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Whether you’re chasing down a dream or looking at an irresistible piece of land in a town far away, you might find yourself wondering how to move to another state.

Will it be difficult? How much will it cost? What will the expenses entail? There’s a lot to consider when relocating — here are some things to keep in mind.

Is It Hard to Move to Another State?

Generally speaking, moving to a new state may take some work, and planning for it might need to happen well in advance to ensure everything stays on track.

You’ll want to consider things like potential neighborhoods to live in, crime rates, the school system, transportation options, and walkability. Before you move, you may also want to think about what items you’ll want to take with you (and what you’ll need to donate), what your moving budget is, and whether it makes sense to hire professional movers.

A Simple Checklist For Moving Out of State

Sometimes, a good old-fashioned moving checklist is the easiest way to ensure things get done on time:

1. ⃞ Find a place to live.

2. ⃞ Select a moving date. If your schedule is flexible and costs are a concern, consider moving during a weekday, which tends to be cheaper than the weekend.

3. ⃞ Select a professional mover (if using one). Request a few quotes from reputable movers.

4. ⃞ Build a budget based on common moving expenses plus any other cost considerations unique to your move.

5. ⃞ Take stock of and sort your stuff about one month before the move. What needs to come along? What should be tossed? What can be given to charity? Start sorting, selling, packing, trashing, and donating accordingly.

6. ⃞ Cancel old services/start new ones. Schedule the stoppage of utilities like cable, internet, gas, and electric, and set up installations at your new location. It could also be a good time to update or cancel gym memberships, delivery services, subscriptions, etc.

7. ⃞ Gather up boxes and packing supplies. About three weeks before the move, start securing boxes, rolls of packing tape, bubble wrap, and other supplies.

8. ⃞ Pack it all up. You might wait until moving day to get the toothpaste into the “personal items” box, but the two weeks before the move can be spent packing belongings and gathering important documents like leases, moving contracts, and moving expense receipts.

9. ⃞ Say farewell. It might sound cheesy, but giving a thoughtful goodbye to any home that held you can be helpful for moving ahead. Perhaps the last pie from your favorite local pizzeria is in order.

How Much Money Should You Save to Move Out of State?

When planning how to move to another state, knowing how much to save to cover moving expenses is an important initial step.

The average cross-country move typically costs somewhere between $2,648 and $6,979, according to HomeAdvisor, with the average amount being around $4,800.

Several other factors can influence how much someone should save to move out of state, such as the number of items they’re moving, how far they’re going, and whether they plan to move themselves or hire professionals. In some cases, long distance moving costs could reach $10,000 or more.

Common Moving Expenses

To decide how much money to save for a move out of state, knowing the most common moving expenses can be helpful:

•   A deposit on the new place, which is typically first and last month’s rent/security on an apartment, or a down payment on a new house.

•   Moving costs, or the amount of money it takes to physically move items — whether with rented equipment or professional movers — from point A to point B. As previously mentioned, they average $4,800 for an out-of-state move, but this figure can vary depending on the distance of the move and the company hired.

•   Transportation costs for traveling to the final destination. A fuel cost calculator can be a helpful tool to get an idea of how much to budget for this expense.

•   Packing supplies like boxes, packaging tape, bubble wrap, packing peanuts, markers, etc.

•   Cleaning supplies can get overlooked, but several surfaces might need scouring. From trash bags to all-purpose cleaners, carpet cleaning for pesky pet stains, mops, and more, having some funds saved for a clean slate can prove helpful in the moving process.

•   Repair and maintenance costs might arise from issues like holes in the walls from hanging artwork, a broken light fixture, a torn screen, etc. Taking out a home improvement loan ensures things can be up to snuff in both abodes.

•   New furniture and home decor can help warm up your new home on day one.

•   New driver’s licenses and registrations can cost anywhere from $10-$89 for a license and up to $225 for a registration.

Recommended: How to Get Approved for a Personal Loan

Ways to Save When Moving to Another State

It can take a lot of time and energy to move to a different state. Luckily, there are several ways to save money in the process:

•   Using cash for moving expenses instead of racking up credit card debt can save money over time.

•   Selling unwanted items is a great way to create space, remove clutter, and acquire some extra moving funds.

•   Packing with free supplies like used boxes or bubble wrap from friends, family or even the town “free stuff” page can help save lots versus buying brand new.

•   Getting help from friends can help you save time which, in turn, can save you money. They can help with sorting, packing, cleaning, and even selling old items to their network.

•   Asking an employer to help with relocation costs can potentially be negotiated, especially if you’re sticking with them in the new state.

•   Relocation loans can be a solid saving option when you need quick cash to move to another state. They can cover a wide range of moving costs, from deposits to storage to professional movers, transportation, and even hotel stays.

The Takeaway

Moving out of state often requires detailed planning, preparation, and lots of considerations — like what it’s like to live in the new location, opportunities for employment, how to sort and pack belongings, how much to save in advance, whether to hire professional movers, what the moving budget is, and how to secure funds for moving costs. The good news is, there are ways to save for a move to another state. Ideas include using cash instead of credit, selling unwanted items, packing with free supplies, asking an employer for relocation assistance, and asking for packing and moving help from friends.

When it comes to paying for moving-related expenses, consider a SoFi personal loan. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.
View your rate

SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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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Whether you’re looking to spruce up your barbecue area or design a fully equipped kitchen, there are plenty of options and logistics when it comes to building an outdoor kitchen.

This guide will go through the steps of siting, designing, and creating an outdoor kitchen, along with some typical costs and considerations for making your home improvement dreams a reality.

Settling on a Location

Before diving into the details of outdoor kitchen designs, settling on a location can help focus your planning and creativity. For starters, you can take stock of existing structures in the yard that could be incorporated into the design, such as patios and decks.

When envisioning options, measure the square footage of potential kitchen areas. This can inform what types of equipment and accessories will fit in the space you have.

Having some essential design features in mind, such as a grill or wood-fired pizza oven, could help guide the siting process, too. If you have your eyes on heavier equipment, like furniture or a bar, you may need to reinforce a deck or patio to safely accommodate the extra weight. Consulting with a professional contractor is advisable to prevent sagging in the floorboards or more severe damage that could lead to a complete backyard remodel.

Slope and distance from the house could also impact the feasibility and cost. Building on an inclined surface might require a more robust foundation than a level area. Situating an outdoor kitchen a greater distance from the home may add the expense of connecting electricity or plumbing, not to mention the practicality of walking back and forth. Adding outlets can cost between $150 and $300 each, while new wiring costs $7 to $10 per foot, excluding the cost of labor for installation.

If possible, use existing structures or buildings next to the house to reduce such costs, and integrate an outdoor kitchen with the rest of the living space.

If you need help paying for your backyard sanctuary, a personal loan may be one option to consider. Personal loans are repaid with monthly payments of principal plus interest. Generally, there is some discretion on how the borrower spends the money, whether on an outdoor kitchen or paying off credit card debt.

Recommended: What Are the Most Common Home Repair Costs?

Creating an Outdoor Kitchen Design

After hashing out where to build, it’s time to delve into the details of the outdoor kitchen design. While browsing through dream kitchens on HGTV can provide inspiration and creative ideas, being realistic with your budget and desired kitchen features can keep you on track.

To avoid the impulse of keeping up with the Joneses, it may be beneficial to make a ranked list of possible equipment and design components alongside a budget.

Keeping in mind your own cooking habits and diet can be a useful litmus test to determine what you may use frequently and what could likely accumulate dust. It’s also worth considering how many people you’d like to accommodate.

If you’re overwhelmed with ideas but don’t know where to begin, finding a focal point to design around is one option to consider. For instance, barbecue connoisseurs may want to orient the outdoor kitchen design around the grill, whereas skilled mixologists might prefer to showcase their craft behind a central bar area.

Here are some further ideas for accessories and appliances to outfit an outdoor kitchen.

Grill

A built-in grill can look sharp and tailored within an outdoor kitchen design, but it can’t be wheeled away for additional entertainment space when you’re not cooking. Opting for a freestanding grill could help stretch your budget further and add some flexibility to an outdoor kitchen design.

Kitchen Island

Adding a kitchen island for a mixed-use of counter space and seating can further integrate the cooking and dining space to bring everyone together at a dinner party or family gathering. Opting for the roll-away variety can help you customize an outdoor kitchen depending on the occasion.

Sink

Including a sink in an outdoor kitchen is useful for cooking, easy clean up, and sanitation. The practicality of installing a sink and plumbing also depends on how far the outdoor kitchen is from the house. Carrying dirty dishes and pans a short distance for washing inside may not be worth the added cost of plumbing for some people.

Refrigerator

Whether storing food or drinks, a fridge can keep an outdoor kitchen stocked and ready and cut down on trips between the house. This requires running electricity for ongoing operation. For a full-size fridge, you can expect the cost to average between $1,000 and $2,000.

Countertops

As the cook in any family can attest, counter space is a big help when it comes to staging and preparing food. On top of stains and wear and tear over time, outdoor kitchen countertops may need to be weather resistant, too.

Marble is a popular interior countertop surface, but its cost and vulnerability to staining and wear mean it’s not the most durable. Some more hardy choices include slate and granite. Tile is a cheaper sturdy alternative, but typically requires more maintenance to clean the grout and replace cracked pieces.

For a functional amount of space, consider having at least 18 inches on each side of a sink, as well as 18-24 inches on either side of a grill.

Cabinets

To house all your outdoor kitchen utensils, pots, and pans in one place, cabinets are a good bet. Similar to the countertops, durability is a key factor to consider alongside cost. Using a marine-grade paint or stain on wood cabinets can improve their weather resistance and tie in the outdoor kitchen design with the house.

Lighting

Unless the outdoor kitchen will be built on an existing porch or patio, adding lighting may be a necessary investment to make a backyard dinner party possible. As mentioned, extending electrical wiring and adding outlets comes with costs. Given that 15% of home energy expenditures go towards lighting, going with solar lights could save on both the electric bill and wiring.

Landscaping

After construction is completed, landscaping can further beautify the outdoor kitchen space and provide privacy and shade in the way of bushes or trees. Landscaping costs can be as little as $500 to $700 for smaller jobs, though this is an easier opportunity than say plumbing or electric to recoup some money as a DIY project.

Recommended: 20 Beautiful Small-Kitchen Remodel Ideas

Choosing a Shelter

Even in the fairest of climates, having some protection from the sun and assurance you won’t be caught in the rain can be an asset to an outdoor kitchen design. In addition to making a more comfortable space, a shelter could also increase the lifespan of your outdoor kitchen equipment and furniture.

Check out some possible options that can protect and enhance an outdoor kitchen design.

Awning

Awnings are an option for shading an outdoor kitchen area. Based on size and materials used, a built-in awning costs between $1,409 and $4,350 on average.

Canvas awnings are not the most durable choice for areas that can have harsh weather conditions, but they can be removed and stored during winter and inclement weather to extend their lifespan. Metal awnings are another option, and are generally cheaper and sturdier. Upgrading to a mechanically retractable awning will likely increase cost, but can be handy in locations where weather changes quickly and frequently.

Gazebo

A framed gazebo can protect furniture and kitchen equipment while creating a comfortable space for cooking and dining. Whereas awnings are often attached to a structure or need to be taken down seasonally, gazebos can offer longevity and more options for placement.

Pergola

Composed of vertical posts and overhead cross-beams with open lattice, pergolas can add some architectural appeal to an outdoor kitchen area. The structure is well-suited for growing vines to increase shade while allowing for ample breeze.

The Takeaway

After figuring out the location, dimensions, and trimmings for your outdoor kitchen design, you can begin itemizing building or remodeling costs within a budget. If you come to realize you’re biting off more than you can chew, it’s okay to do the project in pieces. After all, cooking in your outdoor kitchen could be quite a bit cheaper than ordering from a restaurant, thus helping pad your savings further. There are also options to finance an outdoor kitchen project, such as personal loans.

If you’re ready to roll up your sleeves and get some home repairs or renovations done, see what a SoFi personal loan can offer. With a SoFi Home Improvement Loan, you can borrow between $5k to $100K as an unsecured personal loan, meaning you don’t use your home as collateral and no appraisal is required. Our rates are competitive, and the whole process is easy and speedy.

Turn your home into your dream house with a SoFi Home Improvement Loan.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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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Congratulations on the new home. But hang on. The garbage disposal isn’t working as it should and the hot water doesn’t seem to be hot anymore. A home warranty can ease the headaches and financial strain of fixing or replacing appliances and home systems, but any contract will require much more than a glance.

A policy can be purchased directly from a home warranty company at any time, not just upon a move-in. In some cases, the seller may provide a home warranty with the sale of the home.

Home warranties can help protect new homeowners and existing owners from troubles here and there, but is a home warranty really worth it?

What Exactly Is a Home Warranty?

A home warranty—different from homeowners insurance—covers specific items such as home systems (things like the HVAC system), washers and dryers, kitchen appliances, pool equipment, garbage disposals, and exposed electrical work.

Homeowners insurance, on the other hand, covers theft and damage to a home from perils like fire, wind, and lightning strikes.

While homeowners insurance is typically required by a mortgage company, home warranties are optional.

Price of a Home Warranty

The cost of a home warranty can range from $350 to $600 a year, possibly more for coverage for items not on the stock home warranty list. Extras may include pool systems and septic systems.

Those who purchase a home warranty will pay that annual premium. If they do call in a service provider, they will likely have to pay a fee for service calls, too.

Depending on the extent of the issue, the service call may cost anywhere from $60 to $125.

Recommended: How Much Are Closing Costs on a New Home?

Pros of a Home Warranty

While the above fee may seem pricey, the real pro of having a home warranty is it could save a homeowner a bundle on repairs in the future. HomeAdvisor reports that the average national cost to replace an HVAC system ranges from $5,000-$10,000, and a new water heater ranges from $872-$1,745. Both of these items would likely be covered under a home warranty.

Another benefit of a home warranty is pure convenience. If something breaks, a homeowner calls the warranty company, which will likely have a list of technicians at the ready. This means homeowners won’t have to spend time researching and vetting the right people for a repair or replacement. As the saying goes, time is money.

Then there’s resale value. When selling a home, homeowners with a home warranty may be able to transfer the warranty to the new owner, which could be a bargaining chip for those attempting to sell an older home. (Some home warranties are non-transferable, so it’s up to sellers to do their due diligence when adding this to the deal.)

Cons of a Home Warranty

A downside of a home warranty is that it can be complicated to understand. Every purchaser should carefully read the contract before signing and ask all the questions they need to in order to understand the warranty.

For example, a home warranty may come with a financial limit per repair or per year. If someone ends up having one heck of a year with the appliances, some of those repairs may not be covered.

Recommended: Most Common Home Repair Costs

You may need to request additional coverage for appliances that are considered optional or replaced frequently. And will your Sub-Zero fridge and Wolf range be covered if they go kaput? (Not likely.) Most warranty companies list excluded items on their sample contracts.

Ask: Will the plan repair or replace a broken item? If a repair is considered too expensive, the provider might offer to replace the broken item—but give you only the depreciated value.

Claims can also be denied by the warranty company for a variety of reasons, including if it believes an appliance hasn’t properly been maintained. The warranty company can also ultimately decide if a problem is worth fixing or not, despite how the homeowner feels about the situation.

Home warranties also cannot guarantee timeliness. If something breaks, homeowners may have to wait longer than they’d like to get it fixed.

Home warranties will also likely not cover preexisting conditions. If a person moves into a home with a termite problem, the warranty will likely not cover the cost to repair issues. Before you sign the warranty, the company will probably come inspect all the items covered, and could deny coverage for certain items.

Choosing the Right Home Warranty

Choosing the right home warranty comes down to personal choice and research. It’s important to look into each contract to see what is covered, what isn’t, the cost of services, and more.

While searching for the right home warranty, it may be best to go beyond online reviews. Rather than looking on public listings, head over to websites like the Better Business Bureau and search for individual companies.

Is a Home Warranty Really Worth It?

A home warranty could be the right call for people who are not up for having to perform repairs themselves or don’t have time to hire technicians.

For those buying a new construction, a home warranty may likely be unnecessary as many newer homes come with some type of guarantee. Also, because everything is newer, it may be less likely to break early on.

Individual appliances may also come with their own warranties, so make sure to check each one to see if it’s still protected before spending extra money on it with a home warranty.

One more way to figure out if a home warranty is worth it is to check out the home’s inspection report. If there are red flags about a home’s condition, it may be a good idea to purchase a home warranty to cover any additional expenses that crop up.

Alternatives to Home Warranties

If homeowners are worried about protecting their investment but aren’t sure a home warranty is right for them, there is an alternative: Build up an emergency fund.

Homeowners can start stashing away cash into an emergency savings fund that they can dip into whenever they need repairs done. This acts as their own “home warranty” without having to pay a premium to a company.

To take it one step further, homeowners could also create a spreadsheet with the names of repair workers when they need something fixed.

The Takeaway

Are home warranties worth it? Anyone looking into purchasing one will want to take a close look at the annual cost, the charge for service calls, exactly what is and isn’t included, and how much of a replacement item is covered.

If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.

Learn more about your homeowners insurance options with SoFi Protect.

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Social Finance, Inc. ("SoFi") is compensated by Experian for each customer who purchases a policy through Experian from the site.

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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

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

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Many of us rely on a job for our income. If that includes you, and if you find yourself unable to continue performing your job duties because of a physical ailment, disability insurance can be a godsend. It replaces a portion of the income you lose when you can’t work.

Disability insurance comes in two distinct flavors: own-occupation (also called own-occ) and any-occupation (or any-occ) disability insurance policies. Although they may sound similar, there are some key differences in how much coverage each type of policy offers.

What Is Disability Insurance?

Let’s start with a review of what disability insurance is and how it works.

Disability insurance is an insurance product that protects workers against income loss due to a disability. In other words, if a disability or illness keeps you from being able to do your job, disability insurance can provide you with a source of income. But typically, the payments don’t replace the full amount of your lost wages.

Disability insurance usually has an expiration date. Short-term disability insurance pays a portion of your lost wages — typically between 50% to 70% — for three to six months. Long-term disability insurance can pay around 60% to 80% of your lost wages for two years or until your retirement, based on your specific policy. (The duration may be reflected in the premium amount.)

There’s also public disability insurance through the Social Security program: Social Security Disability Insurance (SSDI), which is free and can pay for as long as you are disabled or until you reach retirement age. Those payments are calculated based on your average indexed monthly earnings, which means they might be higher than the 60% to 80% range offered by private insurers. However, SSDI can be difficult to qualify for and the process can be lengthy. Even if you are approved, you must wait five months after approval to receive your first payment.

Recommended: Short Term vs. Long Term Disability Insurance

Own-Occupation vs. Any-Occupation Disability Insurance

When purchasing private disability insurance, you may have the option to choose either an own-occupation policy or any-occupation policy. (Note that your employer may only offer only any-occupation policy, so be sure you read your paperwork carefully to understand what you’re getting.)

Own-occupation is a more robust disability insurance product. It protects you in the event you become disabled and can’t work at your job. Typically, it’s more expensive than any-occupation disability insurance.

Any-occupation disability insurance protects you in the event you become disabled and can’t work at any job you’re reasonably qualified for.

Let’s dive deeper into the differences between these two products.

Own-Occupation Disability Insurance

Own-occupation disability insurance insures you against any disability that keeps you from performing your regular job. In many cases, you’re still eligible to receive benefits even if you find another job.

There may be language in the contract stating that you have to have been working at the moment you became disabled in order to be covered. But there are also policies that cover people who become disabled outside work if their disabilities prevent them from performing their job duties.

Highly skilled surgeons, for example, frequently get own-occupation insurance, since their jobs require such finely tuned motor skills. For instance, if Grey’s Anatomy heart surgeon extraordinaire Dr. Preston Burke, who suffered from hand tremors after surviving a gunshot injury, had had own-occupation insurance coverage, he could have chosen to move into a different role in the hospital and still received benefits for losing his ability to perform his original job. He could also have chosen not to work at all and still have received benefits.

Any-Occupation Disability Insurance

Any-occupation disability insurance works a bit differently. This type of policy insures you against any disability that keeps you from performing any job you’re reasonably qualified for.

“Reasonably qualified” is determined by the insurance company and is based on factors like your age, education, and experience level. If you’re still considered “capable” of working with the disability — even if it’s at a lower-paying job — you would likely not receive any disability benefits at all.

This means that any-occupation insurance is a much less flexible and reliable form of disability insurance coverage. However, it’s often the only option available through an employer. Be sure to read your benefits package carefully, since you might want to purchase additional coverage to ensure that you’ll receive benefits if you do find yourself unable to do your work.

Let’s go back to the Dr. Burke example to see how the difference between these two insurance coverage options plays out. Because Dr. Burke was still a talented doctor who could perform other medical services and assessments, any-occupation disability insurance wouldn’t have covered him at all after he sustained his gunshot wound. Although he was unable to perform delicate heart surgeries, he could have taken another job in the hospital or even a job outside the medical field entirely. Thus, his any-occupation disability insurance wouldn’t have kicked in unless he sustained a more incapacitating injury that rendered him unable to work at all.

Recommended: Everything You Need To Know About Getting a Loan While on Disability

The Takeaway

Disability insurance helps you replace part of your lost income if you become unable to perform your job duties due to an illness or injury. But when you’re covered depends in large part on whether you have own-occupation or all-occupation insurance.

Own-occupation disability insurance coverage kicks in if your disability prevents you from performing the specific occupation you hold. Any-occupation disability insurance coverage kicks in only if you can’t perform any job you’re reasonably qualified for.
That’s why it’s key to know what kind of policy you have and whether you have the right coverage in place.

Disability coverage can offer one level of protection; life insurance can provide another. If you’re thinking about getting life insurance, SoFi has teamed up with Ladder to offer competitive policies that are quick to set up and easy to understand. You can apply in just minutes and get an instant decision. As your circumstances change, you can easily change or cancel your policy with no fees and no hassles.

Complete an application and get your quote in just minutes.

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Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance. Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

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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If you paid money on your student loans in the last tax year, you might qualify for the student loan tax deduction, which allows borrowers to deduct up to $2,500 in interest they paid out of their taxable income.

Here are some important things you should know about the student loan interest deduction and whether you qualify.

How the Student Loan Tax Deduction Works

With the student loan tax deduction, you claim the interest you paid on your student loans throughout the tax year when it’s time to do your taxes.

The interest applies to qualified student loans that were used for tuition and fees; room and board; coursework-related fees, books, supplies, and equipment; and other necessary expenses like transportation.

So how much student loan interest can you deduct? If you qualify for the full deduction, you can deduct student loan interest up to $2,500, as long as you actually paid that much in interest. (You don’t need to itemize in order to get the deduction.)

Not only do required interest payments count, but if you made any additional interest payments toward your student loans in the past tax year, those count too.

How to Qualify for the Student Loan Tax Deduction

To be eligible to deduct student loan interest, individuals must meet the following requirements:

•   You paid interest on a qualified student loan (a loan for you, your spouse, or a dependent) during the tax year.

•   Your modified adjusted gross income (gross income for the year minus certain deductions) is less than a specified amount that is set annually.

•   Your filing status isn’t married filing separately.

•   Neither you nor your spouse can be claimed as a dependent on someone else’s return.

The loans in question can be federal or private student loans.

Recommended: Private Student Loans Guide

What Are the Income Requirements for Student Loan Tax Deduction?

Your modified adjusted gross income (MAGI) is calculated on your federal tax return before any student loan interest deduction is made. The eligible ranges are recalculated annually.

For tax year 2022 (filing in 2023), the student loan interest deduction was worth as much as $2,500 for a single filer, head of household, or qualifying widow/widower with a MAGI of under $70,000.

For those who exceeded a MAGI of $70,000, the deduction began to phase out, meaning the most they could deduct was less than $2,500. Once their MAGI reached $85,000 or more, they were no longer able to claim the deduction.

For married couples filing jointly, the phaseout began after a MAGI of $145,000, and eligibility ended at $175,000.

Confused by all these requirements? If so, consider going to a tax professional to help with your return to make sure you can take advantage of the deduction.

Other Tax Deductions for Students

In addition to the student loan interest rate deductions, there are other tax breaks that may be available to you if you’re a student, or you’re saving for or paying for certain education expenses for yourself, a spouse, or a dependent. Here’s a look:

529 Plans

A 529 college savings plan is a tax advantaged plan that allows you to save for qualified education expenses — like tuition, lab fees, and text books — for yourself or your children. You can contribute up to $15,000 per year without triggering gift taxes, and other family members can contribute to the fund, as well.

Savings can be invested and grow tax free inside the account. And while the federal government doesn’t offer any tax deductions, some states will provide tax benefits like deductions from state income tax. Withdrawals must be used to cover qualified expenses, otherwise you will face income taxes and a 10% penalty.

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) helps offset $2,500 in qualified education expenses per student per year for the first four years of higher education. Unlike a tax deduction, tax credits reduce your tax bill on a dollar-for-dollar basis. And if the credit brings your taxes to zero, 40% of whatever remains of the credit amount can be refunded to you, up to $1,000.

To be eligible for the AOTC you must be getting a degree or another form of recognized education credential. And at the beginning of the tax year, you must be enrolled in school at least half time for one academic period, and you cannot have finished your first four years of higher education at the beginning of the tax year.

Lifetime Learning Credit

The Lifetime Learning Credit (LLC) helps pick up where the AOTC leaves off. While the AOTC only lasts for four years, the LLC helps offset the expense of graduate school and other continuing educational opportunities. The credit can help pay for undergraduate and graduate programs, as well as professional degree courses that help you improve your job skills. The credit is worth $2,000 per tax return, and there is no limit to the number of years you can claim it. Unlike the AOTC, it is not a refundable tax credit.

To be eligible, you, a dependent or someone else must pay qualified education expenses for higher education or pay for the expenses of an eligible student and an eligible educational institution. The eligible student must be yourself, your spouse or a dependent that you have listed on your tax return.

Recommended: Can You Deduct Your Child’s Tuition from Taxes?

Look for Form 1098-E

Unfortunately, you can’t deduct the entirety of your student loan payments from your taxes. As mentioned, you can only deduct your interest. How to get the student loan interest deduction? Your loan provider reports information on interest paid on Form 1098-E, which is a tax form financial institutions generally send to borrowers when the tax year ends.

The only reason you wouldn’t receive one from your lender is if you paid less than $600 in interest on their loan. But these forms don’t always report things like the interest you paid on certain origination fees or capitalized interest, which may also qualify for the student loan deduction.

How to Calculate the Student Loan Tax Deduction

To calculate the full value of the interest deduction, start with the amount of interest the form says you paid, and then add any interest you paid on qualified origination fees and capitalized interest. Just make sure these amounts don’t add up to more than the total you paid on your student loan principal.

Clear as mud, right? Hey, no one said the IRS makes things easy! Here are some examples of how to deduct these amounts.

Deducting the origination fee: As of Sept. 1, 2004, this fee — usually a one-time fee that lenders charge for creating a new loan — is included on your 1098-E. For loans issued before that date, you can use any reasonable method to allocate the loan origination fees over the term of the loan. One way to do this is to figure out how much the fees will cost you monthly over the life of the loan.

Example: If the origination fee you were charged on your loan was $1,000 and the term length was 10 years, or 120 months, that would mean your origination fee would be $8.33 per month, or $100 per year.

Deducting capitalized interest: If your Form 1098-E says your loan has capitalized interest, you can also claim that after you’ve claimed an origination fee deduction. Capitalized interest accrues and then is added to the loan principal if you don’t pay it. For example, Unsubsidized federal student loan accrue interest while the student is in school and during the loan’s grace period. It’s common for that interest to be capitalized (added to principal) at the end of the grace period.

Example: If you made $6,000 in student loan payments, of which $1,000 went to interest and $5,000 to principal, you can claim the $100 you paid toward your origination fee and the full $1,000 in capitalized interest. But if you only paid off $750 of your principal, you can claim $650 of the $1,000 of capitalized interest, because you’ll have to claim the $100 in origination fees first and you can’t exceed the amount you paid toward your principal.

Tips for Lowering Your Student Loan Payments

Tax credits and deductions are one way to help pay for the cost of school. Finding ways to lower your student loan payments is another cost-saving measure and can be good to know about when it comes to the basics of student loans. Here are a few ideas:

•   Put money toward student loans by making additional payments to pay down your principal. Doing this may help reduce the amount of interest you will owe less interest over the life of the loan, but beware of any prepayment penalties.

•   Make interest only payments while you’re still in school. This may prevent thousands of dollars from being added to your loan principal.

•   See whether your loan provider offers discounts if you set up automatic payment. Federal Direct Loan holders may be eligible for a 0.25% discount when they sign up for automatic payments.

•   Consider refinancing student loans, replacing your student loan with a new loan that ideally has a lower interest rate or more favorable terms.

While there are advantages of refinancing student loans, such as possibly lowering your monthly payments, there are disadvantages as well. One major caveat: If you refinance federal loans, they are no longer eligible for federal benefits or protections. Also, you may pay more interest over the life of the loan if you refinance with an extended term. Refinancing is not right for everyone.

The Takeaway

Who doesn’t love a tax deduction? Qualified filers can take a student loan interest deduction of up to $2,500 atop the standard deduction. Most private and federal student loans are fair game.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. And lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

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SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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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.

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.

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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