Smart Ways to Use Your Tax Refund

When you’re done paying your taxes, you’re left with a nice chunk of change left over but you don’t want to spend every penny on some candy or gift. You don’t want to waste it. You want to use it to make some smart financial decisions. Knowing the best ways to use your tax refund (or any other amount of cash) can set you up for future success.

The average American household has amassed over $46,000 in tax rebates since the US tax law was changed in late 2017. Most of this money is being spent on just about anything and since the tax deadline for this year’s refunds has passed, many are rushing to spend their 2017 tax refunds.

But before you put your refund to use, consider these five smart ways to use your refund to your benefit.

  • Put it in savings

It is time to seriously think about ways to use the tax refund you are due in the summer. If you are like most, you would like to make some investments, save some money, or reduce your debt.

One of the best things you can do with your tax refund is to deposit it into a savings account and let it sit there. If you’re like most people, you’re probably rushing around this time of year, with most of your tax deadlines looming and wondering what to do with the extra cash. One option is to take the money and spend it on high-cost items like a new iPhone or iPhone case or a trip to the movies. Or you could put it in an easily accessible savings account and let it build interest.

  • Pay your debt

According to the IRS, debt is the single most effective way to lower your income. The more debt you have, the more money you will have to pay in taxes, so this is something to consider. But, what if you still have debt, but you are willing to pay it all off? What if you are being penalized for something you have no control over? For example, are you being penalized for not having a job by paying more in taxes than you would have by working full time? Have you ever thought to yourself, “I want to pay off my credit card debt, but I don’t have much cash to spare”? Paying off your credit card debt can be a great way to save money and improve your financial situation. However, it can be time-consuming and even tedious.

  • Fund it for your retirement

The Internal Revenue Service (IRS) hands out tax refunds to millions of Americans every year, but what should you do with it? If you received a refund last year, you might be tempted to blow it all on a new TV or a fancy new car. But there are better ways to spend that money and you can fill your piggy bank account by doing so. Here are four ways to use that refund to fund your retirement. 

When your tax return arrives, you want to put it to good use. You can put that refund into a savings account or use it to pay down debt. If you get a sizable refund that’s allowed without having to pay any taxes, you have a choice of whether to donate it. This is a good way to get a tax deduction, but people have different ideas about how to invest it. Some people donate to charity, others buy a vacation, and some invest it in their retirement account. It’s up to you.

A new tax season is upon us, and many taxpayers are wondering if their refund is going to be big enough to make a difference in their lives. In general, expect a modest refund, no matter how much you earned or how few taxes you paid. The federal government prides itself on keeping refunds from growing too large, as it muddies the tax divide between those who pay more taxes and those who pay less.

After filing your taxes, you probably don’t give much thought to how you spend your refund. But when it arrives in the form of a check in the mail, it’s easy to take it for granted. You might even qualify for a tax refund if you made less than $64,000 in income in 2016. If you don’t, you may want to consider making an extra effort to earn more in 2017. After all, it’s the easiest way to earn more money. As for what to do with it when you get it, that depends on your financial situation.

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