8 Good Things to do with Your Tax Refund

Interest fees from credit cards can snowball quickly into overwhelming debt. But by using your return as a lump sum to pay off the balance, you’ll reduce the financial and psychological burden of debt. You might even see your credit score rebound as a result of this, as well. The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit.

If you have an HSA-eligible health insurance policy with a deductible of at least $1,350 for single coverage or $2,700 for family coverage, then you can contribute to a health savings account. Ideally, three to six months’ worth of income should be stashed away in an emergency fund at all times. But even if you can’t swing that much, any emergency fund is better than none.

Federal Income Tax Return Calculator

Starting or adding to your emergency fund can provide a safety net for life’s unexpected expenses. Having funds available can prevent you from having to borrow money or open a credit card to pay for sudden or unavoidable costs. Paying off high-interest debt saves you money, can increase your credit score, and provides more cash in your monthly budget you can apply to other savings accounts or investment opportunities. HSAs are a great way to https://turbo-tax.org/ set aside money for future medical expenses, as the funds aren’t subject to federal income tax at the time of deposit. So, you’re in a good place financially, with an emergency fund, a retirement fund, and little to no credit card debt. Maybe it’s time to open a brokerage account and start investing with your tax refund! To do so, you can research on your own and invest in a tech startup or stock you believe has the potential for growth.

Investing your tax refund is one way to try and grow that money over time. Once you get started, you can even direct deposit a portion of your income into this slush fund for a rainy day, to build it up slowly over time. As much as you may want to use all your extra cash to invest in your child’s education, Maurer recommends making sure your retirement plan is in place first. Is a terms editor at The Balance, a role in which he focuses on providing clear answers to common questions about personal finance and small business. Has more than 10 years of experience reporting, writing, and editing. As an editor for The Balance, he has fact-checked, edited, and assigned hundreds of articles. If you don’t really need the cash, use your refund to support a worthy cause.

Smart Ways To Spend Your Tax Refund

From refinancing options to savings shares that meet all your needs, you can achieve more with us. If you’re like millions of Americans each year, you may have already received or be expecting a tax refund. The “right” choice for you depends on your personal circumstances, as well as your financial goals. To be clear, a surprise weekend getaway, day to day living expenses, or a new tv is not an emergency. Your emergency fund should be reserved for events like a broken car, a surprise medical expense, a ticket, job loss, etc.

• Have you been wanting to learn a new skill, or become better at something you already do?
• When evaluating offers, please review the financial institution’s Terms and Conditions.
• If you don’t already have an IRA, think about getting one.
• You might also invest some of your refund into taking an online course or working toward a certification or advanced degree.
• If you’re stuck with a credit card that has a high interest rate, one of the smartest ways to use your tax refund is to pay down your balance.

If you received a large refund, one reason could be that you’re claiming fewer allowances on your W-4 than you should, which causes your employer to withhold more federal taxes from your paycheck. You might want to readjust your income tax withholding and have more money in your pocket every month that you could put to better use. It’s important to plan wisely and put your refund toward smart financial goals. An emergency fund is a savings account that can be a cushion during events you can’t anticipate or budget for, such as a major illness, a job loss, a car accident or a natural disaster. Such a fund, especially in a high-yield bank account, is an essential part of a good financial management plan. Use your tax refund to start, build or replenish your emergency savings. Most taxpayers anxiously look forward to receiving their tax refunds.

Open or contribute to a 529 plan

If you’re wondering how to invest your tax return this year, we’ve listed the top 8 ways you can put your tax return to good use. Using your refund to pay off a balance with an 18% interest rate is like earning 18% on your investments — an incredibly valuable use of the money. See Best Ways to Pay Off Every Type of Loan for strategies to help you set decide which debts to tackle first. The CARES Act increased the types of expenses that are eligible for tax-free withdrawals from your HSA. Even if you’re fully employed now, there’s no guarantee that your hours won’t be cut, your salary reduced, or your job eliminated down the road. That means it’s more important than ever to have money set aside for emergencies. That way, you won’t have to run up credit card debts or raid your retirement savings to pay the bills until you get back on your feet.

Earnings from 529 plans are not subject to federal tax and generally not subject to state tax when used for qualified education expenses. Contributions 8 Smart Ways To Use Your Income Tax Refund to a 529 plan, however, are typically not tax deductible. There are plenty of resources for additional information on this, such as the IRS.

Start a business or upgrade an existing one

If you need capital to start your own business, this could be your chance. Or use your funds to invest in classes, courses or certifications that will help take your skills to the next level. This year, credit card interest rates are also expected to rise. From investing to paying down debt, here’s how to do it. Have you been putting off that kitchen remodel or bathroom upgrade? If so, consider applying your tax refund toward home improvements. It will improve the enjoyment of your home and can significantly increase your home’s value.