California might have some of the highest sales tax rates in the country, and calculating how much is owed can come down to where the item is sold, what the item is and who it’s sold to.
California state sales tax rate
In California, the statewide sales tax is 7.25%. However, the final price of any taxable purchase could be higher due to district taxes, which can be anywhere from .10% to 1.00%. It’s also possible to have more than one district tax applied to a purchase.
California state sales tax calculator
Who pays CA sales tax?
In California, sellers are responsible for calculating sales tax and paying the correct amount to the California Department of Tax and Fee Administration (CDTFA).
During a sale, if sales tax is not included in the price, sellers pass the California sales tax to their buyers by meeting three conditions:
The sales agreement calls out the addition of sales tax reimbursement.
The sales tax is listed separately on receipts and invoices.
There’s a sign on the premises (or on price tags, advertising or other printed materials) stating that sales tax reimbursement will be added to prices of taxable products.
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If the sales tax is included in the price, then a notice to the buyer needs to be visible that states either one of the following:
“All prices of taxable items include sales tax reimbursement computed to the nearest cent.”
“The price of this item includes sales tax reimbursement computed to the nearest cent.”
What items are subject to sales tax?
Tangible personal property sold at retail is subject to California sales tax. This could include furniture, gifts, toys, antiques and clothing. Service and labor costs may also charge sales tax, particularly if they create physical items.
Some items exempt from sales tax include certain food products and prescription medicine.
Who is exempt from California sales tax?
No organizations, whether nonprofit, religious or exempt, have a blanket exemption from California sales and use taxes. Instead, it depends on the type of sale and organization.
In general, the types of sales and purchases that are exempt from sales tax include certain food products, prescription medicine, some vehicle and vessel transfers, as well as sales to the U.S. government.
Who collects CA sales tax?
California sales tax is collected by sellers, who then pay that amount to the CDTFA.
Does California have a sales tax holiday?
California does not have any sales tax holidays.
Can you deduct California sales tax?
You may be able to deduct California sales tax from your federal tax return by taking the SALT deduction. This allows for the write-off of up to $10,000 of state or local taxes paid that year.
However, this strategy requires itemizing, which may be ideal for those who live in a state with a high sales tax and who purchase a large number of taxable goods and services throughout the year. Otherwise, itemizing might not result in the largest tax refund, so it can be helpful to seek professional tax advice if you’re considering deducting your California sales tax.
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When a kid receives income for doing nothing, they’re at risk of triggering the kiddie tax, which the child’s parent or guardian will then have to pay.
Under the kiddie tax, if a child is holding income-generating assets, and that income is above $2,500 for the year, their income is taxed at their parent or guardian’s marginal income tax rate. Investment or other unearned income in the form of capital gains, dividends and interest count.
The kiddie tax threshold is $2,500 in 2023 and $2,600 in 2024. In other words, in 2023, a parent or guardian would have to pay income taxes on their child’s investment income above $2,500 at their income tax rate, not their child’s (which is likely lower).
How does the kiddie tax work, and who does it apply to?
Unearned income could take the form of distributions from investments in a custodial account, custodial Roth IRA for kids, or ABLE account, for instance. People with investment income who are under the age of 18, or dependent students between the ages of 19 and 24, are taxed as follows for 2023:
The first $1,250 of unearned income is tax free.
The next $1,250 of unearned income is taxed at 10%, the lowest tax bracket for income tax filers.
Any unearned income above $2,500 will be taxed at their parent’s marginal rate.
Don’t forget to use IRS Form 8615 to file any unearned income.
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Why the kiddie tax? What’s the story?
The kiddie tax was first enacted as a part of the 1986 Tax Reform Act. The purpose of the kiddie tax is to make sure assets gifted to children above a certain threshold are taxed at their parent’s rate.
Imagine you bought a share of stock for $50 that’s now worth $100, and that you’ve held the share for more than a year. If you sell the share, you’ll be taxed at capital gains tax rates based on your income: 0%, 15%, or 20%. But if you give that stock to a child whose income is lower than yours, they could likely sell it at a lower capital gains rate than you. The kiddie tax is meant to prevent adults from realizing these lower capital gains by funneling investments through minors.
So, in this scenario, if the sale of that stock netted more than $2,500, the capital gains tax amount above that would be based on the parent’s income, not the child’s. The knock-on effect of this is that parents now must be aware of any unearned income in their dependents’ investment account, even if they’re not trying to pull one over on the IRS.
The bottom line
If you want to pass down generational wealth, talking to a tax professional may help you figure out the most tax efficient way to do so. The kiddie tax reminds us that receiving investments as a gift isn’t always free, especially if that investment’s realized gains or annual unearned income are over $2,500.
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Federal Reserve left its key short-term interest rate unchanged again Wednesday, hinted that rate hikes are likely over and forecast three cuts next year amid falling inflation and a cooling economy.
That’s more rate cuts than many economists expected.
The decision leaves the Fed’s benchmark short-term rate at a 22-year high of 5.25% to 5.5% following a flurry of rate increases aimed at subduing the nation’s sharpest inflation spike in four decades. The central bank has now held its key rate steady for three straight meetings since July.
That provides another reprieve for consumers who have faced higher borrowing costs for credit cards, adjustable-rate mortgages and other loans as a result of the Fed’s moves. Yet Americans, especially seniors, are finally reaping healthy bank savings yields after years of paltry returns.
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Is a soft landing in sight? What the Fed funds rate and mortgage rates are hinting at
Will the Fed raise interest rates again?
The central bank didn’t rule out another rate increase as it downgraded its economic outlook for next year while lowering its inflation forecast. In a statement after a two-day meeting, it repeated that it would assess the economy and financial developments, among other factors, to determine “the extent of any additional (rate hikes) that may be appropriate to return inflation to 2% over time.”
Fed Chair Jerome Powell said at a news conference, noting the Fed’s key rate is “at or near its peak.”
while the Dow Jones Industrial Average closed at a record high after rising 1.4% following the Fed’s signals that it’s probably done lifting rates and is forecasting three cuts next year. The 10-year Treasury was down to about 4% from 4.21% on Tuesday.
Last month, Powell said high Treasury yields, if persistent, likely would constrain the economy and require fewer Fed rate increases,
In its statement Wednesday, however, the central bank didn’t acknowledge the recent decline in Treasury yields, suggesting yields are still relatively high and could spike again, crimping the economy.
“Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation,” the Fed said, repeating the language of its previous statement.
Is inflation really slowing down?
The Fed’s middle-ground approach may have been cemented Tuesday by a mixed report on the consumer price index. The good news was that overall inflation barely budged in November amid falling gasoline prices, pushing down annual price gains to 3.1% from 3.2%, still well above the Fed’s 2% goal.
The Federal Reserve System is the U.S.’s central bank.
When does the Fed meet again?
The first Federal Reserve meeting of the new year will be from Jan. 30 through 31.
Federal reserve calendar
Jan. 30-31
March 19-20
April 30- May 1
June 11-12
July 30-31
Sept. 17-18
Nov. 6-7
Dec. 17-18
The U.S. economy was strong in the third quarter as consumers continued to spend despite high interest rates and inflation.
The value of all services and products generated in the U.S., or GDP, rose at a seasonally adjusted 4.9% for the year in the months spanning July to September, according to the Commerce Department. That was more than twice the 2.1% increase in the previous quarter and the most aggressive pace of growth since the end of 2021 when the economy surged back from a recession sparked by the pandemic.
a recession over the next year, down from the 61% odds forecast in May.
Barclays predicted a loss of roughly 375,000 jobs by the middle of next year. But consumer spending remains robust despite high inflation and interest rates that are making credit card use and consumer loans more expensive. And that may help stave off a recession, says Barclays economist Jonathan Millar.
What does FOMC stand for?
The FOMC is the Federal Open Market Committee, the voting body responsible for setting interest rates. The 12-member committee includes seven members of the Board of Governors and five of the 12 Reserve Bank presidents.
What causes inflation?
Inflation can have many roots. Typically, it’s caused by “a macroeconomic excess of spending over the economy’s relative ability to produce goods and services,” said Josh Bivens, the director of research at the Economic Policy Institute, a left-leaning think tank based in Washington D.C.
That means more people are wanting items and services than there is adequate supply, leading producers to raise prices.
“If everyone in the economy, tomorrow, decided they weren’t going to save any money from their paychecks, and they’re just going to spend every last dollar out of the blue, they would all run to the stores and try to buy things,” Bivens said. “But, producers haven’t produced enough to accommodate that big surge of across-the-board spending. So, you would see prices bid up.”
Inflation can also happen when there are too few producers, or there aren’t enough employees to provide the coveted products and services, Bivens said.
Finally, economies also have some “built-in inflation” to help keep inflation in check. In the U.S., that target is 2%, meaning businesses can raise prices 2% annually year and that shouldn’t overburden consumers. That’s also the typical cost of living raise offered by employers.
Inflation meaning
Inflation is the term for a “generalized rise in prices,” according to Josh Bivens, head of research at the Economic Policy Institute, a left-leaning think tank based in Washington D.C.
Everything from food to rent can become costlier due to inflation. But it is the overall impact that determines what the inflation rate actually is.
“Inflation, though, really is meant to only refer to all goods and services, together, rising in price by some common amount,” Bivens said. The Federal Reserve’s inflation goal is 2%, which means businesses can hike prices by 2% a year and that shouldn’t cause consumers financial distress. Cost of living increases to workers’ pay are also expected to meet that target to ensure consumers can adequately deal with the rising costs of goods and services.
What is CPI?
In November, the Consumer Price Index (CPI) ‒ a measure of the average shift in prices for different products and services ‒ was 3.1%, down slightly from the month before.
Annual inflation is down dramatically from the 9.1% in June 2022 that marked a 40-year high but remains above the 2% target the Fed sees as the level that signals the rate of price increases is under control.
Why is CPI important?
The Federal Reserve watches two key aspects of the economy, price stability and maximum employment, and those are the main factors it takes into account for its interest rate decisions. The CPI is a primary measure the Fed looks at to help determine if prices are “stable.’’
What is the difference between CPI and core CPI?
Core prices don’t count the volatile costs of food and energy items, giving a more accurate window into longer-term trends.
Are wages going up in 2024?
If you’re deemed a top performer at a company that is offering raises, you’ve got a pretty good chance of getting a pay boost next year.
About 3 out of four business leaders told ResumeBuilder.com they intended to give raises. But half of those company executives said only 50% or less of their staff members would see a pay hike, and 82% of the raises would hinge on performance. For those who do manage to get the salary boost, 79% of employers said the pay hikes would be greater than those given in recent years.
Are U.S. Treasury yields rising?
Not recently.
The 10-year Treasury yield was above 5% in November when the Fed kept rates steady for the second consecutive month the first time it had left the key rate unchanged two months in a row in almost two years.
That led to mortgage rates spiking to almost 8% and pushed up other borrowing costs for consumers and businesses. Stocks meanwhile sank close to a recent low, leading Fed Chair Jerome Powell to say such financial pressures could achieve the same cooling effect on the economy as additional rate hikes.
But in the following weeks, 10-year Treasury yields dipped to 4.2% and stocks rebounded. That might make the Fed resist rate cuts in case the economy heats up and causes the broader dip in prices “to stall at an uncomfortably elevated level,” Barclays says.
Barclays and Goldman Sachs forecast that rate cuts won’t happen until the spring, and that there will be only two, to a range of 4.75% to 5%, with more cuts implemented in the next two years.
When will inflation go back to normal?
It may take a little while.
Inflation’s decline likely “won’t show much progress in coming months,” Barclays wrote in a research note.
Overall price hikes have eased significantly since peaking at 9.1% in June 2022, a four-decade high. And in October, broader inflation as well as core prices experienced a dip, leading to a lower 10-year Treasury yield.
But core prices, which exclude the volatile costs of food and energy, will probably rise 0.3% each of the next three months, Goldman Sachs says. Used cars and furniture have been getting cheaper as the supply-chain shortages of the pandemic end. Meanwhile, health care, auto repairs, car insurance and rent continue to get more expensive, as employers pay higher wages to attract workers amid a labor shortage lingering from the global health crisis.
What is core inflation right now?
Core prices, which leave out the more volatile costs of food and energy, bumped up 0.3% in November, slightly more than the 0.2% uptick seen the previous month. That kept the yearly increase at 4%, the lowest rate since September 2021.
New inflation tax brackets
Inflation may also impact the amount of taxes you have to pay.
The Internal Revenue Service said in its annual inflation adjustments report that there will be a 5.4% bump in income thresholds to reach each new level in next year’s tax season.
In 2024, the lowest rate of 10% will apply to individuals with taxable income up to $11,600 and joint filers up to $23,200. The top rate of 37% will apply to individuals earning over $609,350, and married couples filing jointly who make at least $731,200 a year.
The IRS makes these adjustments annually, using a formula based on the consumer price index to account for inflation and stave off “bracket creep,” which happens when inflation shifts taxpayers into a higher bracket though they’re not seeing any real rise in pay or purchasing power.
The 2024/25 increase is less than last year’s 7% increase, but much more than recent years when inflation was below the current 3.1% inflation rate.
Will Social Security get a raise because of inflation?
Yes, but it will be a lot less than what recipients received in 2023.
The cost-of-living adjustment, or COLA, to Social Security benefits will be 3.2% next year. That’s roughly one-third of the 8.7% increase given in 2023, which marked a forty-year high.
The 2024 COLA hike is above the average 2.6% raise recipients have received over the past two decades, but seniors remain concerned about being able to pay their expenses as well as the increasing possibility Social Security benefits will be reduced in coming years, according to a retirement survey of 2,258 people by The Senior Citizens League, a nonprofit seniors group.
How does raising rates lower inflation?
The federal funds rate is what banks pay each other to borrow overnight. If that rate increases, banks usually pass along that extra cost, meaning it becomes more expensive for businesses and consumers to borrow as rates rise on credit cards, adjustable rate mortgages and other loans. That’s why the funds rate is the key mechanism used by the Federal Reserve to calm inflation.
Simply put, companies and consumers don’t borrow as much when loans cost them more, and that means an overheated economy can cool and inflation may dip.
Will credit card interest rates continue to rise this holiday season?
The Fed’s string of rate hikes, aimed at easing the highest inflation in four decades, are a big reason credit card interest rates have reached record highs just in time for the holiday season.
Some retail credit cards now charge more than 33% interest, topping a 30% threshold that stores and banks were previously able to bypass but seldom did – until now.
“They can charge that much,” said Chi Chi Wu, a senior attorney at the nonprofit National Consumer Law Center. “Credit cards can actually charge whatever they want. It’s a little-known fact.”
The domino effect of a high benchmark rate and soaring credit card interest could put many Americans in financial straits this holiday season.
Though some consumers are paring back to deal with high prices, rising debt and shrinking savings, the average shopper expects to spend $1,652 this year on holiday purchases, according to the consultancy Deloitte, more than was typically spent in the last three years.
A lot of the buying will be done with credit cards. In an October poll of 1,036 shoppers by CardRates.com, nearly 4 in 10 respondents said they intend to have holiday credit card debt in the new year.
The nation’s collective credit card debt was $1.08 trillion, at the end of September, a record high. And the average interest rate was 21%, the highest ever documented by the Federal Reserve.
Savings account impact of high rates
The upside to the Fed’s string of rate hikes has been that consumers were able to earn good interest on their savings for the first time in years. Even when the Fed leaves interest rates unchanged, savers can do well.
Unfortunately, most account holders aren’t making the most of that potential opportunity.
Roughly one-fifth of Americans who have savings accounts don’t know how much interest they’re earning, according to a quarterly Paths to Prosperity study by Santander US, part of the global bank Santander. Among those who did know their account’s interest rate, most were earning less than 3%.
But consumers have time to make a change that could enable them to make more from their savings.
“We’re still a long way from (the Fed) beginning to cut rates,” said Greg McBride, chief financial analyst at financial services platform Bankrate. “This is great news for savers, who will continue to enjoy inflation-beating returns in the top-yielding, federally insured online savings accounts and certificates of deposit. For borrowers, interest rates staying higher for a longer period underscores the urgency to pay down and pay off costly credit card debt and home equity lines.”
The string of Fed rate hikes that began in March 2022 has made it costlier for consumers to borrow as interest rates on credit cards and other loans increased dramatically.
At the same time, inflation has made daily needs more expensive, pushing more Americans to lean on credit cards to get by. But lenders have become more reluctant to issue new cards, so in the midst of the holiday season, more shoppers are seeking higher credit limits, experts say.
In October, the application rate for higher limits rose to 17.8% from 11.2% in the same month the previous year, and from 12.0% in 2019, New York Fed data showed.
For some consumers, a higher limit on a card they already have is about their only option.
“After COVID, inflation and interest rates went out of control … people have less emergency funds for car repairs or buying presents,” said Brandon Robinson, president and founder of JBR Associates, which specializes in retirement strategies. “What they’re doing is using more credit card utilization – over 30% or well over 50% of their credit card allowance – and then can’t get approved for another card because their credit rating is down.”
Inflation is leading more Americans to work multiple jobs
The number of Americans working at least two jobs is at its highest peak since before the COVID-19 pandemic, according to federal data, an uptick that may reflect the financial pressure people are feeling amid high inflation.
Almost 8.4 million people had multiple jobs in October, the Labor Department said, a figure that represents 5.2% of the laborforce, the highest percentage since January 2020.
“Paying for necessities has become more of a challenge, and affording luxuries and discretionary items has become more difficult, if not impossible for some, particularly those at the lower ends of the income and wealth spectrums,” Mark Hamrick, senior economic analyst at Bankrate, told USA TODAY in an email.
People may also be moonlighting to sock away cash in case they’re laid off since job cuts typically peak at the start of a new year.
What is the Federal Reserve’s 2024 meeting schedule? Here is when the Fed will meet again.
What is the mortgage interest rate today?
Mortgage rates are falling, so is it time to buy?
It depends.
First of all, the Fed doesn’t directly set mortgage rates, but its actions have an impact. For instance, when the central bank was steadily boosting its key rate, the yield on the 10-year treasury bond went up as well. Because those bonds are a gauge for the interest applied to an average 30-year loan, mortgage rates increased.
But over the past six weeks, mortgage rates have been declining, averaging 7% for a 30-year fixed mortgage. That’s down from almost 7.8% at the end of October, according to data released by Freddie Mac on Dec. 7.
That may be giving some wannabe homeowners the confidence to start house hunting. For the week ending Dec. 1, mortgage applications rose 2.8% from the prior week, according to the Mortgage Bankers Association.
“However, in the big picture, mortgage rates remain pretty high,” says Danielle Hale, senior economist for Realtor.com. “The typical mortgage rate according to Freddie Mac data is roughly in line with what we saw in August and early to mid-September, which were then 20 plus year highs.”
So, many potential buyers may still need to sit on the sidelines, waiting for rates to drop further, says Sam Khater, chief economist for Freddie Mac. Hale and many other experts believe mortgage rates will dip next year.
Interest rate projection 2024
The Fed is expected to cut interest rates next year, though markets and economists disagree about how many rate cuts there will be.
Futures markets forecast there will be four or five rate cuts in 2024, amounting to a quarter of a percentage point each. The cuts, they predict, should start by spring, and ultimately drop interest rates as low as 4% to 4.25%.
But core prices, which leave out the volatile costs of food and energy and are the metric followed more closely by the Fed, ticked up 0.3% in November, higher than the 0.2% increase the month before. That might make the Fed more hesitant to nip rates in the immediate future.
Goldman Sachs and Barclays expect there to be only two rate decreases in 2024. And Fed Chair Jerome Powell has cautioned in recent public remarks that it was “premature” to talk about rate cuts.
November inflation report
Inflation dipped slightly last month, with falling gas prices mitigating the impact of rising rents.
Consumer prices overall increased 3.1% from a year earlier, slightly below the 3.2% rise in October, according to the Labor Department’s consumer price index. That slower pace moves the inflation rate nearer to the level, reached in June, that was the lowest in over two years. Month over month, prices increased a slight 0.1%.
Core prices, however, which leave out the more erratic costs of food and energy and which are more closely monitored by the Fed, increased 0.3% in November after rising 0.2% the previous month. That means core inflation’s yearly increase remained at 4%, though it’s the lowest level since September 2021.
Are you downsizing, moving or doing a major decor change in your home but don’t know what to do with your old furniture? Well, you’re in luck because many local nonprofit organizations make moving easy by offering free furniture donation pick up.
Donating furniture to your favorite charities is a chance to get rid of extra furniture and household items for free while giving back to your community. Here is how to get started in the process.
Where to donate furniture
When looking for furniture donation pickup, there can be so many options it’s hard to know where to start. Thankfully, we’ve got you covered with our detailed list summarizing nonprofit organizations, who your donation will help, items they accept and how to schedule your pickup.
The best part is that every organization in our guide is completely free of charge for their furniture removal services and your donations go to a great cause.
1. Salvation Army
When people start thinking about donating furniture, The Salvation Army is usually one of the first places to come to mind. The Salvation Army is an international organization that operates in over 7,000 U.S. towns and cities and assists 23 million Americans annually.
Their services help provide disaster aid, support the LGBTQ+ community, fight food insecurity, combat addiction, assist those living in poverty and more. With the number of people Salvation Army helps each year, you can feel confident that you are doing good by donating to this organization.
Who your donation helps: Your items are either brought directly to those in need or sold at one of their Salvation Army stores. The proceeds from their stores are used to fund their Adult Rehabilitation Centers that provide housing, food, counseling, community and employment for individuals suffering from drug and alcohol dependency.
Items they accept: The Salvation Army will accept furniture, vehicles, clothing, household items, electronics, mattresses, books, exercise equipment and more.
How to schedule a pick-up: You can schedule an appointment for furniture pickup at The Salvation Army website or call 1-800-SA-TRUCK. Salvation Army pick-up hours can vary depending on your location, but they are typically 8 a.m. to 4 p.m. They make the transition even easier by allowing you to leave items outside your home for them to pick up without you even needing to be home.
2. Goodwill
Goodwill is an organization that supports communities through job training and employment services. They also provide support services, language training, education assistance, access to transportation and child care to help people in their communities achieve success.
In 2020, Goodwill served nearly 22 million individuals worldwide and provided career support to 126,000 people. Items brought to one of Goodwill’s stores are sold at a discounted price and the money raised goes to their various programs and initiatives.
Who your donation helps: Donation funds go to their job training or community-based programs. Some of their community-based programs include classes for people with disabilities, senior resources and helping convicts reclaim their lives after prison.
Items they accept: Goodwill accepts furniture, toys, electronics, clothing, media items, electronics, vehicles, exercise equipment, dishware and tools. Something to note is that Goodwill will accept boats, cars, campers and RVs even if they aren’t in working condition.
How to schedule a pick-up: Goodwill stores provide a donation center to give easy drop-off access for donations you’re able to bring in yourself. Most stores also offer a free pick-up service for larger furniture items, making it perfect for those who are downsizing. You can schedule your free Goodwill pickup online on their website locator, but keep in mind that store hours will vary based on their location.
3. Habitat for Humanity
Habitat for Humanity is a global nonprofit that provides safe and affordable housing to families in need. Their initiative also assists older adults to improve their homes, puts efforts towards neighborhood revitalization projects, provides shelter during natural disasters and teaches classes focused on financial education. This organization has been in operation since 1976 and works in all 50 U.S. states as well as 70 countries.
Who your donation helps: Habitat for Humanity sells donated furniture, building supplies and appliances at their resale store called ReStores. Proceeds from sales go to home restoring and building projects for families in need of affordable housing.
Items they accept: Habitat for Humanity will accept furniture, building materials, appliances, vehicles and farm equipment.
How to schedule a pick-up: To schedule a free furniture donation pick up with Habitat for Humanity, visit their website and enter your ZIP code to see which stores are near you. Next, you can contact your closest store directly to schedule your appointment.
4. Green Drop
GreenDrop is a program on the East Coast that raises funds for popular charities by picking up used furniture, clothes and appliances to sell at thrift stores. Their proceeds go back to charities that help those in need. Some of the charities they support include the American Red Cross, Military Order of the Purple Heart and the National Federation of the Blind.
Who your donation helps: In 2018, GreenDrop raised $3.1 million for the charitable organizations listed above.
Items they accept: GreenDrop accepts various items, including furniture under 50 pounds, clothing, household items, electronics, tools and toys.
How to schedule a pick-up: Start by packing up all of your belongings in plastic boxes or bins. Next, decide if you want to make an in-person donation or if you can schedule a furniture pick-up online. After they receive a donation, they’ll provide you with a tax receipt.
5. The Arc
The Arc is the largest organization devoted to helping individuals with developmental and intellectual disabilities. It provides a wide variety of services, supports and advocacy for people with disabilities and their families. The organization has over 700 chapters and one of their key sources of fundraising comes from their thrift stores, which they stock with donated goods.
Who your donation helps: Their services vary based on each chapter and the unique needs of their community. Once your donation sells, it goes towards public policy advocacy, vocational programs, residential assistance, education services, financial planning and recreational activities for people with disabilities.
Items they accept: The Arc accepts furniture, clothing, electronics, toys, vehicles, books, decorations, kitchen items and more, depending on the chapter.
How to schedule a pick-up: You can also schedule via phone by calling The Arc at 1-800-283-2721. Another option is to head to their website to find your local chapter and schedule your pick-up.
6. AMVETS
AMVETS is an organization that represents the interests of 20 million veterans across the United States. This group helps veterans obtain their entitled benefits. They also work to improve the quality of life for veterans, their families and the communities where they live through leadership, advocacy and services.
Who your donation helps: AMVETS supports U.S. veterans, those who have been honorably discharged and active duty servicemen and women. They will sell your furniture in one of their thrift stores to raise money for their cause.
Items they accept: AMVETS accepts small furniture, clothing, toys, bedding, games, bikes, electronics, lamps, curtains, exercise equipment and kitchenware. AMVET requires donations to be 5-years old or less but is also open to accepting other items that are not on their list.
How to schedule a pick-up: Send an email through the AMVET site or call to schedule a furniture donation pick-up between the hours of 8 a.m. and 4:30 p.m. It’s important to check with this organization ahead of time to see if their services are available near you. AMVETS has branches across the United States, but only has free furniture pick up available in certain states.
7. Donation Town
This site is perfect for anyone feeling overwhelmed trying to find charities that provide furniture pickup in their community. Donation Town works with local charities all over the country to help put individuals in touch with nonprofits that will provide this service for free. Simply enter your ZIP code and they’ll give you a list of charities to choose from.
Who your donation helps: Your donation will help the charity of your choice. They currently have over 400 charities of all sizes in their directory and are adding more all the time.
Items they accept: Items they accept depend on each charity’s guidelines.
How to schedule a pick-up: Visit Donation Town’s website to plan your pick-up with your selected charity.
8. Furniture Banks
If you donate your items to Furniture Banks, then you’ll be playing an important part in helping vulnerable families get back on their feet. The furniture donation pick up organization encourages people to donate gently used furniture and transfer the items to those struggling financially to furnish their own homes. Furniture Banks operates in 36 states, so check their website to see if they are in your area.
Who your donation helps: The families served by this organization include the previously homeless, unemployed, victims of crime, battered women and children in retreat, immigrants, individuals with disabilities and victims of natural disasters.
Items they accept: Furniture Banks accepts good condition furniture of all sizes. They also provide a towing service to pick up cars and recreational vehicles.
How to schedule a pick-up: To schedule a pick-up with this organization simply schedule an appointment on the Furniture Banks website.
9. Vietnam Veterans of America (VVA)
The Vietnam Veterans of America are working to change negative beliefs towards Vietnam veterans and provides individual assistance in a variety of ways. This includes creating outreach programs for veterans experiencing homelessness, substance abuse, incarceration and more. The VVA furniture removal program operates through a program called Pickup Please.
Who your donation helps: The Vietnam Veterans of America promote and support the full range of issues important to Vietnam veterans and work to change public perception of Vietnam veterans.
Items they accept: The Pickup Please program accepts small furniture items, sports equipment, toys, kitchenware, electronics and lightly used household goods. Pick Up Please says that they will pick up “almost anything” in good condition, but the piece of furniture must be light enough for one person to carry.
How to schedule a pick-up: VVA operates in most states and they make it super easy to schedule a donation pickup online. You can also get to VVA by way of their Pick Up Please site.
10. Out of the Closet thrift stores
The Out of the Closet thrift stores chain is owned and operated by the AIDS Healthcare Foundation (AHF). This organization provides medical, preventive and educational resources for patients. AHF is the nation’s largest non-profit HIV/AIDS healthcare, research, prevention and education provider. The proceeds from Out of the Closet thrift stores directly benefit the AIDS Healthcare Foundation.
Who your donation helps: Donations and financial contributions to this organization fund AIDS Healthcare Foundation’s HIV/AIDS programs, free HIV testing and housing programs.
Items they accept: Out of the Closet Thrift Stores accept furniture, kitchenware, electronics, musical instruments, tools, books, vehicles, artwork and home decor.
How to schedule a pick-up: You can schedule your pickup by filling out your address and items in a form on their website. Something to note is that you must have at least two furniture items for them to complete a free pick-up. You can also deliver any pieces of furniture to their local stores.
11. PickUpMyDonation.com
PickUpMyDonation.com is an organization that works with independent non-profit thrift stores in their communities. They’re focused on making large item donations simple by getting your furniture request to a local charity in minutes. Although they are not a charity themselves, they put you in touch with smaller charitable chapters that support the area you live in.
Who your donation helps: Your donation will support the charitable cause of the thrift store you are put in contact with.
Items they accept: PickUpMyDonation.com accepts large furniture, large appliances, vehicles, tools, recyclable materials, outdoor recreation items and artwork.
How to schedule a pick-up: To schedule a pick-up, visit pickupmydonation.com to make a furniture removal request and fill out a form describing the items you want to donate. Next, they’ll put you in contact with the closest thrift store, and if they’re interested in your furniture, they will schedule a furniture removal pickup.
Tips for furniture donation pick up
Donating your furniture is a great way to get rid of furniture you don’t use anymore while also helping your community. Follow these tips for a seamless furniture pickup experience.
Schedule your donation pick-up in advance: Many charities’ free donation pickup spots fill up quickly, so it’s important not to wait until the last minute to make an appointment. Schedule as far in advance as possible to ensure you get the date and time that works for you.
Research different organizations: Instead of just picking the first charity on the list, make sure to do some research to make sure their values and methods align with your own. All of the charities listed do great things for their communities, but each has its own way of making an impact.
Prepare your furniture: Each charity will have individual guidelines for how they want your furniture packaged and prepared for pickup. Leave furniture uncovered to be inspected but make sure it is cleaned and houseware is boxed correctly.
Write off your furniture donation: Did you know you can write off your furniture donation on your taxes? Simply ask the charity picking up your furniture for a tax receipt or paperwork to file and you’ll be saving money this upcoming tax season.
Coordinate with neighbors: While many nonprofits allow you to simply leave furniture outside your home for them to retrieve, others might require you to be there. If this is the case, then it’s best to coordinate with a neighbor or friend to stop by when they’re scheduled to arrive.
If you follow these tips, you should have an easy transition and donation pickup day. Also, make sure to always check to see if the organization of your choice has any additional requirements.
Declutter with furniture donation pick up services
Finding a new apartment has never been easier with Rent.’s finder tool. Start your move off on the right foot by using a free furniture removal service to declutter your place and take care of any worries prior to moving into your new home.
Alex Heinz is a writer with experience in a variety of industries from tech to lifestyle. Her work has appeared in Business Insider, TechCo and PopSugar. She’s lived in a handful of large cities including New York and San Diego, giving her first-hand knowledge of the ins and outs of renting. In her spare time, you can find her exploring new hikes with her dog.
Graduating college is a big deal. The time you spent in school has likely taught you a lot about the subjects you studied, being organized and meeting deadlines, and life in general. Once you have your degree, you’ll put those skills to good use as you embark on your career and independent life. No more dining hall, no more dorms…it’s time to launch adult life and figure out how to make your own way.
To help you deal with some of the basics (like a job and banking), read on. You’ll find valuable tips to help you through the first steps of post-grad life.
Life After College
Congrats on your degree! Now, on to the next challenge after graduating college. It’s time to tackle adulting, which can include such things as getting set up in your new living situation, finding your favorite brunch spot, and making new friends if your college pals have scattered to different places.
In addition, there are some major daily-life tasks to wrangle:
• Finding and holding a job
• Taking control of your health and your health insurance
• Keeping your brain active, which may lead to more studies
• Managing your money.
Read on to get some helpful advice on these last four topics (you can probably find the best brunch spot in your new neighborhood without too much help). 💡 Quick Tip: Enjoy no hidden fees and special member benefits when you refinance student loans with SoFi.
Getting to Work
Hopefully you enjoyed a few weeks off post-grad to travel or kick back and relax after four years of hard work. But what to do after college for many people is find work.
When you’re ready to begin your job search, it can be a lot to process. Chances are, it’s time to focus on taking steps towards building your career.
First off, don’t let job searching stress you out. New grads are in luck. Unemployment is low, and the labor market is strong. According to a recent survey by the National Association of Colleges and Employers, companies expected to hire almost 4% more class of 2023 grads than they did from the previous class.
Not sure where to look for work or what you should be earning? Research, network, and research some more.
• Your school’s career services office may provide job leads, and its alumni office may be able to network you with people in your field who can share insights.
• Search for jobs online. There are many job boards, such as Indeed and ZipRecruiter, to access.
• Put out the word among friends, families, past internship supervisors, and others.
• To gain intel on starting salaries, try an online salary calculator. You provide some basic info like your location and experience, and their tool tells you what the average salary for your desired role is. While this tool can only provide an estimate, it may help you determine if you should try to negotiate for a higher salary when you receive a job offer.
Taking Your Health into Your Own Hands
As part of learning how to navigate life on your own, make sure you take the reins of your healthcare. Mom and Dad likely aren’t scheduling those biannual dental checkups for you anymore.
Whether you’re still on your parent’s policy or are buying your own health insurance, getting more familiar with the resources your healthcare plan provides is never a bad idea.
It can help you stay on top of scheduling check ups, dental cleanings, and eye exams. You may also need to learn the ropes of finding in-network doctors as you move to a new place or get your own policy.
And you might want to start saving for any unexpected medical or dental bills that may arise. Having an emergency fund at the ready can be an important step to financial wellness in this new chapter of your life.
Speaking of wellness: You may feel swamped by post-grad life, but it’s such an important time to prioritize your well-being. It might be helpful to make time to go to the gym each week, meditate, cook healthy meals, and get a good night’s sleep. Getting into good health habits is an excellent adulting accomplishment. 💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.
Continuing Your Learning
It’s normal after college to need a little break from learning. For the first time in your life, there is no one telling you what to read or what classes you have to take. But once the dust has settled and you’ve had a rest from hitting the books, you might try to prioritize learning. Not only does it keep your brain sharp, it can also help boost your career.
For example, you could consider obtaining a professional license related to your career or industry. According to the most recent intel from the Bureau of Labor Statistics, 24% of workers have some sort of professional license or certification. Having one may give you a competitive boost at work or while job searching. You can go the extra mile to develop more skills needed in your career through an online class or professional conference.
What’s more, additional learning and training could lead to a profitable side hustle or gig work. For instance, you might be able to pick up extra cash during tax season supporting professional tax preparers.
Learning-wise, not all of what you do after graduation has to go towards career advancement, of course. Take that cool history of film class at your local community college. Join a book club or just load up your bookshelf with books you’re dying to read. Exploring your passions can help you feel motivated, fulfilled, and inspired. Now is the time in your life to open doors, not close them.
Recommended: What Should I Do After My Master’s Degree?
Getting Your Finances Organized
Once you graduate from college and join the working world, it’s likely time to look at whether your current banking partner suits your needs.
It can be a wise move to look for a bank that offers a good interest rate on your deposits, convenient access, and tools that help you track your money in a quick and convenient way.
As you organize your money (and don’t forget to start that emergency fund mentioned above), you may realize that one expense that may really be bringing you down is your student loan debt payments.
The average federal student loan debt is currently $37,338, according to the Education Data Initiative. Is student loan debt weighing you down? There are a few strategies you can use to help pay off your student loan debt quicker. You might start your journey to a student loan-free life by creating a monthly budget that can help you get out of debt.
• To create a budget that can assist with paying off debt, you could start by gathering all of your bills and recent receipts. Review exactly what you need to spend on necessary living expenses (rent, food, health insurance, minimum debt payments), how much you are spending on the wants in life (travel, entertainment, clothing), and how much you can save or put toward additional debt payment.
• There are different budgeting methods, and it’s a good idea to spend a bit of time finding the one that works for you. For instance, you might like the 50/30/20 budget rule, which says to allocate 50% of your take-home pay to necessities, 30% to wants, and 20% to savings and extra debt payoff.
Whichever technique you choose, do compare the cost of your living expenses to your paystubs to see how much you can afford to pay towards debt each month. Creating a budget can help you not only pay off your debt, but avoid accumulating more debt in the future.
Recommended: Which Debt to Pay Off First: Student Loan or Credit Card?
The Takeaway
Once you have your monthly budget under control, you might be considering refinancing your student loans as part of how you navigate life post-college. You may be able to lower your interest rate, lower your monthly payments by extending your repayment term, or release a co-signer from a previous loan.
Do note that lengthening your repayment term can increase the interest you’ll pay throughout the life of your loan.
Refinancing comes with many benefits, but keep in mind that you lose federal benefits and protections when you refinance federal loans with a private lender. But if you are not planning on taking advantage of these benefits, refinancing might be for you.
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. Also, 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.
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.
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.
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.
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.
New York — and New York City in particular — is known for having some of the highest taxes in the United States. NYC residents pay income taxes and sales taxes to both the state and the city, which can make it a bit confusing to figure out how much tax you’re paying to which entity.
What is New York City’s sales tax?
The total sales tax rate in New York City is 8.875%. That consists of a 4.5% sales and use tax from the city, a 4% sales and use tax from the state, and a 0.375% Metropolitan Commuter Transportation District (MCTD) surcharge.
Sales taxes apply to retail sales of most goods and services, with a few exceptions, while use tax applies to business purchases from out-of-state vendors that don’t collect state and local sales taxes. (If you buy a printer for your business from a website that doesn’t collect sales taxes, for example, it’s probably subject to city and state use tax.)
State sales taxes apply to any sales made in New York state, city sales taxes apply to any sales made in New York City and MCTD surcharges apply to any sales made in the city, as well as Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess and Westchester counties.
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What is exempt from NYC sales tax?
There are a few exemptions from city and state sales and use taxes, generally involving essential day-to-day goods. The following items are exempt from city, state and MCTD sales taxes:
Clothing and footwear costing less than $110.
Unprepared and packaged food.
Certain items used in clothing manufacturing and repair.
In addition, there are a few other items that are exempt from New York state sales taxes but may still be subject to city and MCTD taxes:
Beautician, barbering and hair-restoring services.
Hair removal services.
Manicures and pedicures.
Massage services.
Tanning salons.
Tattooing or permanent makeup.
Weight control and health salons, gyms, Turkish and sauna baths, and similar places.
Who pays NYC sales tax?
If you’re a consumer, NYC sales tax is generally baked into the price of whatever you’re buying — and isn’t something you need to worry about, unless you want to try to deduct it from your income tax liability (more on that in a moment).
Businesses are responsible for actually paying NYC and New York state sales, use and MCTD taxes to the government by filing sales tax returns.
How do you file NYC sales tax returns?
NYC sales and use taxes — as well as the MCTD surcharge — are collected by New York state.
Businesses can file New York sales tax returns on the state’s Sales Tax Web File site
. Some businesses, such as those with taxable receipts of more than $500,000, must use the state’s PrompTax program, which a business can join through an Online Services for businesses account.
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Can you deduct NYC sales tax?
You can deduct NYC sales tax via the state and local tax (SALT) deduction — but doing so comes with some big caveats. The SALT deduction is only available to taxpayers who choose itemized deductions, is capped at $10,000 for joint filers, and makes you choose between deducting your state and local income taxes or your state and local sales taxes.
Itemizing isn’t right for every taxpayer. It’s a good idea to consult a trusted tax professional, such as a certified public accountant (CPA), to see if it’s right for you.
The Internal Revenue Service (IRS) generally requires that you report a forgiven or canceled debt as income for tax purposes. But forgiven student loan debt is different.
The American Rescue Plan (ARP) Act specifies that student loan debt discharged between 2021 and 2025, and incurred for postsecondary education expenses, will not be counted as income, and therefore does not incur a federal tax liability.
This includes federal Direct Loans, Family Federal Education Loans (FFEL), Perkins Loans, and federal consolidation loans. Additionally, non-federal loans such as state education loans, institutional loans direct from colleges and universities, and even private student loans also qualify.
However, some states have indicated that they still count canceled student loans as taxable income. Read on for more information about which discharged student debt is taxable and by whom.
Different Student Loan Forgiveness Programs
Federal student debt can be canceled via an income-driven repayment plan (IDR) or forgiveness programs.
While President Joe Biden’s plan to offer federal debt cancellation of up to $20,000 to those with qualifying income failed — struck down by the U.S. Supreme Court — other forms of student loan forgiveness have been strengthened.
In October 2023, the White House announced at least $127 billion in student loan relief for nearly 3.6 million Americans:
• $5.2 billion in additional debt relief for 53,000 borrowers under Public Service Loan Forgiveness programs.
• Nearly $2.8 billion in new debt relief for nearly 51,000 borrowers through fixes to income-driven repayment. These are borrowers who made 20 years or more of payments but never got the relief they were entitled to.
• $1.2 billion for nearly 22,000 borrowers who have a total or permanent disability who have been identified and approved for discharge through a data match with the Social Security Administration.
Recommended: Guide to Student Loan Forgiveness
Whose Student Loan Cancellation Is Not Federally Taxed?
As stated earlier, under the provisions of the ARP Act, any student debt (private or federal) for post-secondary education that was or is forgiven in the years of 2021 through 2025 will not be federally taxed. This means that the borrowers just listed above were not required to report their discharged loan amount as earned income, and therefore taxable.
Outside of the special five-year window of tax exemption provided by the ARP Act, participants in the Public Service Federal Loan program who receive forgiveness also don’t have to worry about paying taxes on the canceled amount. The program explicitly states that earned forgiveness through PSLF is not considered taxable income.
Recommended: A Look Into the Public Service Loan Forgiveness Program
Whose Student Loan Cancellation Is Federally Taxed?
Borrowers who receive loan cancellation after participating fully in an income-driven loan repayment plan can generally expect to pay taxes. Again, those whose debt was discharged in 2021 and 2022, or will be discharged in 2023, 2024, or 2025, will not need to pay federal taxes on their forgiven loans.
Forgiven amounts that are taxable are treated as earned income during the fiscal year it was received. Your lender might issue tax Form 1099-C to denote your debt cancellation. 💡 Quick Tip: Enjoy no hidden fees and special member benefits when you refinance student loans with SoFi.
Which States Have Said They Will Tax Forgiven Student Loans?
Typically, states follow the tax policy of the federal government. But some states have announced that their residents must include their forgiven or canceled student loan amount on their state tax returns.
As of October 2023, the states that say forgiven loans are taxable are Mississippi, North Carolina, Indiana, Wisconsin, and possibly Arkansas, depending on an upcoming vote in its legislature. More states could decide to do so.
It’s important to consult a qualified tax accountant or someone knowledgeable about forgiveness of student loans in your state to confirm the latest information of how much you owe.
Preparing to Pay Discharged Student Loan Taxes
If you’re anticipating a tax liability after receiving loan forgiveness, there are a few steps you can take today to get ready.
Step 1: Estimate Your Bill
The first step when bracing for a student loan forgiveness tax bill is calculating how much you might owe come tax season. This factor can be influenced by factors including the type of forgiveness you are receiving and the forgiven amount.
To avoid sticker shock, you can use a student loan forgiveness tax calculator, like the Loan Simulator on StudentAid.gov. It lets you see how much of your student loan debt might be forgiven, based on your projected earnings.
Step 2: Choose the Right Plan
Enrolling your federal student loans into an IDR plan can help you keep your monthly payments to a manageable amount while you’re awaiting loan forgiveness. All of these repayment plans calculate your monthly payment based on your income and family size.
The newest IDR program is the Saving on a Valuable Education (SAVE) plan, which offers unique benefits that will lower payments for many borrowers, to as low as 5% of disposable income in 2024 for those who qualify.
Recommended: The SAVE Plan: What Student Loan Borrowers Need to Know
Step 3: Prioritize Saving
If you’re expecting loan forgiveness after 2025, it might be advantageous to allocate extra cash flow toward a dedicated tax savings fund. Incrementally setting money aside over multiple years can ease the burden of a sudden lump sum tax bill down the line.
Paying Taxes on Canceled Student Loan
If you can’t afford to cover an increased tax bill, contact the IRS to discuss your options. Inquire about payment plans that can help you pay smaller tax payments over a longer period of time. However, be aware that fees and interest will likely accrue. 💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.
The Takeaway
Thanks to a special law passed by Congress in 2021, post-secondary education loans forgiven from 2021 through 2025 will not count as earned income and will not be federally taxed. That said, state taxes may be due, depending on where the borrower lives.
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. Also, 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.
FAQ
Is loan repayment considered taxable income?
If your employer offers loan repayment assistance benefits, they would typically be considered taxable income. However under the Cares Act, loan forgiveness payments — and employer assistance loan payments up to $5,250 — made each year from 2021 through 2025 are tax-free.
Will refinancing my student loans help me avoid taxes?
Student loan refinancing simply involves reworking one or more existing student loans into a new private loan with more favorable terms. It’s a repayment strategy that does not incur a tax liability.
Photo credit: iStock/fizkes
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.
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.
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.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
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.
Inside: Do you want to claim your partner as a dependent on your taxes? This guide will explain the rules of claiming dependents whether girlfriend or boyfriend and help you take the necessary steps to do so.
Navigating the waters of tax credits can be tricky, especially when it involves claiming an unmarried partner as a dependent.
The Internal Revenue Service (IRS) does permit the declaration of a non-relative adult as a dependent, provided certain conditions are met.
And that is where it gets tricky for the tax novice.
That is where we are going to reference the IRS guidance, so you can determine whether or not you qualify for this deduction.
By pointing you in the right direction, you can understand the specific tests and requirements to avoid any tax-related complications.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
Understanding dependency in the context of taxes
The word “dependent” might remind you of a newborn baby or an elderly family member. But in tax terms, the meaning broadens.
In the IRS terms, a “dependent is a person, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption.” 1
This might be a child, an adult family member, a significant other, or even a close friend. This term “qualifying relative” is crucial in IRS parlance for its implications on your tax dues.
Typically, any person can qualify as a dependent if more than half of their financial support, including living and medical expenses, is taken care of. Also, it’s an opportunity to boost one’s tax return by up to $500 with the Other Dependent Tax Credit.
What qualifies a person as a dependent?
The IRS bases dependents on two categories: “Qualifying children” and “Qualifying relatives.”2 You might think of a qualifying child as your son or daughter. Expanding the scope, a qualifying relative can be a sibling, a parent, or even a significant other.
The essence lies in their financial reliance on you and the nature of your relationship. They ought to:
Be related to you via blood, marriage, or adoption;
You provide over 50% of their financial support including housing, food, medical care, and other expenses
They are U.S. citizen.
The income of the possible dependent.
These nuanced rules might sound overwhelming, but IRS guidance and tax experts like TurboTax can help lighten the load.
Now, let’s address this sticking point: Can you actually claim your partner as a dependent? The following section unravels the mystique.
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Can I Claim My Partner as a Dependent?
You can claim your partner as a dependent on your tax return, provided they meet certain criteria explained by the IRS, including passing the non-qualifying child test, the citizen or resident test, the joint return test, the income test, and the dependent taxpayer test.
I know this is where it gets difficult to follow for the average person.
So, we are here, to break this terminology down into layman’s terms, as such you can then make the best decision for your tax situation.
If you are still confused, then consult with an online tax software like TurboTax or a tax professional for guidance on your personal taxes.
Basic requirements for claiming your partner as a dependent
This essentially means that your partner should be financially dependent on you, where you bear more than half of their living expenses.
In essence, claiming your partner as a dependent revolves around these fundamentals: 2
Residency: Your partner must have been living with you for the full tax year.
Income limit: Your partner’s gross income should not exceed $4,700 for the year 2023.
Support Requirement: You are the main pillar for your partner’s financial needs by covering over half of their total expenses.
Anyone Else Claiming Them: None else should claim your partner as their dependent.
Unmarried. Your partner must be unmarried legally.
All fulfillment of these criteria moves you a step closer to enjoying some tax relief.
Confirm with an accountant or tax expert as exceptions can exist, such as temporary absences due to illness, education, business, and others.
Common scenarios where you can claim your partner as a dependent
Claiming a partner as a dependent isn’t as fancy as it sounds, but it’s plausible. Here are common scenarios enabling you to do so:
Co-habiting Before Marriage: You and your partner share a home, and you pay more than half of your partner’s living costs. However, your living situation cannot violate local laws, as in some states, “cohabitation” by unmarried people is against the law.
Unemployed Partner: Your partner’s tie with working life is severed (e.g., due to health issues or being laid off), and you bear most of the living expenses.
Supporting Student Partner: Your partner pursues their education, and you shoulder the majority of their expenses.
Take this interactive IRS quiz to determine whom I may claim as a dependent.
How much will I get if I claim my girlfriend as a dependent?
Now the pivotal question: what’s the advantage in dollars and cents?
In essence, claiming your partner as a dependent will slash your taxable income by $500 with the Other Dependent Tax Credit. 3
If you already qualify for Head of Household status with another dependent, then it is possible your deduction may be more. 4
Remember, there’s no one-size-fits-all answer. When tax complexities strike, consult an expert!
Is it better to claim my girlfriend as a dependent?
Honestly, like most tax questions, the answer is: it depends.
If you’re covering your partner’s majority expenses and they’re fulfilling all IRS criteria, then claiming them can bring solid tax savings.
Yet, bear in mind:
If your partner earns substantial income (greater than $4,700), they might lose personal benefits by becoming your dependent.
By claiming your partner, their Social Security or medical benefits may take a hit.
So, assess your partner’s income, benefit entitlements, and your tax situation. Then, tread wisely.
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Important Rules to Keep in Mind When Claiming Your Partner
When filing taxes, it’s crucial to understand that both parties are responsible for the accuracy of each other’s tax reporting and liability.
It’s worth noting that tax advantages and disadvantages exist in the scenario of being married and filing jointly, such as potential reductions in your tax bracket and sharing of business losses. So, it may be something to consider.
Can I claim my girlfriend as a dependent if she has no income?
In a nutshell, yes! If your girlfriend had no income in the tax year, you might claim her as a dependent. Given you provide over half of her total support and she lived with you all year, you’re golden.
For 2023, your partner’s gross income should not exceed $4,700.
However, keep in mind that in cases where public assistance or Social Security benefits are her primary financial sources, claiming her could negatively impact those benefits.
Learn the answer to do you have to file taxes if you have no income.
Remember: tax waters are often murky. When in doubt, lean on a tax professional’s shoulder!
Support factors
Answering the support question plays a hefty role in determining who qualifies as a dependent.
You shouldn’t just share the living cost; you should pay more than half of it. Remember, it includes an array of expenses, like food, clothing, education, or medical expenses.
The implication of your partner being claimed by someone else
Here’s a key rule: if someone else is claiming your partner as a dependent, you’re out of the game. The IRS rules say a person can be claimed as a dependent by only one taxpayer in a single tax year.
This could happen if your partner perhaps lives part of the year with someone else like a parent.
Another possibility is if your partner is legally married still, then they would have to file a married, filing separately return.
So, if your partner qualifies as someone else’s dependent, even if they don’t claim them, you can’t claim your partner.
Frequent Situations Where You Can’t Claim Your Partner as a Dependent
Considerations for Non-resident or Non-citizen partners
If your partner isn’t a U.S. citizen, resident, or national, the dependent claiming game changes. Notably, nonresident aliens cannot be claimed as dependents.
However, if your partner is a resident of Canada or Mexico or a U.S. national, you may claim them. But they should be living with you full-time. 2
This rule extends to partners awaiting changes in their residency or citizenship status. In such cases, you must wait until their status changes before claiming them.
When your partner earns more than the stipulated income threshold
When your partner’s income level sails past the IRS limit ($4,700 in 2023), claiming them as a dependent slips off the table. 2
Any part-time job, seasonal work, or income source counts, even those seemingly negligible. As soon as they cross this threshold, regardless of how heavily they rely on you or where they reside, they can’t qualify as your dependent.
Make sure to stay updated on IRS rules. They adjust the income limit for inflation annually, which changes this income ceiling. Keep an eye peeled for those IRS updates!
TurboTax
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How to Officially Claim Your Partner on Your Taxes
To officially claim your partner as a dependent on your tax return, you will do this when you file your taxes.
Thankfully, this is made easier with online software companies like TurboTax or H&R Block.
The same is true when you are trying to figure out how to file taxes without a W2.
Necessary steps to claim your partner on your taxes
You will first identify them as “other qualifying dependent” or “other qualifying relative”.
Gather the facts first: Confirm your partner’s income, residency, and who has been supporting them for more than half the year.
Document expenses: Keep track of all relevant bills and receipts to demonstrate your majority support.
Use tax software or a professional: Follow prompts about dependents in tax software like TurboTax. They could guide you through the process and specifics.
Complete relevant Tax Forms: Prepare the necessary forms such as Form 1040 and Schedule H and have proof of residency, financial support, gross income information, and certification of your domestic partnership to support your claim.
File your return: Don’t forget to include your partner’s details and tick the correct boxes.
Remember, the devil is in the details. So carefully evaluate your situation to avoid missteps, and consult with a tax professional when in doubt.
Pitfalls to avoid while filing tax returns
While preparing to file your tax returns, beware of these common pitfalls:
Incorrect income calculation: Ensure you tally your partner’s gross income accurately. Reminder: it should not eclipse $4,700 in 2023.
Overlooked Living Qualification: Your partner must have resided with you the entire year. Temporary absences (illness, education) can be exceptions.
Ignoring Other Claimants: If someone else is poised to claim your partner as a dependent – even if they don’t – you can’t claim them.
Emergency Funds Consideration: If your partner taps into their savings for a large expense, this could speak against you providing most of their support.
Forgotten Documents: Maintain a record of bills, receipts, and other expense documents.
The IRS overlooks no mistakes, so take care and stay informed. When in doubt, professional tax help is a button away.
Frequently Asked Questions (FAQ)
Intriguing question! Here’s the short answer: Your partner’s marital status may indeed affect your ability to claim them as a dependent.
For instance, if your partner is married and files a joint tax return with their spouse, you can’t claim them as a dependent.
Remember, tax rules are lock-key specific, and bending them can lead to penalties. Always seek advice from a tax professional.
While you might be able to claim your partner as a dependent, laying claim on their children as dependents is unlikely. IRS rules are clear: you can claim a dependent only if they’re your child or relative.
Since your partner’s children don’t fulfill this requirement, you can’t claim them unless they can be considered your qualifying relative AND you provide more than half of their support.
As always, it’s best to run this by a tax professional for clarity on your unique situation. All we tax-seers can do is guide; the decision falls on your shoulders.
Here’s the hard truth: if your partner didn’t live with you all year, you couldn’t claim them as a dependent. IRS rules are stringent about this: your partner must have the same home as you for the entire year. That is 365 days, no less.
However, IRS grants a green light to temporary separations due to special circumstances like illness, education, military service, or even a holiday. The key lies in their intent to return and, of course, their follow-through.
Stay wise and stay informed, and consult with a tax analyst to seal your decision with assurance.
Get Online Help
Navigating tax rules and regulations doesn’t need to be overwhelming. With the advent of online help, understanding whether you can claim your partner as a dependent becomes considerably more manageable. Here are a few benefits of seeking online help:
Convenience: With online help, you can access the information you need anywhere, anytime. No need to schedule appointments or deal with traffic to get to a tax office. You can get the updates and instructions right from the comfort of your own home.
Accessibility: Some great examples of accessible platforms are TurboTax, e-File, and H&R Block which provide 24/7 support and resources. They offer a wealth of information and experts at your fingertips.
Expertise: Apart from the convenience, these websites employ tax experts who deliver professional analysis and guidance tailored to your specific needs. Specifically, you can use TurboTax Live Full Service for someone to do your taxes from start to finish. Or you can ask questions with TurboTax Live Assisted.
File your own taxes with confidence using TurboTax. This can greatly simplify the process and minimize potential missteps.
Now, Can I Claim my Unmarried Partner as a Dependent is Up to You
As they say, “Ignorance of the law is no excuse”. The same holds true for tax rules.
Falsely claiming a dependent can lead to severe penalties, not just a dinging of your wallet. You’d be sailing the choppy waters of tax evasion, which can bring on hefty fines or even dark days behind bars.
In blatant cases, the IRS could impose a Civil Fraud Penalty. That means a penalty amounting to 75% of the unpaid tax amount resulting from fraud. 5
In short, play by the rules! Accurate and clear tax filing may seem tedious, yet it will steer clear of any legal trouble. Remember, it’s always safer to ask if you are unsure!
Now, are you wondering why do I owe taxes this year?
Source
Internal Revenue Service. “Tax Tutorial.” https://apps.irs.gov/app/understandingTaxes/hows/tax_tutorials/mod04/tt_mod04_glossary.jsp?backPage=tt_mod04_01.jsp#dependent. Accessed October 23, 2023.
Internal Revenue Service. “About Publication 501, Dependents, Standard Deduction, and Filing Information.” https://www.irs.gov/forms-pubs/about-publication-501. Accessed October 23, 2023.
Internal Revenue Service. “About Publication 501, Dependents, Standard DeductionUnderstanding the Credit for Other Dependents.” https://www.irs.gov/newsroom/understanding-the-credit-for-other-dependents. Accessed October 23, 2023.
Intuit TurboTax. “Guide to Filing Taxes as Head of Household.” https://turbotax.intuit.com/tax-tips/family/guide-to-filing-taxes-as-head-of-household/L4Nx6DYu9. Accessed October 23, 2023.
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While the principal of a student loan isn’t tax deductible, the interest you pay on it can be — and that includes refinanced student loans. If you’re eligible, you may be able to deduct up to $2,500 from your taxable income.
The amount you can deduct is dependent on your income; as you earn more, the amount you can deduct is decreased and eventually eliminated. You also must have paid interest on a qualified student loan – that is, one taken out to pay for qualified higher education expenses, such as tuition, books, or room and board.
Here’s what to know about refinanced student loans and tax returns, including when interest on student loans is tax deductible, how tax deductions differ from tax credits, and how refinancing can affect taxes.
What Is a Tax Deduction?
For starters, it’s helpful to review what a tax deduction is: A tax deduction lowers your taxable income by reducing the amount of your income before you or a tax professional calculates the tax you owe.
For example, a $100 exemption or deduction reduces your taxable income by $100. So it would reduce the taxes you owe by a maximum of $100 multiplied by your tax rate, which can range from 0% to 37%. So your deduction could reduce your taxes between $0 to $37.
And before considering how refinancing affects your taxes, it’s helpful to review what happens when you refinance a student loan: Your lender “swaps out” (or “pays off”) your existing loans and gives you a new loan with new terms. A student loan refinance may be beneficial if you get a lower interest rate and/or a lower monthly payment, which can save you money in the long run. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.)
If you’re considering refinancing federal student loans, however, it’s important to understand that you would lose access to certain federal benefits and protections, such as Public Service Loan Forgiveness, federal deferment and forbearance as well as income-driven repayment options. 💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.
The Difference Between a Tax Deduction and a Tax Credit
Keep in mind that a tax deduction is not the same as a tax credit. While a tax deduction reduces your taxable income, a tax credit directly reduces your taxes.
Tax credits give you a dollar-for-dollar reduction on your taxes. In other words, if you qualify for a $2,000 tax credit, the tax credit lowers your tax bill by that exact amount — $2,000.
Recommended: Tax Season 2022: A Guide to Understanding Your Taxes
How Does Paying Student Loans Affect Taxes?
If you paid qualified student loans during the year, you may be eligible for the student loan interest tax deduction. This deduction can reduce your taxable income by the amount of student loan interest you paid during the year — up to $2,500.
Note that the interest on student loans is tax deductible, not your total payment amount (which includes the principal). You can claim it without having to itemize deductions on your tax return because it’s taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Form 1040.
Who Is Eligible for the Student Loan Interest Deduction?
The student loan interest deduction is an “above the line” deduction, which means that it is deducted to calculate your adjusted gross income (AGI).
As mentioned earlier, the interest paid must be for a qualified student loan that you take out for yourself, your spouse, or a dependent for qualified undergraduate or graduate education expenses, such as tuition, books, or room and board. In addition, the expenses must have been incurred within “a reasonable period of time” prior to or after taking out the loan, according to the IRS.
For taxable years beginning in 2023, your modified adjusted gross income (MAGI) must also amount to less than $80,000 ($160,000 if filing a joint return). Your amount will be phased out (reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return).
You cannot claim the deduction at all if your MAGI is $90,000 or more ($180,000 or more if you file a joint return). You also will not qualify for the deduction if you are married and filing separately.
Recommended: How Income Tax Withholding Works
Are Refinanced Student Loans Tax Deductible?
Yes, you can get a tax deduction on the interest you’ve paid on refinanced or consolidated student loans as long as the new loan refinanced qualified student loans.
Refinancing affects your taxes only insofar as the refinancing might change how much interest you pay in a given year – and thus, how much you can deduct. For instance, if refinancing lowers the amount of interest you pay below the $2,500 deduction amount, then that would mean you can’t deduct as much on your taxes. Still, refinancing may save you more money in the long run than a student loan interest deduction because it’s a deduction, not a tax credit. It’s important to do the math or consult a tax professional before you make a final decision.
Recommended: Where Is My Tax Refund?
Refinance Qualifications
It’s also worth taking a look at common eligibility requirements for a refinance. For most borrowers, the soonest you can refinance is usually after graduating. In addition to a degree, you often need to have:
• A debt-to-income (DTI) ratio under 50%: Your DTI refers to how much of your income goes toward debt and how much goes toward your regular income. It’s best to keep your DTI under 50%, but being over doesn’t necessarily mean you won’t qualify for a student loan refinance.
• Minimum credit score of 650: Your credit score is a three-digit number that shows how well you pay back debt. It’s best to have a minimum credit score of at least 650 to be eligible for student loan financing. Again, your personal situation will be considered before determining whether you qualify for a refinance.
• A steady job and/or consistent income: You may need to prove that you have a steady job and have enough savings to be able to pay for at least two months’ worth of regular expenses.
• A certain balance amount: In most cases, lenders will require you to have a certain minimum balance on your student loans in order to qualify for a refinance.
Refinancing Your Student Loans With SoFi
If you’re thinking about refinancing your student loans, SoFi offers flexible terms with fixed or variable rates. You can apply online, and there aren’t any fees.
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. Also, 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.
FAQ
What refinance costs are tax deductible?
When it comes to refinancing and taxes, lenders usually don’t charge any upfront fees to refinance your student loans, which means that there aren’t any refinance costs to deduct.
When you make payments on a qualified student loan — including refinanced student loans — you may be eligible for the student loan interest deduction.
Is it worth it to claim student loan interest?
Yes, when it comes to student loans and tax returns, you may be able to deduct up to $2,500 from your taxable income if you’re eligible.
To be able to claim the deduction, your modified adjusted gross income (MAGI) must be less than $80,000 ($160,000 if filing a joint return). You’ll also experience a phased-out deduction if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). It disappears entirely at MAGIs above $90,000 and $180,000 for joint filers.
Are student loan payments tax deductible?
Only the interest you pay on your student loans is tax deductible. Whole student loan payments (which include principal) are not tax deductible.
Student Loan Refinancing If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) 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, such as the SAVE Plan, or extended repayment plans.
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.
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.
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
“Two is better than one” is an old adage that translates to finances, too. Two incomes can go much further than one, especially between married couples.
People who say “I do” also have access to various tax breaks that can give them a financial edge when it comes to building wealth. For instance, married couples filing their taxes jointly get a standard deduction of $27,700 in 2023, while single filers get a $13,850 deduction.
How can married couples act on the many tax breaks they have access to and use them to build wealth? Two certified public accountants share a few strategies for couples to consider.
Strategy 1: Investing
When married couples get a tax deduction or tax credit, there’s an opportunity to invest that extra money. There are a string of ways to invest the money, but couples could benefit from investing in themselves, says Sheneya Wilson, a CPA and founder of Fola Financial in the Bronx in New York City. Couples may choose to use their tax savings to invest in courses that improve their skills, market value and salaries, she says.
Retirement accounts like 401(k)s, IRAs or regular brokerage accounts are also an option for couples. Investing those extra dollars from tax breaks means couples have more money that can potentially grow and enjoy the benefits of compound interest.
Wilson adds that married folks can also consider alternative investments, such as commodities, gold, silver, royalties or music catalogs.
Ultimately, couples can choose investments that align with their goals and legacy.
“The best investments are going to be in line with how that person wants to leave an influence on the world,” Wilson says.
Strategy 2: Real estate
Married couples who own a property may be able to sell it and exclude some of the real estate capital gains tax from their income. For married couples filing jointly, that means they can keep up to $500,000 of the profit tax-free. Single filers, on the other hand, are capped at $250,000.
“Now think about what you can do with around $500,000 of tax-free income,” says Williams. That extra money could go toward investing in another property, she adds.
Note that couples have to own the house, use it as their main home, live there for at least two of the five years before selling and meet other rules in order to qualify for the exclusion.
Strategy 3: 529 plans
529 plans — investing plans for education that allow tax-free growth and withdrawals — are another way couples can use tax breaks to build wealth, says Jasmine Young, a CPA and founder of Southern Heritage Financial Group in Atlanta.
“It could be your niece, your nephew, your cousin, it could be you, whoever’s gonna use the money for educational expenses,” Young says. ”That’s one way for you to reduce your tax liability and put the money somewhere that’s going to give you a resource to build generational wealth.”
Some states offer deductions or credits for 529 plan contributions. A perk for married couples is that in many states, joint filers can deduct double the amount than single filers, lowering their taxable income. The amount joint filers can deduct varies from state to state.
Another way married people can benefit from 529 plan tax benefits is with the federal gift tax exclusion. While 529 plans don’t have an annual contribution limit, contributions are considered “gifts” by the IRS, which means gifting over a certain amount could lead to extra paperwork at tax time. In 2023, those married filing jointly could gift $34,000 without needing to file a gift tax return versus $17,000 for single people.
Married couples who take advantage of this larger limit can save more annually for their kids or loved one’s kids and potentially help them grow wealth faster.
Another wealth-building strategy couples can potentially use beginning in 2024 is rolling unused funds in a 529 account into a Roth IRA account for the beneficiary. By rolling unused funds into a Roth IRA, the beneficiary — be it a child or family member — can get a head start on saving for retirement. There are several conditions account owners must meet to do this, so consult a financial advisor beforehand.
Strategy 4: Entrepreneurship
If one spouse is an entrepreneur, or a couple runs a joint venture, there’s an opportunity to write off business losses during tax season, Wilson says.
“If you are married, filing jointly and your spouse is investing in starting a business, there may be a net loss from that business venture on the joint tax return because that spouse was investing in maybe educational courses [to] start their business,” she says.
In 2023, married couples with their own business can take a loss of up to $524,000, compared with $262,000 for single filers. The dollars that may have gone to paying taxes can be funneled into growing an existing business, starting a new one, or paying down debt.
Couples curious about exploring more strategies they can implement may want to speak with a finance professional like a tax advisor or financial planner.
This article was written by NerdWallet and was originally published by The Associated Press.