income tax returns each spring. Some details:

•   The typical deadline is April 15, though if that date falls on a weekend or holiday, the date will be moved to the next business day.

•   Those who are self-employed may pay quarterly estimated taxes.

•   You must file your federal income tax return with the IRS, by mail or electronically. In order to file, you must have all the necessary year-end income documents, including those from your employers and financial institutions.

•   The IRS recommends taxpayers file electronically, since it can take six months or more to process a paper return. Electronic files move much more quickly through the system.

When you fill out your tax return and file it with the IRS, you’ll find out if you’ve underpaid and still owe any taxes or if you’ve paid too much and are entitled to a refund. Salaried workers file an IRS Form W-4 with their employer spelling out their tax withholding, or allowances. This indicates how much to set aside from a paycheck for taxes. This number can be changed to help compensate for too much or too little taxes paid out during the previous year.

Quick Money Tip: Direct deposit is the fastest way to get an IRS tax refund. More than 9 out of 10 refunds are issued in less than 21 days using this free service, plus you can track the payment and even split the funds into different bank accounts.

Brief History of How Income Taxes Came to Be

Now that you know what income tax is, here’s a quick look at how it came into being in America. The first federal income tax came about in 1861, as a way to finance the Civil War effort. A year later, Congress passed the Internal Revenue Act which created the Bureau of Internal Revenue, which eventually evolved into today’s IRS. But income tax didn’t have the substantial support after the Civil War and was repealed in 1872.

Federal income tax made a short comeback in 1894, but the next year it was ruled unconstitutional by the Supreme Court. This verdict was based on the grounds it was a direct tax and not apportioned among the states on the basis of population.

In 1909, the 16th amendment to the Constitution was introduced, which would give the government the power to collect taxes without allocating the burden among the states in line with population. It was passed by Congress then, but it still needed to be ratified by 36 states. Ratification of the 16th amendment finally happened in 1913, giving Congress the legal right to impose a federal income tax. This laid the foundation for the tax system as it’s known today.

What Are the Different Types of Income Taxes?

There are three basic types of taxes: taxes on what you buy, taxes on what you own, and taxes on what you earn. Under the umbrella of the latter, or earned income, there’s individual or personal income tax, business income tax, and state and local income taxes. Here’s the differences between them:

•   Individual or personal income tax. This type of tax is imposed on salaries, wages, investments, or any other forms of taxable income a person or household earns. Thanks to deductions, tax credits, and exemptions, most people don’t end up paying taxes on all their income.

•   Business or corporate income tax. This kind of tax is based on business profits, minus the costs involved in doing business. According to the IRS, all businesses except partnerships must file an annual income tax return.

•   State and local income tax. Depending on where you live and work, you may have to pay state and local taxes. Currently, nine states (Alaska, Florida, Nevada, South Dakota, Texas, Tennessee, Washington, Wyoming, and New Hampshire) don’t have a state income tax. Some local governments impose a local income tax on people who live or work in a specific city, town, county, municipality, or school district. Both state and local taxes help pay for a wide range of services like roads, schools , and law enforcement. State and local taxes are generally much lower than federal income tax.

How Do I Know How Much I Owe in Income Taxes?

In order to figure out how much income tax you may owe, here are some steps:

•   You’ll want to know your filing status which will determine which tax bracket you fall under. The five filing status choices are single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child.

•   Once you know how you’re going to file, you’ll need to gather up all your documents detailing your earned income, such as your W-2 and 1099 statements. When you have all of the information about how much money you earned, you can total it up, which amounts to your gross income.

•   The next step in knowing how much you owe in taxes is to calculate your adjusted gross income (AGI). You can do this by taking your total gross income from the year and subtracting any “above the line” adjustments, as they’re known, that you are eligible for. A list of adjustments to income can be found on the Schedule 1, 1040 IRS form and include deductions such as educator expenses, self-employment tax, and student loan interest payments.

Once you’ve got your AGI number, you can then subtract any standard or itemized deductions to get your taxable income amount. Itemized deductions can include charitable donations, paid mortgage interest, property taxes, and unreimbursed medical and dental expenses . An alternative to itemized deductions is the standard deduction option. A standard deduction is a set dollar amount based on your filing status. When you have your taxable income number, you can then pinpoint your tax bracket and determine your tax rate.

Recommended: What Are the Common Types of Payroll Deductions?

Ways to Lower Your Taxable Income

You can reduce your taxable income by taking advantage of any pre-tax savings opportunities available to you. Consider these tips:

•   Take advantage of employer-sponsored retirement plans. Contributions to a 401(k) for example, are made before tax. This removes the contribution amount from your taxable income and can thereby lower the amount of taxes you’ll have to pay for the year. You can also take an individual retirement account (IRA) deduction if you contribute, which can also lower taxes owed.

•   Enroll in a health spending account (HSA) or flexible spending account (FSA) if your company offers them. A health savings account allows pretax contributions to be used for upcoming healthcare costs for employees with high-deductible health insurance plans. If your employer doesn’t offer one, you can open a HSA on your own.

   With a flexible spending account, you’ll need to sign up through your employer. Similar to an HSA, you would make a pretax contribution, but a FSA covers medical and dependent expenses like childcare.

•   Figure out what tax deductions you can claim when you file your return. As previously noted, when it comes to deductions, Uncle Sam allows you to write off a number of expenses, including real estate taxes, certain casualty or theft losses, and donations made to a charitable organization. People who are self-employed can deduct such costs as office supplies, phone and internet costs, and any travel expenses related to work. These deductions can help save you hundreds or even thousands of dollars on your tax bill.

•   Check that your tax withholding is appropriate. As noted above, check your W-4 form, the one you fill out for your employer to let them know how much tax to take out. It may need to be adjusted if you owe a considerable amount of money in April. On the flip side, if you have too much withheld and get a significant refund, you’re basically giving the government an interest-free loan throughout the year. To be sure you’re paying the right amount, be sure your W-4 form is updated if you have a major life change, such as the birth of a child, marriage, divorce, or a significant pay raise.

Recommended: 7 Steps to Prepare for Tax Season

Tips for Filing Income Taxes Correctly

Avoiding mistakes when filing your tax return can help prevent you from missing out on a bigger refund than you claimed, owing more taxes, or triggering a tax audit by the IRS.

Here are some suggestions on how to fill out your tax return when filing whether you’ve done it before or are doing your taxes for the first time:

•   Gather all of your pertinent paperwork and make sure you’re not missing tax forms. You’ll need a W-2 form from each employer, other earning and interest statements, and receipts for any expenses you’re itemizing on your return. Any income and investment interest forms should be mailed or sent electronically to you in January. If you haven’t received them in the mail, you can find and download many of these documents online through your bank, mortgage provider, or payroll company. If you still haven’t received your tax statements or can’t find them online, call the necessary people to get your documents as soon as possible.

•   When filling out your return, make sure your basic information is accurate, such as your name, Social Security number, and filing status. The IRS will also be double-checking your numbers against your tax statement documentation.

•   Take care when disclosing your earned income. Report your financial information exactly as it’s reported to the IRS on forms such as your W-2 and 1099.

•   Sign your tax return. According to the IRS, an unsigned tax return is invalid. If you’re married and filing jointly, in most cases both spouses must sign the form. Filing electronically can help taxpayers avoid submitting an unsigned form by using a digital signature.

•   Consider using a tax preparation software program or having a professional tax preparer do your return. Online software is often fairly straightforward if your situation is pretty simple. However, if your tax return is more involved and complicated, it may be worth it to hire a tax professional. An experienced tax preparer can help ensure your tax return will be filed correctly and on time.

•   Try not to put off filing your taxes until the last minute or you run the risk of missing the tax filing deadline.

•   You can file for a tax extension of six months, but know that any taxes owed are still due on time; it’s the return that can be filed later.

Recommended: 11 Red Flags that Can Trigger a Tax Audit

The Takeaway

Income taxes are a way for the government to collect revenue from citizens and businesses. Besides paying federal income taxes, you may need to also pay state and local taxes. There are ways to lower your taxable income, and doing so can result in paying less when the bill comes due or a bigger refund. Knowing how to file correctly and on time can help prevent any delays in reimbursement checks, late fees, or penalties.

FAQ

Can I lower my income taxes?

Yes, there are several ways you can lower your taxable income. Participating in employer-supported programs (such as pre-tax contributions to a 401(k), FSA, and/or HSA), taking deductions, and choosing the right filing status are all ways you can help reduce your income taxes.

How can I determine how much income tax I’m required to pay?

You can start by estimating your taxable income. This involves taking your adjusted gross income, or AGI. which is the total amount you report that’s subject to income tax; typically, it’s earnings such as wages, dividends, and interest from a bank account, for example. Then you would subtract any tax deductions or eligible adjustments from that amount. What’s left is taxable income. You would then calculate the appropriate tax bracket percentage based on your income and filing status to figure out your tax liability.

Does income tax improve your money management?

It can. Being organized with your taxes can prevent you from owing a large sum come Tax Day, missing the filing deadline, and potentially paying any interest and late filing penalties to the IRS. If you’re self-employed, putting aside taxes from your earnings and paying your taxes quarterly can also help prevent a potentially large tax bill. And, of course, getting a hefty tax refund can go towards savings, investments, or paying down debt.

Photo credit: iStock/Charday Penn

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.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

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

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

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

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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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