MoneyLion helps you find personal loan offers based on your background and info you provide. You can get matched with offers for up to $50,000 from top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

Can I get a personal loan to pay taxes?

If you have a decent credit score, you may be able to take out a personal loan to pay your taxes. You use the money for any purpose.  

Pros and cons of taking out a personal loan to pay taxes

Consider the benefits and drawbacks of taking out a personal loan to pay taxes.  

Pros

• Interest rate: If you have a decent credit rating, you may get a lower interest rate than with an IRS payment plan.  
• Satisfy tax debt: Once you pay off your tax debt, you don’t have the stress of dealing with the IRS.  
• No collateral: Personal loans are unsecured. You don’t need collateral, so you won’t risk losing assets like your home or bank account.  

Cons

• Cost: The interest rate with a personal loan may be higher than what you get with the IRS if you have bad credit.  
• Must qualify: Most lenders require you to meet eligibility, credit score, and income requirements to qualify.    
• May affect your credit: Your debt-to-income ratio changes when you take out a personal loan. Your credit score could drop by taking out a personal loan.  

Using a personal loan to pay taxes means that you’re switching out one type of liability for another. Although you’ll solve your tax bill, you’ll still need a clear plan to pay off the personal loan. Budgeting for loan payments is key to your long-term financial health.

How to use a personal loan to pay taxes

Follow the steps below when taking out a personal installment loan to pay taxes.  

1. Shop around and compare offers

Start by shopping around for personal loan offers. Narrow down your choices by comparing interest rates, terms, and eligibility requirements.  

2. Gather documents

Lenders often ask for documents that prove who you are, where you live, and how much money you make each year. Speed up the application process by having documents like your driver’s license, Social Security number, and W-2s readily available.  

3. Submit your application

Some lenders let you complete and submit your loan application online. You may have to complete a loan application in person at a brick-and-mortar bank.  

4. Pay your taxes

The fastest way to settle your tax debt is to make an electronic payment through IRS DirectPay or by setting up an online account with the IRS. You may also mail a check or money order. If you owe $500 or less, you can pay in cash at an authorized IRS retail partner.  

What happens if you can’t pay your taxes?

When you can’t get a personal loan, you can work out a payment plan with the IRS to pay your taxes. The IRS could garnish your wages or levy your bank account if you don’t pay your tax bill.  

Alternatives to using a personal loan to pay taxes

You can find alternative ways to pay taxes if you can’t get a personal loan.  

1. Credit card

If you have enough available credit, you could pay off what you owe on your credit card. The IRS may charge a processing fee for a credit card payment, ranging from 1.82% to 1.98%.  

However, using a credit card to pay tax debt can be costly if you have a high interest rate.  

MoneyLion can help you explore a wide variety of credit card options tailored to different needs and preferences.

2. IRS payment plan

The IRS offers short-term and long-term repayment plans. You apply for a payment plan online. If you can pay back what you owe in 180 days or less, you pay no setup fees and have greater flexibility with your payments. 

You must complete an installment agreement for a longer repayment term. Setup fees range from $31 to $225, depending on how you apply and whether you plan to make payments electronically, by check, money order, or credit card.  

3. 401(k) loan

You could borrow money from your 401(k) retirement account to pay your taxes. The upside of a 401(k) loan is that you are paying yourself back for the loan. However, if you leave your job, you have a brief time to repay the loan. You could be taxed and charged a 10% penalty for any money you don’t pay back by the deadline. 

4. Home equity loan

You can borrow against the equity built up in your home to pay your taxes. A home equity loan may get you a lower interest rate and better repayment terms than a personal loan. Since your home is collateral, you could lose your house if you don’t repay your loan.  

Liquid asset-secured financing loan

With liquid asset-secured financing, you can borrow money against the value of your investment portfolio. The value of your portfolio determines the amount you can borrow. If the market declines and your portfolio’s value falls, you may have to repay part of your loan to cover this shortfall.  

Keep the IRS off your back: Pay taxes with a personal loan

Owing money to the IRS can be scary, especially if you don’t have the money to pay your debt. By taking out a personal loan, you can pay your tax bill quickly and potentially on better terms than what you might get with the IRS.  

FAQ 

To take advantage of tax breaks, you’ll want to be sure you’re aware of possible credits and necessary forms required during tax time to ensure that you can get all the benefits you are owed. To start, let’s take a look at whether or not student loans are considered taxable income. Please note that MoneyLion does not provide tax advice. Please consult a tax or legal adviser for guidance regarding your individual situation.

Does the IRS consider student loans taxable income?

The IRS does not consider student loans taxable income because you are required to pay them back. Student loans are treated like other loans, although you can deduct interest on federal student loans, offering potential tax advantages. Likewise, the American Opportunity Credit and Lifetime Learning Credit allow additional deductions. 

When financial aid may be taxable

Generally, financial aid is not taxable. However, some states are considering taxing student loan debt cancellation related to recently proposed student loan forgiveness programs.

In addition, your financial aid might be taxable if you exceed your qualified education expenses, even with student loan payments. 

These expenses include the following: 

• Books 
• Supplies 
• Student activity fees

Fees associated with room and board, as well as travel expenses, are not considered qualified education expenses. 

By the way, MoneyLion has teamed up with Column Tax to provide a smooth tax filing experience exclusive to RoarMoney^SM customers.

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How to qualify for student loan tax deductions

There are a handful of ways to qualify for student loan tax deductions. 

Student loan interest deductions

With a maximum of $2,500 in total, you might be eligible for an interest deduction on your student loans. Eligibility will be determined by your tax filing status and your income levels. 

For example, if you are single and your adjusted gross income is between $70,000 and $85,000, or you are filing jointly with an adjusted gross income of anywhere from $145,000 to $175,000 together, you would qualify for the student loan interest deduction. However, as with other deductions, there are requirements you must meet. 

For the loan to qualify, it must be used for qualified education expenses, the school must be an eligible institution, and the loan must have been taken out when the borrower was enrolled, at least part-time, in a program that leads to a degree or certification. The borrower must be the taxpayer or an eligible dependent as well.

Education tax breaks

You could be eligible for an education tax break if you paid for education expenses in the past year. These expenses can be claimed if you or your dependent paid educational fees. 

The eligible person must be listed on your taxes. They must also be enrolled in an eligible education institution. If you fulfill these requirements, you could qualify for a student loan tax break. 

American Opportunity Tax Credit

The American Opportunity Tax Credit, formerly known as the Hope Credit, is eligible for students who have not completed their first four years of higher education. You can get up to $2,500 in tax credit per eligible student if you qualify. 

Suppose the credit brings the amount you owe on your taxes to zero. You could have 40% of any remaining amount refunded to you directly, as long as it does not exceed $1,000. 

You can claim 100% of the first $2,000 of qualified educational expenses and 25% of the following $2,000 expenses as an eligible student. There are a few requirements to qualify for the American Opportunity Tax Credit. 

• You must be pursuing a degree, or other recognized education credentials, such as a certification.
• You must be enrolled at least part-time for at least one academic period that began in the applicable tax year.
• You cannot have finished the first four years of a higher education degree or recognized credential at the beginning of the applicable tax year.
• You cannot have claimed the American Opportunity Tax Credit for more than four prior tax years. 
• You cannot have a felony drug conviction at the end of the tax year.

Lifetime Learning Credit

The Lifetime Learning Credit is credit available to a much broader audience. This credit can be used to pay for qualified tuition and related expenses related to undergraduate, graduate, and professional degree courses. 

This even includes courses to improve your job skills or acquire new ones. This credit is worth up to $2,000 per tax return. 

Here are the requirements to qualify for the Lifetime Learning Credit:

• You or your dependent paid educational expenses. 
• The eligible person must be listed on your taxes.
• They must be enrolled in an eligible education institution. 

Tax-free 529 withdrawals

A 529 savings plan is designed for education expenses. This plan is tax-free and can be used to pay for qualified education expenses. When setting up this plan, a beneficiary is identified, and funds can be used for their expenses. 

A withdrawal will be considered tax-free if it is used for qualified expenses. However, if the withdrawal is not for qualified expenses, you are expected to pay income taxes on the withdrawal, and you’ll have to pay a 10% penalty. 

How to report student loan interest on your taxes

To report student loan interest on your tax return, you’ll use Form 1098-E. If you paid $600 or more in interest to a federal loan servicer during the tax year, you will receive at least one 1098-E. How many 1098-E forms you receive will depend on how much you paid in interest, how many federal loan servicers you had, and possibly other factors. 

With 1098-E, the student loan interest statement, you can report the amount of student loan interest you paid on your federal tax return and may be able to count as a deduction.

To get interest deductions deduction, you claim it on your income tax return, Form 1040. You don’t have to itemize your tax return to claim a student loan interest deduction. Instead, you can take the deduction as an exclusion from your income.

What are the consequences of not claiming student loans on taxes?

The potential consequences of failing to report student loans on your taxes include facing penalties or audits. Claiming student loans accurately can help you avoid these consequences. Likewise, if you defaulted on your federal student loans, the federal government could seize any federal tax refund you were expecting.

Tips for maximizing your tax benefits

To maximize tax refund benefits related to student loans, consider paying down your student loan interest early or consolidating loans for better tax outcomes. Consider options to take advantage of the Lifetime Learning Credit or American Opportunity Tax Credit. If in doubt, speak with a tax advisor or certified public accountant (CPA).

Maximizing Savings This Year

Student loans can be confusing, and so can taxes. With so many credits or tax options available, make sure you check with your tax preparer before filing to see if you qualify for any student loan tax credit or student loan tax breaks and ensure that you’ve claimed them correctly. 

You might be eligible for some great ways to save money or get a larger tax refund! Regardless of tax refund status, consider mastering budgeting basics to save more and start building financial freedom this year. 

FAQ 

Read on to understand the answer to “Is home improvement loan interest tax deductible?” for your situation. 

If you need funds for your home improvement, MoneyLion offers a service to help you find personal loan offers based on the info you provide. You can get matched with offers for up to $50,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you. You can also use the loan funds to pay off other existing debts. MoneyLion is here to help.

Understanding home improvement loans 

Home improvement loans are any type of loan used for home renovations. While home equity loans, or home equity lines of credit, require equity in your home for backing, other home improvement loans are unsecured and don’t require equity. 

You can get home improvement loans from online lenders, banks, and credit unions. These are usually a form of unsecured personal loan marketed specifically to borrowers interested in home improvements. You will need to meet individual lender requirements. Once approved, you’ll receive a lump sum to use for renovations or anything else you need. 

While home improvement loans are most commonly available to borrowers with good to excellent credit, some lenders will give these loans to borrowers with poor credit or no credit. 

The fact that unsecured loans or debts like home improvement loans aren’t secured by a house or property means they’re not eligible for the tax credits, even if the loans are used for home improvement projects.

Home loans eligible for tax deductions

The following home loans may be partially eligible for a tax deduction, such as deducting interest payments. You can also learn more about personal loan taxes.  

1. Home equity loans

Home equity loans are a type of secured loan backed by the equity you’ve built up in the home. They are a type of second mortgage and have strict usage restrictions and come with higher risk for lenders. 

As a borrower, if you fail to make the payments, you risk losing your home. However, securing a home equity loan can be easier if you’ve built up home equity. You can also usually deduct interest payments on home equity loans as they’re considered a type of second mortgage. As long as you use the funds to improve your home substantially, you may be able to deduct interest from your loan.

Home equity loans usually have fixed interest rates and repayment terms of 15 to 30 years. You can choose a repayment plan that fits your needs and may be able to repay the loan sooner. The maximum you can borrow with a home equity loan depends on how much equity you’ve built up in the property and individual lender policies. Lenders typically will offer up to 85% of the equity you’ve built in the home, but individual policies vary.

2. Home Equity Lines of Credit (HELOCs)

Home equity lines of credit, or HELOCs are different from home equity loans. HELOCs allow you to borrow against the equity you’ve built up in the home. However, unlike a home equity loan that gives you a lump sum, you can withdraw funds over time with a HELOC. You can take out as much as you need, with no obligation to take more. This makes HELOCs a good choice for ongoing or long-term home improvement projects. 

Usually, HELOCs include checks or a credit card that you can use to spend as needed within a specified time, known as the “draw period”. During the draw period, you only need to make minimum payments. Then, during the repayment period, you’ll need to pay back the borrowed funds plus interest, usually on a set repayment schedule. 

HELOCs usually come with variable interest rates, but you might be able to secure a fixed interest rate on your outstanding balance. Interest on HELOCs is usually eligible for a tax credit when used for eligible projects. 

Home improvement (renovations) vs. home repairs

The difference between home improvements or renovations and home repairs comes down to the purpose. A home improvement is an upgrade or change to the property that improves its intrinsic value or comfort. In contrast, repair is the maintenance of existing structures to keep them in working order.

For example, home repairs might include fixing a leaky roof or repairing an HVAC system with issues. Renovations include major improvements such as replacing a bathroom, re-doing a kitchen, adding an extension, or installing a pool or solar panels. A renovation may include repairs, but the purpose is more than repairs; instead, it focuses on refreshing or renewing the property with updates.

Tax-deductible home improvements

Certain home improvements may be eligible for tax benefits regardless of the type of loan you take out. Even if you use a home equity loan for financing, not all home improvement projects qualify for a tax deduction. It’s important to check the IRS website for current guidelines on home improvement deductions. 

While it’s essential to speak with a CPA or tax professional to confirm your eligibility, the following may be tax-deductible or qualify for tax credits. 

1. Home office deductions

If you work from home and have a dedicated workspace, you may be able to deduct the proportionate costs. This only applies to self-employed individuals or business owners. You cannot take this deduction if you’re an employee of another company working from home. 

Interestingly, the term “home office” is broad. A boat, RV, mobile home, unattached garage, studio, or even barn might qualify if it’s strictly used for business. To qualify for this deduction, you must meet other IRS criteria.

2. Energy-efficient installations

Energy-efficient equipment like heat pumps, solar panels, energy-efficient windows, biomass equipment or small wind turbines may qualify for a tax break. You can even get a possible credit for energy-efficient air conditioning or water heaters. 

The Residential Clean Energy Property Credit applies to qualifying eco-friendly renovations made between Dec. 31, 2021, and Jan. 1, 2033. You could be eligible for a tax credit of up to 30% of the total equipment costs. Specific criteria vary by the type of equipment installed, and you may have to spread deductions over several years. 

3. Medical-related home renovations

Medical-related home renovations include installations necessary for medical care for you, your spouse or dependents. These renovations typically don’t increase the property value but are medically necessary. Common medically-related renovations include:

• Adding ramps or wheelchair lifts 
• Modifying stairwells.
• Widening hallways and doorways.
• Installing wheelchair or differently-abled access for bathrooms, kitchen cabinets, appliances, electrical outlets, or specialized plumbing systems for a person with a disability.

If you’ve made these types of upgrades, you may qualify for a tax break as long as the additions fall within certain parameters. Of course, architectural or aesthetic changes and medically necessary renovations won’t be considered deductible. Before making renovations, speak with a CPA to understand what is deductible. 

Tax-deductible home repairs

Capital improvements add value to your home, prolong its life or adapt it to new uses. These improvements include major renovations like

• Swimming pool
• A new deck
• Storm windows
• An intercom system
• A home security system
• New roof
• New central air-conditioning system
• An extra water heater
• Upgrades to heating or cooling systems. 

Capital improvements aren’t deductible in the year you make them and instead are only deductible from your cost basis when you sell the property. Keep clear records and speak with a tax advisor about the cost basis and any possible deductions when you plan to sell.  

Should You Take a Loan for Home Renovations?

A home equity loan, HELOC, or home improvement loan offers access to funds when you need it. You can also consider online personal loans or personal loans for bad credit. With a clear strategy, quotes from reliable contractors for your budget, and estimates about the added value of your renovations, home renovations can add more than comfort to your home. They can be a smart financial choice while adding comfort to your family’s unique needs.  

FAQ

How should you file your taxes for the upcoming tax season? We’ll cover both the Head of Household and Single filing status in greater detail below. 

Are there advantages of filing as the Head of Household?

We all pay taxes as a percentage of our overall income. However, those who file as Head of Household often pay less tax on their income as a percentage than those who file taxes as Single. Tax brackets update yearly, but taxpayers gain a meaningful advantage when they file as Head of Household.

For example, in 2022, Single filers started paying 22% tax when their income reached $41,775. If you filed as the Head of Household, the 22% tax didn’t start until your income reached $55,900. It’s in your best interest to find out if you qualify for Head of Household filing status. 

What Qualifies a Person as Head of Household?

Filing as Head of Household involves more than just checking off a box. You must meet several requirements to claim this status. Always ask a tax professional if you are not sure. 

To qualify for Head of Household status, you must:

• Be unmarried
• Pay at least 50% of the costs of maintaining a household
• Have a qualifying dependent who lives in your household, and you provide their support for at least 50% of the year

To file using the Head of Household status, you must meet all of the requirements above. If you miss just one, you need to file your tax return using Single status. 

It’s a good idea to document how you meet Head of Household rules. The IRS could challenge the status of your tax return.  If you can’t show that you’ve met all of the requirements under the Head of Household test, the IRS could change your status to Single, which could ultimately result in paying more taxes. A good rule of thumb is to keep accurate and updated financial records. Not only can this process help you better track and manage your money throughout the year, it can also help you substantiate your tax filing status in the event you were ever audited by the IRS. 

Can I claim the Head of Household without dependents?

Normally, to qualify as Head of Household, you would have a child dependent. However, it is possible to file as Head of Household without claiming dependents. This exception might happen when a noncustodial parent has the right to claim a child as a dependent. 

Even if you aren’t entitled to claim your child as a dependent, you may be able to file as Head of Household as long as you’re unmarried, paid for more than half the home cost with your child, and your child is your qualifying person. 

Who Is considered a qualifying person?

A qualifying person is a child, parent, or relative who helps you meet requirements for Head of Household filing status. In general, a qualifying person is a child under 19 years old who lives with you for at least half of the year. A child under 24 years old who is away at college could also qualify.

A qualifying person doesn’t have to be a child. If you provide more than half of the support for a parent, they may meet this definition as well–even if they don’t live with you. 

The IRS has various definitions of who a qualifying person is to allow you to file as Head of Household. It’s important to familiarize yourself with these definitions yearly to see if you happen to qualify for the Head of Household filing status. 

How do I file taxes if I’m married to a nonresident alien spouse?

Carefully consider your tax filing status if your spouse is a nonresident alien. Choosing the wrong status could trigger higher tax rates, lost deductions, and expanded reporting requirements. It is always a good idea to consult a tax professional if you are not sure. 

And remember, for the latest information head to IRS.gov.

When you are married to a nonresident alien, you may fall under a Married or Head of Household tax status. 

• Married Filing Single – If you report your spouse on your tax return and don’t have dependents, you may need to select Married Filing Single. You may pay a higher tax rate and miss out on some deductions with this status, but it may be your only option if you don’t have a qualifying dependent.
• Head of Household – If you have a qualifying person that is not your nonresident alien spouse, you may qualify for Head of Household status. You still need to meet the IRS rules for having a qualifying person, including paying for more than half of that dependent’s home. You can receive a lower tax rate if you qualify for the Head of Household status. 
• Married Filing Jointly – You can choose to treat your spouse as a U.S. resident when filing your tax return. However, you and your spouse must then include your combined global income on your tax returns.  

Single tax filing status

Single tax filers are unmarried and don’t qualify for any other filing status. The IRS bases your marital status on the last day of the year. If you get divorced at any time during the year, you are considered unmarried and file as Single on your tax return. 

If you are legally separated from your spouse and lived apart for at least six months during the year, the IRS considers your status to be Single. 

Difference between Single and Head of Household

Head of Household and Single filers experience differences in tax rates. On a high level, the two biggest differences are that filing as Head of Household gives you a preferential standard deduction amount and a lower income tax bracket. Said differently, those who file as the Head of Household may pay less tax on the income they earn, and they have the potential to earn a higher tax refund when compared to the same income as someone who filed single. 

Should I file as Single or Head of Household?

Filing as Head of Household gives you more tax benefits than filing with Single status. Head of Household filing status has lower rates and a larger deduction. However, to qualify as Head of Household, you need to be single or unmarried and pay for more than half the cost of supporting a qualifying person. If you are a single parent or take care of dependents, investigate which tax status maximizes your tax savings. 

As a reminder, be sure that you follow the IRS guidelines. Choosing the wrong status can be a costly mistake if the IRS decides that you don’t qualify. You’ll pay back any tax savings, along with penalties and interest. The IRS conducts random audits to ensure people are complying with the tax laws and regulations. If you are intentionally misleading your taxes, you could face legal charges as well. 

To decide whether it’s better to file single or head of household for your situation, you may also want to consult with a tax professional. Having a dedicated attorney or accountant at your side can help you ensure your approaching your filing status in the smartest way.

Save money by picking the right tax filing status

Choosing between Head of Household or Single status can be tricky. Different living situations can push you toward one status or another. If you pick the wrong status, it can cost you time and money. If you are unsure which filing status you qualify for, consider filing your federal and state tax returns using a free online tax service or the free IRS filing program. 

The IRS will always tell you whether you owe them more money, but don’t expect them to let you know if you missed taking a tax credit or deduction on your return. It’s up to you to stay informed about the top tax deductions and credits that can help maximize your refund. 

Here are some tips you should know about how to get the maximum tax refund.

In the meantime, learn how you can become eligible to file your taxes in the MoneyLion app for free*.

1. Review common tax deductions and credits

If you have a child or dependent, you may be eligible for a tax break by claiming the Child Tax Credit (CTC). You can take a credit of up to $2,000 per eligible dependent under the CTC.

You may also be eligible for a tax credit if you pay qualified care expenses, such as daycare. Under the Child and Dependent Care Credit (CDCC), you could get a credit worth up to $3,000 for one child or up to $6,000 for multiple children. 

Not all tax credits are refundable, meaning they may lower your taxes but won’t carry over and increase your refund. Reducing the amount you’ll pay in taxes can positively impact your refund in the long run. 

You may also be eligible for tax deductions if you paid for college or post-secondary school expenses with the American opportunity tax credit (AOTC) or lifetime learning credit (LLC). If you’re a teacher, you may even be able to deduct classroom supplies you purchased for your students. If you adopted a child this year, you may be able to claim the adoption credit to boost your refund.

2. Claim your business expenses

Although your taxes get a bit more complicated when you have self-employment income, there are some benefits. While you may need to pay taxes on your earnings from side hustles, freelance gigs, and other untaxed business income if you didn’t pay those taxes throughout the year, you can offset some of this income and make sure your tax bill goes down — which could cause your refund to grow — by claiming relevant business expenses and deductions.

Business travel, business meals, your home office, equipment expenses, and ongoing education to improve your skills are all common business expenses you can claim that may reduce the amount you’ll pay in taxes.

3. Make sure you use the right filing status

If you’re married, it’s generally (but not always) more lucrative to file a joint tax return, although it can be more involved. That’s because married, joint filers often have access to bigger tax breaks, which can help boost your refund. Filing separately can prevent one spouse from claiming certain tax credits and breaks, which could result in paying more taxes.

If one spouse makes considerably less than the other, it may be more advantageous to file separately.

4. Contribute to your IRA or HSA

You can contribute to your individual retirement account (IRA) or health savings account (HSA) for the previous year (2023) until the filing deadline. If you want to maximize your tax benefits — and possibly help boost your refund — contributing at the beginning of the year could help you reduce your taxable income and may allow you to qualify for the saver’s credit if you meet the income thresholds.

The bottom line

Be sure to claim all eligible tax deductions or credits, claim your business expenses if you worked a side hustle, and use the right filing status for your financial situation. To boost your refund even more, you can also contribute to your 2023 HSA or IRA. Don’t leave money on the table this tax season. If you need additional help, seek out a tax professional or go to IRS.gov for additional information on contributions, deductions and filing status. 

FAQs

Please note that MoneyLion does not provide tax advice. Please consult a tax or legal adviser for guidance regarding your individual situation.

What should you do with your tax refund?

What you do with your tax refund is ultimately up to you. If you’re looking for tips, though, using the money tactfully and frugally to help build your financial future is one of the smarter options. 

Although spending your refund now on nice things for yourself could bring short-term gratification, putting the money aside for future projects can help you stay on track for your long-term goals. The value of your refund could help you get out of debt or set you up for retirement. 

15 ways to get the most out of your tax refund

Many Americans receive a refund when they finalize their tax returns with the IRS, and an average tax refund comes to about $2,800. Read more to find out 15 smart ways to get the most out of your tax refund. 

1. Build your emergency fund

An emergency fund is a financial security net that is set up in case an unexpected life event happens and requires a fair amount of money to cover the situation. Potential unexpected life events can include losing your job, experiencing medical issues, or needing major car repairs. 

Your emergency fund isn’t just a piggy bank. Some banks offer high-yield interest rates up to 5%, which can increase your overall savings. 

MoneyLion offers a convenient marketplace to compare high-yield savings accounts from our trusted partners that could help grow your money.

2. Pay off debt

Debt starts a difficult cycle. You pay interest on it, which means the longer you take to pay off the loan, the more you’ll spend on it in the end. Plus, having a large amount of debt can impact your credit score, preventing you from qualifying for certain loans.

Increasing your payments on your debt can save you money in the long run. It also gets you closer to a point where you get more money in your pocket with each paycheck, as you won’t have to spend it on the loan. That can put you in a better financial position in the future and provide you with peace of mind. 

3. Invest in your retirement

Investing in your own retirement may seem like you are planning far ahead, but the sooner you start contributing, the more you could have by the time your retirement comes along. 

Putting this extra money towards your retirement fund, whether that’s an IRA or a 401(k), could be a great way to slowly contribute to your future retirement. The more you’re able to put in, the more the money can build on itself. 

4. Kickstart your career

Your tax refund could also be used to improve your current skill set to enhance your career. Invest in yourself by putting your tax refund toward courses in your field of study to land that next promotion. 

5. Save for big purchases

Saving up for a big purchase could seem overwhelming, but putting some of your refund toward purchases means fewer months you’ll have to spend saving up. If you are looking to buy a home in the future, you may be able to set aside money for a down payment now. 

As an alternative, you could use this amount to save up for holiday gifts, a car, or home renovations. In the long run, your tax refund could help you in the future when it comes to making a big purchase. 

6. Fund your next vacation

Need a break and want to go on vacation? Rather than spending impulsively, wait until you have extra money from your tax refund. Set aside a chunk of change for your next vacation and start planning the trip. 

By saving these extra funds for a vacation you might be able to worry less about charging your credit card or taking out loans. Plus, you’ll thank yourself in the future if you’re enjoying free time in a nice change of location. 

7. Pay extra on your mortgage

Increasing your monthly payment or making an extra payment is a fantastic thing to do as often as you can. The faster you pay off your mortgage, the less you’ll have to pay in interest. Even a few thousand dollars extra could take years off the life of your loan.

8. Save for your kids and their future

Education, medical care, clothing, and after-school activities can pile up over time. Starting a bank account or a college fund can help fund your child’s future. Additionally, proactively saving for your child’s education can reduce the possibility of having to take large loans to pay for their college tuition. 

9. Invest in your education

Other than preparing for your child’s career, you can also benefit from investing in your own. With the extra money from your tax refund, explore the topics you’d always hoped to learn more about. You may be able to turn that knowledge into cash in the long run, gaining access to more job opportunities and higher pay. 

10. Look into a home improvement project

Investing in your home is a great way for you to maintain or improve its value. Home improvement projects can range from redesigning space to upgrading your kitchen appliances. Setting this money aside to help pay for renovations can help your property preserve or increase in value. Additionally, upgrading your can enhance your comfort and enjoyment throughout the space. 

11. Get life Insurance

Life insurance is a way to support your family even after you pass away. You may have better peace of mind if you know your family has funds to pay for funeral expenses, medical bills and mortgages. 

12. Add to your health savings account (HSA)

A health savings account lets you set aside money for certain medical expenses that won’t be taxed. That money can be used for bills like copays and deductibles, lowering your out-of-pocket costs. Using your tax refund to add money to your HSA can be a smart choice for many consumers.

13. Open a business

If you’ve always wanted to start a business but haven’t had the money to kick things off, your tax refund can be the perfect place to start. Plus, since the money wasn’t something you had in your pocket originally, it can feel like a free extra check that doesn’t seem as risky to lose. 

14. Start a diversified portfolio 

Investing is an opportunity to potentially turn the cash you have into more money. If you put your money into stocks and bonds in companies that turn out to be successful, in time you may get paid back even more than you initially put in. That means that you can use your tax refund to try to create more money. Dabble in stocks and bonds, open a high-yield savings account, or invest in a low-cost index fund. Investing is subject to risk of loss, including loss of principal.

15. Donate to those in need

Since your tax refund isn’t something you’d factor into your monthly budget, you can spend it more freely than the money on your typical paycheck. Consider that others may be struggling more than you at the moment. You may want to use your tax refund to donate to those in need. 

Your Refund: To Save or to Spend 

No one can direct what you do with your tax refund, but it’s smart to try to use it strategically. You can pursue side hustles, go back to school, pay down debt, save for additional expenses, or put the money in the market. Investing in yourself and your future could help you move toward financial security and start building a foundation for financial freedom.

FAQ 

1. Figure out if you have to file

Although most individuals have to file a tax return, not everyone needs to. If you make under a certain amount of income, you may be tax-exempt and not have to file a tax return. If you earned less than the standard deduction last year, you should not have to pay taxes this year. However, sometimes you may be eligible for tax credits, so it might be worth doing your tax return to make sure you aren’t missing out.

The IRS changes the standard deduction every year, and it’s a good number to know. You can use the standard deduction to reduce your taxable income if you do not want to itemize your tax deductions.

2. Know the filing deadlines

Your 2023 tax return is due to the IRS by April 15, 2024. If you need more time to file, you can request an extension. Keep in mind that if you owe the IRS tax money, you still need to pay your bill by April 15 — even if you receive a filing extension.

3. Gather your relevant forms and paperwork

Whether you’re filing online, working with a CPA, or mailing in your tax return, you’ll want to have your documents ready to go. Depending on your situation, these might include:

• W-2 for employer income
• 1099-K, 1099-NEC, or 1099-MISC for other income types
• 1099-INT for interest received from savings or investment accounts
• 1098 for interest paid on student loans or your mortgage

You may receive additional tax forms if your situation calls for them. You should have a copy of last year’s tax return handy and copies of all relevant expenses you plan to claim. If you have capital gains or crypto transactions, make sure you have this information as well.

Gathering these documents in January and keeping them in the same place can make the tax season less cumbersome. Don’t wait until March to start collecting your documents. A headstart will reduce stress and help ensure you report all of your income.

4. Determine your tax filing status

Next, you’ll want to figure out your filing status. This is important because it directly impacts your tax rate and the amount you’ll receive when claiming deductions and credits. There are five main filing statuses, including:

• Single
• Married filing jointly
• Married filing separately
• Head of household
• Qualifying surviving spouse

The IRS has criteria you must meet to file as a certain status. Be sure to become familiar with these rules so you know you’re choosing the right filing status. If you think you qualify for more than one status or need help determining the right filing status, use the IRS filing status questionnaire tool.

5. Review your eligible tax deductions and credits

Even if you’re working with a tax professional, it’s a good idea to brush up on the credits and deductions you’re eligible to claim. A tax credit reduces your tax bill directly and, if refundable, may boost your refund. A tax deduction lowers your taxable income and, in some cases, could drop you into a lower tax bracket with a lower tax rate.

Most people claim the standard deduction. If you have enough deductible expenses, compare both types of filing to see if you’ll save more by itemizing your taxes and claiming these deductions or by taking the standard deduction.

It’s a good idea to review some of the most common tax breaks to make sure you’re not missing out on a benefit you didn’t know existed. An accountant or tax preparer can walk you through various tax deductions and credits to help you save money.

6. Review and file your return

Once you’ve filled out the required forms and entered your information, review your tax return one final time to make sure there are no mistakes. Double-check your personal information to make sure your address and social security number are correct and review income forms (like your W-2) to make sure you didn’t accidentally mistype a number.

If everything looks good, it’s time to file and pay your tax bill or request your refund. To pay your bill, you can visit the IRS payments portal to submit your payment along with your state revenue department. If you need more time to pay, you can request a short-term or long-term payment plan from the IRS. You should still pay as much as possible upfront to reduce IRS penalties and fees.

For those getting a refund, make sure you enter the correct bank account information. Double-check to make sure the account numbers are correct so that your refund isn’t delayed.

7. Track your refund

Though the IRS normally turns over more than 90% of refunds within 21 days, you’ll want to track your return to ensure it was accepted and keep an eye out for your refund. Refund timeframes may vary as determined by the IRS. 

It’s best to request a direct deposit refund, as a paper check refund can sometimes take months to get to you. That way, you can quickly use your return for any purchase or investment. 

If you need help tracking your refund, use the IRS’s “Where My Refund?” tracker.

8. Get Ahead for Next Year

Keeping your finances organized throughout the year can make filing during next year’s tax season easier. Hang on to tax documents you receive and keep track of receipts for expenses you encounter. Keep these documents in a safe place so you have them all together during next year’s tax season.

Filing your taxes isn’t fun, but it’s a necessary part of life for most Americans. The good news? MoneyLion is here to help. Learn more about filing taxes (for free), How to Get the Maximum Tax Refund, and more here. 

FAQ

Follow these simple steps to qualify for free tax filing and to be entered for a chance to win $1,000

1. Download the MoneyLion app or create an account on MoneyLion.com

2. Create a RoarMoney account¹
Powered by Pathward^®, N.A., Member FDIC

3. File your taxes

Once the IRS accepts your return, you’ll be entered for a chance to win $1,000.
No Purchase Necessary. Ends April 15, 2024. Subject to Official Rules*.

These are real people filing their taxes the MoneyLion way²:

“It was easy and straightforward, also, I could track my refund and that was great.”
Ashley H. 12/20/23

“It was easy, quick and I got a bigger refund than others were offering.”

Malcolm H. 12/20/23

“Filing was very easy. First year doing it in my MoneyLion app & it connected easily to where my W2s were stored in other apps.”

Kiera K 12/20/23

Stay up to date on everything 2024 tax-related. Check out all our tax blog content here.

It’s everyone’s favorite time of the year again—tax season. Navigating the complexities of tax filing can feel a little scary and any mistakes can be expensive, but it doesn’t have to be. With a bit of organization and the right tools, you can breeze through the process and even use it as a springboard for smarter money moves. Let’s break it down.

Step 1: Find Your Filing Service

Before diving into tax filing, choosing the right platform can impact how much you pay, your refund amount, and your stress levels. You have options: tax software, a tax professional, or doing it manually. But beware of many services that claim to be free, they often will hit you with hidden fees and costs. 

Pro Tip! MoneyLion has partnered with ColumnTax to offer a tax filing service for RoarMoney^SM customers with NO filing fees, State fees, or Federal fees. It also guides you through a step-by-step process for a quick and easy experience.

Step 2: Know Your Deadlines

Hopefully, you’re reading this before Tuesday, April 18th, 2024. That’s the last day you can file taxes without an extension. But if you need more time to file and submit for an approved extension, you’ll have until October 16th, 2024 to file your taxes. Keep in mind that if you owe the IRS tax money, you still need to pay your bill by April 18th—even if you receive a filing extension.³

Step 3: Gather Your Paperwork

The next step is to gather all the necessary information and documents that you’ll need all in one place. These forms can include:

• W-2 for employer income
• 1099-K, 1099-NEC, or 1099-MISC for other income types
• 1099-INT for interest received from savings or investment accounts
• 1098 for interest paid on student loans or your mortgage
• Receipts for any deductions

Using a dedicated app, like MoneyLion, can let you snap pictures of your forms and maintain organized records to significantly assist in this task.

Step 4: Check Your Deductions

Deductions reduce your taxable income, sometimes dropping you into a lower tax bracket with a lower tax rate—which could lead to a bigger refund.⁵ MoneyLion’s tax filing feature, partnered with Column Tax, is designed to get you all the tax credits and deductions you’re eligible for, which means a maximum refund guaranteed. But even if you’ve got a tax pro on your side, it’s smart to know the credits and deductions you can use. For simpler taxes⁶, most folks go for the standard deduction.

Step 5: Review, File, and Smile

You may be eager to hit that “submit” button when filing online, but you should review your return for accuracy. Double-check numbers, deductions, and personal information. When filing through MoneyLion, you’ll also have peace of mind in knowing ColumnTax will reimburse you for any penalties and you’ll have accuracy on your filing guaranteed.

Step 6: Use Your Refund Wisely

Now, for the exciting part—the refund! If you’re filing with MoneyLion, you’ll have access to that refund up to 2 days early⁴ with direct deposit to your RoarMoney² account. So consider using it wisely, like paying off debt, depositing it into a high-yield savings account or a fully managed portfolio that aligns with your interests and level of risk. These are excellent ways to help make that money work for you, while keeping your money easily accessible for future needs.

Bonus Tip: Get Schooled On Taxes

MoneyLion’s new series “Know Money” hosted by Professor Brandon Copeland, teaches you all the tax information you should’ve learned in school. Plus, we’ve curated a tax season playlist filled with informative videos to level up your tax knowledge—all within the MoneyLion app.

Remember, filing your taxes doesn’t have to be a headache. With the right organization, tools, and smart financial moves post-refund, you can turn tax season into a stepping stone toward a stronger financial future. Don’t just file your taxes—use this time to set yourself up for financial success!

Stay up to date on everything 2024 tax-related. Check out all our tax blog content here.

How is a savings account taxed?

When it comes to taxing bank accounts, you don’t owe the IRS anything on the deposits you make. However, you do have to pay taxes on any interest your saved dollars earn. Generally, you pay interest tax at your ordinary income tax rate. Here’s what those brackets look like for the 2021 tax year. 

How do I pay taxes for interest earned on a savings account?

If you earn more than $10 on your savings in a year, your financial institution is required to send you tax form 1099-INT. Your 1099-INT details how much you earned on which account(s). You’ll need this information when filing your income tax return. 

But even if you don’t receive a 1099-INT (which may happen if you receive under $10), you’re still on the hook for taxes on savings account earnings. Depending on your bank, they may provide that information in a handy document. Or you may have to go through your monthly statements to add up your annual interest earnings.  

How to avoid tax on savings account

Unfortunately, you can’t wiggle out of paying income taxes on regular savings accounts. However, there are ways to save that do come with tax advantages on earned interest. 

Tax-deferred accounts 

Tax-deferred accounts let you invest after-tax dollars to save for retirement. Any interest you earn in the account grows tax-free until you retire. Then, you’ll pay your ordinary income tax rate on withdrawals. 

Traditional 401(k)s are employer-sponsored accounts that often offer additional perks, such as employer matching. Individual retirement accounts (IRAs) also offer tax-deferred benefits, but you can open these accounts on your own. 

Tax-exempt accounts

You can also invest in a tax-exempt retirement account, such as a Roth IRA or Roth 401(k), to lower your interest tax bill. Unlike a tax-deferred account, you contribute to these accounts after you pay taxes. Then, the money grows tax-free until retirement, at which point you don’t have to pay taxes on withdrawals – or on interest earned. 

Flexible spending and health savings accounts

Flexible spending accounts (FSAs) and health savings accounts (HSAs) also offer interest tax savings. While FSAs must be set up by your employer, HSAs are only available to individuals with high-deductible health plans. 

Both types of accounts let you contribute pretax income up to a specified limit, depending on your income and family size. The money you put in may be invested or otherwise earn interest. As long as you use the funds on eligible medical or dental expenses, you won’t have to pay taxes on withdrawals. (But if you use the money for unrelated expenses, you’ll owe income taxes and a penalty tax.) 

Education oriented accounts

If you’re planning to invest in your or your child’s education, you may have additional ways to save on taxes on savings accounts. 

For instance, with a 529 savings plan, you can pay for K-12 tuition, college, or even make student loan payments. 

Coverdale Education Savings Accounts (ESAs) are another option, though they act more as a trust or custodial account. With an ESA, you may be able to cover additional education-related expenses for elementary and secondary schoolchildren.

Both of these accounts allow you to save after-tax dollars and enjoy tax-free growth and withdrawals. (Providing you use the money for qualified education expenses, of course.) However, these accounts generally don’t allow you to deduct your contributions, unlike retirement accounts. 

Invest in municipal bonds in your state

Another way to earn tax-free interest is to invest in municipal bonds. To encourage investment in local projects, interest earned on municipal bonds is federal, state, and local tax-free as long as you live within the state where the bond was issued. 

Permanent life insurance

Permanent life insurance is a policy that provides coverage throughout your life (as long as you pay your premiums). One perk of these policies is that any payout your beneficiaries receive is generally 100% tax-free. Additionally, permanent life insurance builds up cash value as you pay your premiums, which you may be able to borrow from tax-free. 

Is interest income taxable? Usually – but not always 

Whether you want to build a safety net for medical emergencies, go back to school, or prepare for retirement, you can build a tidy nest egg for many major goals. And while regular savings accounts generally earn taxable income, specially designated accounts may let you save tax on savings accounts.

FAQ