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What’s considered a “good” salary in Texas depends on your household size and lifestyle, but most Texans make between $45K and $100K annually.

Texas cities have differing costs of living, of course — Austin is much pricier than Amarillo — so where you live in the Lone Star State also matters. Let’s break it down further.

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What Is a Good Salary for Texas?

A good salary, in many people’s minds, is one that allows an earner to save, take vacations, eat out, and so on. But before we can calculate that amount, we need to look at the average income required to cover basic needs in Texas.

Each year, MIT releases living wage figures — the income that one or two working adults, with or without children, must earn to pay for necessities. Living wage numbers are expressed as an hourly rate, and it’s assumed that the person will work full time.

Wages needed to cover basic needs are as follows:

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Living Wage for 1 Adult
No children	$16.41
1 child	$31.63
2 children	$38.97
3 children	$51.02

Living Wage for 2 Adults, 1 Working
No children	$25.12
1 child	$30.64
2 children	$35.75
3 children	$39.24

2 Adults, Both Working
No children	$12.56
1 child	$17.44
2 children	$22.10
3 children	$25.96

If you multiply the hourly figure by 40 hours a week and 52 weeks, you’ll get the living wage as an annual salary. For an individual with no kids, that comes out to just over $34K.

That income would pay for rent and utilities, minimal food, healthcare, child care, and other basics. But it’s not enough to cover DoorDash deliveries, restaurant meals, a deluxe apartment, vacations, or savings for retirement or a house.

Average Annual Salary in Texas

So what is a good yearly salary in Texas? According to MIT, the top three professions in Texas pay around $100K, while the three lowest paying fields average out to $45K. Most Texans then make somewhere in the middle. However, statewide figures can’t tell you what constitutes a good salary in Austin, where the cost of living is much higher.

Another measure of what constitutes a good salary: one that allows you to purchase an average priced home. The average home price in the Woodlands, one of the most popular suburbs in the country, is $500K. A buyer would need to make over $100K to qualify for a mortgage. In the Panhandle or Dallas, however, home prices are considerably lower.

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Average Annual Expenses in Texas

When determining a living wage, MIT considers these expenses: food, child care, medical, rental housing, transportation, civic, and annual taxes (including individual income tax, payroll tax, corporate income tax, and excise tax, but not property tax). By the way, “civic” is a catchall category that includes cultural attractions, hobbies, and pets, while “other” groups together clothing and personal care items.

As noted above, one adult with no children requires a gross income of $34K on average. This is how that income might allocated:

•   Food: $3,351

•   Child Care: $0

•   Medical: $2,549

•   Housing: $10,823

•   Transportation: $5,509

•   Civic: $2,503

•   Other: $4,508

•   Taxes: $4,761

Supporting a family of two working adults and three children requires an income of about $108K, which breaks down as follows:

•   Food: $11,999

•   Child Care: $22,710

•   Medical: $8,805

•   Housing: $19,195

•   Transportation: $16,304

•   Civic: $5,153

•   Other: $8,655

•   Taxes: $15,067

To compare your spending to these figures, sign up for a free money tracker app.

How Much Money Do You Need to Live Comfortably in Texas?

Comfort is in the eye of the beholder. Some people want luxuries while others embrace financial minimalism. This is a “less is more” attitude to spending. People who follow this philosophy focus on purchases that will add meaning to their lives.

When determining the income you need to live comfortably, factor in where you fall on the minimalism to luxury spectrum. There’s no “bad” answer; it’s just important to be honest when budgeting. Also, what changes are you willing to make in order to save more? For instance, would you downsize your home?

Texans with a financial minimalist philosophy will be comfortable with less money than someone who strives for luxury. Minimalists often reap the benefits of living below their means, which can make room for having an emergency fund, spending in ways that are better for the planet, and stressing out less about finances.

If you’d like a more structured approach to saving and spending, the 50/30/20 budget can help. The three numbers represent the percentage of income that will be allocated to needs, wants, and savings, respectively.

Which City in Texas Has the Lowest Cost of Living?

Harlingen (pop. 72,00) has a cost of living that’s 24% lower than the national average, according to recent data from the Council for Community and Economic Research. Harlingen is in the Rio Grande Valley about 30 miles from the Gulf of Mexico. Its median home sale price was $250,000 in December 2022.

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The Takeaway

What is a good salary in Texas? It depends on your family size, location, and spending habits. Most individuals make between $45K and $100K. You’ll need an income on the higher end of that range if you’re living in Austin, with its high cost of living. In Harlingen, on the other hand, where the cost of living is 24% lower than the national average, you can get by on much less. With that in mind, a good salary in Texas is between $55K and $73K.

To live comfortably anywhere, it helps to track your spending and saving with SoFi Insights. The free budget app also provides credit score monitoring. Set your budget, categorize your spending, spot upcoming bills, and gain insights into your finances.

Stay on top of your money — where it comes from and where it goes — with SoFi Insights.

FAQ

What is a livable salary in Texas?

The answer depends on your spending habits, locale, and how many people live in your household. The living wage for a single worker with no children is $34K before taxes, which is just enough to cover necessities. Two working adults with two children need a gross income of $91,949, to cover basic needs

What is considered rich in Texas?

This will depend on the city where you live. In general, you’ll need to earn between $110,000 and $125,000 annually to be in the top 20% in Texas’ big cities, such as San Antonio, Houston, and Dallas.

What is the top 1% income in Texas?

You need to earn nearly $600,000 per year to be in the top 1% in Texas. This is similar to the national average.

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When people are starting a business, it’s likely that they’ll consider the tax benefits of different company structures. In some cases, founders may create a limited liability company (LLC) specifically for its tax benefits.

Here, we’ll delve into the tax benefits of LLCs for business owners, as well as other pros and cons.

What Is an LLC?

An LLC is a type of business structure available in the United States. A kind of hybrid, it combines some characteristics of corporations with others from a partnership or sole proprietorship.

According to the IRS, LLC owners are called “members.” Depending on the state in which you set up the LLC, members may be individual people, other LLCs, or corporations. There is no maximum number of members that a company can have, and most states allow LLCs with just one member. Check your state for specifics.

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Tax Benefits of Forming an LLC

As mentioned above, company founders may choose an LLC structure especially for its tax benefits. Here, we go into detail about what those benefits are.

Limited Liability

An LLC, as its full name implies, provides limited liability to its members. This means that, if the company fails, the owners’ and investors’ private assets are not at risk and can’t be seized to repay company debts.

Flexible Membership

As noted previously, an LLC can have one member or many, and those members can be individuals or companies. This business structure gives owners significant freedom when starting their company.

Management Structure Options

LLCs can be managed by a member (owner) or by a hired manager. A member-managed LLC may be chosen if the company has limited resources or few members. An owner may select a member with management experience to oversee the business, or they may want all members to actively participate in the company’s operations.

A hired manager is someone who is not a member but has the appropriate experience and skill sets to run the LLC. An accountant or financial advisor can go into detail about the tax benefits of member-manager vs. hired manager approaches. (Here’s what to know if you’re filing taxes for the first time.)

Pass-Through Taxation

LLC member-owners have some control over how their business will be taxed. If there is only one member, it will automatically be treated like a sole proprietorship, and if there is more than one, like a partnership. In those cases, business income will pass through the business to the member-owners, and they’ll only get taxed once. Members will report income and losses on their personal tax returns, while the LLC itself is not taxed. (Learn how business income differs from other types of income.)

Because income and losses are reported as part of members’ personal financial pictures at tax time, taxes will be owed at each member’s personal tax rate.

Alternatively, the LLC owners may decide to be taxed as a corporation. If they choose an S-Corp structure, pass-through taxation still applies.

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Heightened Credibility

When someone opens an LLC, it shows that they’ve gone beyond just hanging a shingle. Instead, they went through the decision making and paper filing processes involved in setting up the LLC.

Limited Compliance Requirements

According to the U.S. Small Business Association (SBA), another form of business structure — the corporation — has the strictest requirements. In contrast, LLCs have some but fewer.

In general, an LLC should maintain a current operating agreement, hold annual meetings, ensure that they have appropriate shares recorded for each member, and keep records if membership interests transfer. (Find out if you can use a personal checking account for your business.)

Disadvantages of Creating an LLC

So far, the LLC sounds like the ideal low-maintenance company structure. However, there are several caveats to be aware of.

Cost

Forming an LLC can cost a few hundred dollars, which may be more than what a small business wants to spend. The company will also need to file annual reports along with annual fees and taxes. These taxes and fees may cost a miniscule amount or several hundred dollars annually.

No Stock Ownership

When a corporation wants to raise funds, they sometimes issue shares of stock. An LLC cannot issue stock.

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Transferable Ownership

Some states may require that an LLC be dissolved if there is a change in ownership. If the people starting the business expect to take in outside investors over the years, a corporation might be a better choice.

How to Form an LLC

Once you’ve decided to start an LLC, you’ll want to choose and reserve a company name that doesn’t conflict with currently existing ones. Typically, an LLC must have what’s called a registered agent: someone who will handle official documents for the company.

Then, you’ll need to document the nuts and bolts of the operating agreement that describes the structure of the company. This can include who owns what portion of the company and who gets to vote on which issues. You’ll detail how profits and losses will be addressed, how the company will be managed, when meetings will be held, and how to handle the business if a member leaves the company or dies. This document should also describe what should happen if the company goes out of business.

Recommended: 2022 IRS Tax Refund Dates

How LLCs Are Different From Other Business Entities

An LLC is formed to be a legal entity that’s separate from its owners and is responsible for its business debts. Here’s how an LLC differs from other company structures.

LLC vs Sole Proprietorship

Profits in an LLC are only taxed once because of the pass-through taxation structure. This is reported on and addressed through owners’ personal tax returns by filing a Form 1040, Schedule C, listing profits or losses. As an LLC owner, you may be taxed as a sole proprietor, a partnership, or a corporation.

A sole proprietorship is owned by one person and is the simplest structure available. A sole proprietorship also involves pass-through taxation with the business owner paying taxes on the business’s profit. There isn’t as much flexibility in filing as a sole proprietor as there is with an LLC.

LLC vs S-Corp

An LLC is a business structure. An S-corp, meanwhile, is a tax classification. Many businesses decide to have their LLC taxed as an S-corp. The nuances can be complicated, so it makes sense to consult your personal accountant or other professional before making this decision.

LLC for Rental Property

If you create an LLC to buy rental homes, you’ll have the benefits of no personal liability and pass-through taxation. There can be a flexible ownership structure, personal anonymity, and fairly simple reporting.

However, it may be harder to finance rental property as an LLC. There can also be significant fees to get the LLC up and running. LLCs for rentals can be more complex at tax time, and property transfers can also be more complicated.

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How to Choose the Right Business Type

Consider how simple or complex your proposed business will become. Do you plan to basically run the business yourself, or will it ideally turn into something bigger? What kind of legal protections will you need based on your business plans?

Entrepreneurs should also weigh the tax benefits of LLCs and sole proprietorships. The two structures, along with partnerships and S-corps, feature pass-through benefits, meaning that profits are taxed only when they’re paid to the company owner(s). A C-corp, meanwhile, is taxed as a company as well as when shareholder payouts are made.

Consult your accountant or financial advisor for specifics on your situation.

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The Takeaway

Limited liability companies (LLCs) come with plenty of advantages and a few disadvantages. As its name implies, the owners’ and investors’ private assets are not at risk if the company should struggle financially. Owners of the LLC are referred to as members. Membership may range from one individual to multiple individuals to other companies.

A major benefit is pass-through taxation, where income passes through the company to its members, who report it on their personal taxes. One disadvantage of LLCs for very small businesses is the startup cost and annual fees, which can run to several hundred dollars a year. Consult a professional to find out whether an LLC is the right fit for your business plan.

No matter what business structure you choose, it’s important to keep track of your finances. SoFi Insights, our spending app, provides you with an easy to use online budget planner so you can stay on top of your finances.

Benefit from the insights you’ve always wanted with SoFi Insights.

FAQ

What are the tax benefits of having an LLC?

With an LLC, you’ll have flexibility in deciding the structure under which your company will be taxed. There are more tax benefits of an LLC, including pass-through taxation, which means you’ll only get taxed once at your individual tax rate.

What are the benefits of a limited liability company?

They can include limited liability, meaning that owners aren’t personally responsible for company debts; flexible structures; pass-through taxation; more credibility; and fewer compliance requirements compared to a corporation.

What is the best tax option for an LLC?

Each situation is unique, so consult your accountant or financial advisor for specifics.

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SoFi’s Insights tool offers users the ability to connect both in-house 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. 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 provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
*Terms and conditions apply. (Must click on the link to be eligible.) 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 into SoFi accounts such as cash in SoFi Checking and Savings or loan balances, Stock Bits, fractional shares and cryptocurrency 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.]
This article is not intended to be legal advice. Please consult an attorney for advice.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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An individual preparing to file a federal tax return will want to think back on gifts given in the prior year. If a gift exceeds a certain threshold, the IRS wants it reported by Tax Day — but only extremely wealthy taxpayers will ever have to pay taxes on their lifetime of gifts.

In 2022, you could have made gifts worth up to $16,000 per recipient without reducing your lifetime exemption, being required to report the gift to the IRS, or paying federal gift tax.

Gifts over that value count toward the lifetime gift and estate tax exemption of $12.06 million (per spouse, if married), rising even higher in 2023.

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What Is a Gift and What Is Not?

According to the IRS, gift tax is applicable when property is transferred from one person to another, with the giver receiving nothing, or less than full value, in return.

The tax applies even when the donor doesn’t consider the transfer a gift.

The IRS defines the federal gift tax broadly, including when the gift is monetary or a physical property, or a donor allowing someone to stay in their property or earn income from the property without getting something equal in return.

Someone who makes an interest-free or reduced-interest loan may also be seen as giving a gift.

When you make a gift other than cash, you must assess the property’s fair market value: the price a willing buyer would pay in the open market. If you’re buying a house from a family member, you might ask for a gift of equity.

Generally, the IRS does not consider these taxable gifts:

•   Gifts that are not more than the annual exclusion for the calendar year

•   Another person’s tuition, as long as payments are made directly to the educational institution

•   Another person’s medical expenses, as long as the payments are made directly to medical service providers

•   Gifts to a spouse who is a U.S. citizen

•   Gifts to a political organization

•   Gifts to IRS-approved charities

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What Is a Gift Tax Return?

Par for the course with the IRS, there’s a form involved if you made a gift exceeding the annual limit: Form 709. It is to be filled out the year after the giving of the gift. So if a relevant gift was given in 2022, the information belongs on the 2023 tax return form.

Information on this form lets the IRS know that a gift has been given that falls within the scope of the gift tax.

Married couples may “split” gifts and essentially double their annual exclusion. If you are married and your spouse consented, you could have given up to $32,000 to an unlimited number of individuals in 2022 with no gift or estate tax consequences. For 2023, that amount rises to $34,000.

Spouses who split gifts always have to file Form 709, even when no taxable gift was incurred.

The gift tax is tied to the estate tax. As of tax year 2022, you can leave up to $12.06 million to relatives or friends free of any federal estate tax. If you’re married, your spouse is entitled to a separate $12.06 million exemption. Clearly this is the province of high earners.

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Who Files the Gift Tax Return: the Giver or the Recipient?

Taxes typically fall on the donor, not the recipient.

There may be special circumstances when the recipient will agree to pay the tax. If you make this agreement, the IRS suggests that you contact your tax professional for guidance on how to proceed.

Annual Exclusion for 2022

You could have made an unlimited number of tax-free gifts in 2022 as long as no one received more than $16,000.

If you held back, just know that you can make an unlimited number of tax-free gifts of up to $17,000 in 2023, when the lifetime gift tax exemption increases to $12.92 million per person.

Tracking gifts you make, and all outlays, is easier with a spending app.

When Do You Need to File a Gift Tax Return?

This follows the regular tax filing deadline, which is April 18 in 2023.

If you need a gift tax return extension when you’re not filing a tax extension for your general income tax return, file Form 8892. This will typically give you a six-month extension.

How to File a Gift Tax Return

First, you use the federal gift tax return Form 709 that’s available online through the IRS. The IRS also provides gift tax return instructions. The agency includes determining if you need to file a form and, if so, for what gifts.

You may need to decide whether you and a spouse will split the gift taxes.

Form 709 is complicated. Whether you’re a seasoned tax filer or filing taxes for the first time, a tax pro could be of great help.

Recommended: How Long Does It Take for the IRS to Mail a Refund?

What Happens If I Don’t File a Gift Tax Return?

You could be fined by the IRS, and the taxing authority is becoming more vigilant in levying these failure-to-pay penalties. The fine equals 0.5% for every month that the tax isn’t paid, based on the amount of the gift. So, as time goes by, the fine gets bigger. If the IRS determines that fraud was involved, the fine can go up to 5%.

If this oversight isn’t discovered in a person’s lifetime, the estate could be assessed the accumulated fine.

How Long Should You Keep Gift Tax Returns?

Keep them indefinitely! They will likely be needed by the executor of your estate.

Recommended: Updates to the Tax Code

The Takeaway

A gift tax return might inspire dread, but it’s simply a way for the IRS to track eligible gifts made in a year and over a lifetime. Most people will never pay gift taxes.

Want to keep tabs on gifts and track all of your money in one place? SoFi Insights provides credit score monitoring, spending breakdowns, budget planning, and more at no cost.

Find financial enlightenment with SoFi Insights.

FAQ

What triggers a gift tax return?

The main trigger is exceeding the annual limit of what you can give without taxation. The annual amount per donee is $16,000 in 2022 and $17,000 in 2023.

Do I have to file a gift tax return if I receive a gift?

In general, it’s the donor of the gift, not the recipient, who pays the tax.

What happens if I don’t file a gift tax return?

The IRS may levy fines. If it doesn’t happen in your lifetime, the situation may be uncovered by the IRS after your death, and fines can be levied on the estate.

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SoFi’s Insights tool offers users the ability to connect both in-house 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. 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 provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
*Terms and conditions apply. (Must click on the link to be eligible.) 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 into SoFi accounts such as cash in SoFi Checking and Savings or loan balances, Stock Bits, fractional shares and cryptocurrency 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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Form 709 is the way to report to the IRS any gifts made in the prior year that are subject to the gift tax. Don’t worry, though. Most people will never pay any taxes on gifts made over the course of their lives.

The annual gift tax exemption amount is fairly substantial; the lifetime gift tax exemption is stratospheric.

In any given year, you may give gifts under the annual threshold to an unlimited number of people and be free from filling out IRS gift tax Form 709. If you do need to report one or more gifts, again, you’re probably never going to have to pay gift taxes.

What Counts Toward the Gift Tax?

For taxpayers filing in 2023, the gift tax applies to anything worth over $16,000 that they gave another person while receiving nothing, or less than full value, in return.

Whether it’s cash, real estate, stocks, or the use of or income from property, the recipient must be able to have full and immediate access to the gift for the gift to qualify for the annual exclusion.

For gifts of over $16,000 per person, you can apply an amount you gift to the current lifetime estate tax exemption of $12.06 million (if you’re married, your spouse is allowed the same).

Gifts can include assets in any class or type of income, such as:

•   Real estate (including a down payment gift for a first home)

•   Stocks

•   Bonds

•   Digital assets

•   Cryptocurrencies

•   NFTs

•   Loans made with rates below IRS “applicable federal rates”

•   Transfer of benefits of an insurance policy

•   Student loan payments or other debt payments made for another person

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What Is the Annual Gift Tax Exemption?

For tax year 2022 (taxes filed in 2023), you could have given any number of people up to $16,000 each without incurring a taxable gift ($32,000 for spouses “splitting” gifts). That is up from $15,000 in tax year 2021.

You do not have to file Form 709 for a gift you made worth up to $16,000.

The annual gift tax exclusion rose to $17,000 per recipient in tax year 2023, and the lifetime exemption to $12.92 million per individual.

You can log all of your largesse in a spending app that tracks financial goals.

Examples of Gift Tax Rules in Action

Let’s say you gave $116,000 to your mother in 2022 for her birthday. You would report $100,000 of the gift to the IRS, but federal tax law provides you with that unified gift and estate tax exemption ($12.06 million for tax year 2022) to offset any gift tax you may owe.

A married couple you know has three children and five grandchildren they like to shower with generosity. Each spouse may give eight gifts of $17,000 in 2023 to their family members without touching their combined $25.84 million lifetime gift tax exemption or filling out Form 709.

You want to buy a house from a family member. The sale price must equate to what it would be between strangers unless the seller provides a gift of equity — the difference between the selling price and the home’s current market value.

The relative could give you a gift of equity worth the annual exemption ($17,000 in 2023, or $34,000 for spouses “splitting” gifts) without reporting that sum to the IRS. (Another perk: Most lenders will allow the gift to count as the down payment in a non-arm’s-length transaction.) In this example, the seller must report any gift of over $17,000, or $34,000 for spouses, and apply it to their lifetime gift tax exclusion.

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Does the Giver or Recipient Fill Out Form 709?

Form 709 is filled out by the giver of the gift. The donor is also responsible for paying the tax, whether it’s when the gift was given or after the giver’s death.

However, it is possible that the recipient may have to pay the tax if the donor does not.

How to Fill Out Form 709

Understanding what each part means and how to calculate the tax can be difficult. There are a lot of rules and exceptions to understand. When filling out Form 709, getting help from a tax professional is a good idea.

Form 709 is actually called the Gift (and Generation-Skipping Transfer) Tax Return. The generation-skipping transfer tax (GSTT) exemption applies to certain gifts that skip a generation (or are transferred to anyone more than 37.5 years younger than the donor), such as a gift from a grandparent to a grandchild. It also includes trusts.

The GSTT exemption is separate from the gift and estate tax exemption.

Determine If You Are Required to Fill Out Form 709

You do not need to fill out Form 709 if you made contributions for the following reasons:

•   Payments made that qualify for the medical exclusion

•   Payments made that qualify for the tuition exclusion

•   Payments or transfers made to certain political parties or charities

•   Payments to spouses, except for gifts over $164,000 made to non-U.S. citizen spouses (for 2022) and $175,000 (for 2023)

To reiterate, gifts under the annual exclusion amount ($16,000 per person in tax year 2022) do not need to be reported on Form 709.

For couples splitting gifts, if either spouse makes a gift that exceeds the couple’s combined annual gift tax exclusion, or if each spouse makes gifts that exceed the individual annual gift tax exclusion, both spouses will need to file a Form 709, and each will need to provide consent to split gifts on the other spouse’s return.

Each gift tax return should also disclose one-half of the amount over the combined annual gift tax exemption as a lifetime gift.

Part 1: General Information

The first part to fill out is your general information, which is the same as when you’re filing taxes for the first time or you’ve been filing for years. This includes your name, address, and whether or not you elect to split gifts between you and a spouse.

Schedule A

Head to the next page to fill out Schedule A, a computation of taxable gifts, including transfers in trust.

The filer must include information about the gift recipient, a description of the gift, and the value of the gift. Reporting taxable gifts is divided into:

•   Part 1: Gifts subject only to gift tax

•   Part 2: Direct skips

•   Part 3: Indirect skips and other transfers in trust

•   Part 4: Taxable Gift Reconciliation

Schedules B, C, D

Next, fill out Schedules B, C, and D (if applicable). Schedule B is for gifts from prior periods; Schedule C is for claiming unused amounts of the exclusion for a deceased spouse; and Schedule D is for computation of generation-skipping transfer tax.

Part 2: Tax Computation

You’ll enter amounts from Schedules A, B, C, and D back on the first page of Form 709. Your tax return preparation software or professional will calculate the amount of gift tax owed.

If filing a paper return, you’ll need to use the Table for Computing Gift Tax found in the instructions.

The executor of a decedent’s estate will use Form 706 to decide whether any estate tax is owed. Form 706 is also used to compute the GSTT on direct skips.

Recommended: What Tax Bracket Am I In?

The Takeaway

Understanding annual and lifetime gift tax exemptions is easy, but filling out Gift Tax Form 709 may require help from a professional. Remember that you can make an unlimited number of gifts valued at less than the annual limit and skip reporting them to the IRS.

How to log gifts you make and track your spending, debt, and investments? A free money tracker app like SoFi Insights allows you to connect all of your accounts on one mobile dashboard.

SoFi Insights also includes credit score monitoring.

See your total financial landscape and get insights at no cost. Now that’s a gift.

FAQ

Do I file Form 709 with my tax return?

Yes, Form 709 is filed with your federal tax return if you exceeded the annual gift tax exclusion.

What happens if I don’t fill out Form 709?

According to the IRS, filers who are required to fill out Form 709 but do not may be subject to penalties and criminal prosecution.

An audit could reveal a gift not reported. A generous gift might just stick out like a sore thumb. If you’re running behind, file Form 8892 by Tax Day for an automatic six-month extension of time to file Form 709 when you are not applying for an extension to file your individual income tax return.

What should I include with Form 709?

Include all gifts in excess of the annual threshold that were given during the tax year and that need to be reported to the IRS.

Do you have to file Form 709 every year?

IRS Form 709 must be filed every year that gifts worth more than the excluded amount were made. For tax year 2022, that’s any gift given by an individual that was over $16,000 in value; for 2023, it’s gifts over $17,000. Couples may “split” gifts.

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SoFi’s Insights tool offers users the ability to connect both in-house 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. 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 provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
*Terms and conditions apply. (Must click on the link to be eligible.) 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 into SoFi accounts such as cash in SoFi Checking and Savings or loan balances, Stock Bits, fractional shares and cryptocurrency 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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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The earned income tax credit directly reduces the amount of income tax owed by lower-income working taxpayers. Depending on a tax filer’s number of children, tax filing status, and income, the tax credit can be in the thousands.

Here’s what you need to know about the 2022 EITC tax refund schedule and the 2023 EITC numbers.

Recommended: Does Net Worth Include Home Equity?

What Is the Earned Income Tax Credit (EITC)?

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

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

The credit ranges from $560 to $6,935 for the 2022 tax year (taxpayers filing by April 18, 2023) and from $600 to $7,430 for 2023.

For those filing federal returns in 2023, the maximum allowable adjusted gross income (AGI) is $59,187 for a married couple filing jointly who have three or more children. Tables with amounts for the tax credit and maximum AGI are in the next section.

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

Recommended: Are Student Loans Tax Deductible?

How Does the Earned Income Tax Credit Work?

The EITC is a fairly complicated credit, even for taxpayers who are not filing taxes for the first time. In fact, the IRS sees errors in close to 25% of tax returns claiming it. Online tax filing software can help. The IRS also offers an “EITC Assistant” calculator.

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

Investment income must be $10,300 or less in 2022 ($11,000 or less in 2023).

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

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

Taxpayers with earned income or AGI above a certain level won’t qualify for the tax credit at all. These amounts are listed below for tax years 2022 and 2023.

Tax Year 2022 EITC Tax Refund Schedule
Number of children or dependents	Maximum earned income tax credit	Maximum AGI for single, head of household, or widowed filers	Maximum AGI for married joint filers
0	$560	$16,480	$22,610
1	$3,733	$43,492	$49,622
2	$6,164	$49,399	$55,529
3 or more	$6,935	$53,057	$59,187

Phaseout amount begins at:

•   Single, head of household, or widowed: $9,160 for no children; $20,130 with qualifying children.

•   Married filing jointly: $15,290 for no children; $26,260 with qualifying children.

Tax Year 2023 EITC Tax Refund Schedule
Number of children or dependents	Maximum earned income tax credit	Maximum AGI for single, head of household, or widowed filers	Maximum AGI for married joint filers
0	$600	$17,640	$24,210
1	$3,995	$46,560	$53,120
2	$6,604	$52,918	$59,478
3 or more	$7,430	$56,838	$63,398

Phaseout amount begins at:

•   Single, head of household, or widowed: $9,800 for no children; $21,560 with qualifying children.

•   Married filing jointly: $16,370 for no children; $28,120 with qualifying children.

Who Qualifies for the EITC?

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

Types of income include:

•   W-2 wages from employment

•   Self-employment (or gig or freelance) earnings

•   Certain disability benefits

•   Benefits from a union strike

•   Nontaxable combat pay

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

•   Social Security

•   Child support or alimony

•   Unemployment benefits

•   Pensions or annuities

•   Interest and dividends

•   Pay as a prison inmate

What Are ‘Qualifying Children’?

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

The four tests for a qualifying child are:

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

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

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

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

Recommended: How Long Does It Take for the IRS to Send Refunds?

Can You Claim the EITC If You Have No Children?

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

For tax year 2022, the maximum credit is $560 for filers without children. The maximum adjusted gross income is $16,480 for taxpayers filing as single, head of household, or widowed and $22,610 for married couples filing jointly.

For tax year 2023, the maximum credit is $600. The income figures are in the table above.

Requirements include:

•   A valid Social Security number

•   Not filing Form 2555 (foreign earned income)

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

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

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

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

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

How the EITC Can Affect When You Receive Your Refund

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

Expect a tax refund by March 1, assuming there were no issues with your tax return and you opted for direct deposit, the IRS says.

Recommended: What is The Difference Between Transunion and Equifax?

Common Errors to Avoid When Claiming the EITC

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

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

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

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

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

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

Recommended: Should I Sell My House Now or Wait?

The Takeaway

The EITC offers income tax relief for lower-income workers. If you think you might qualify, look at the EITC tax refund schedules, seek tax help if you need to, and file electronically for a speedier refund.

While filing taxes isn’t most people’s idea of fun, a free money tracker app can make keeping your financial house in order much easier.

SoFi Insights free budget app will allow you to track your credit score, keep tabs on your cash flow and spending habits (plus find ways to save), monitor your credit usage, and see the paydown progress on your loans.

Take credit for good decisions, like signing up for SoFi Insights.

FAQ

When should I expect my EITC refund?

According to the IRS, a refund with an EITC will arrive around March 1 if you filed electronically and elected for direct deposit, and there were no issues with your return. By law, the IRS cannot issue a tax refund with an EITC before mid-February.

Most taxpayers of all stripes who file electronically should get a refund within 21 days, the IRS said in January 2023.

Will there be an EITC in 2023?

Yes, there is an EITC for 2023. It rises to a maximum of $7,430 for the 2023 tax year.

Will tax refunds be bigger in 2023?

No, not in general. Many taxpayers could see significantly smaller refunds in 2023, the IRS says, thanks to the expiration of expanded tax credits that served as pandemic relief. For the EITC, a taxpayer with no children who received an earned income credit of $1,502 in 2021 will receive a credit of $560 for tax year 2022 ($600 for 2023).

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Photo credit: iStock/sinseeho

SoFi’s Insights tool offers users the ability to connect both in-house 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. 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 provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
*Terms and conditions apply. (Must click on the link to be eligible.) 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 into SoFi accounts such as cash in SoFi Checking and Savings or loan balances, Stock Bits, fractional shares and cryptocurrency 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.
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.
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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