Every year, three-fourths of tax filers receive a refund, with the typical check so far this filing season coming in at $2,972*. Here are some suggestions for practical using your tax refund.

Using your tax refund

1. Clear your debt. Pay off the debt in whole or in part using your refund. This is a wonderful place to start, especially with credit card interest rates soaring due to inflation. Also, making an additional payment on your car or home could result in longer-term financial gains.
2. Save for retirement. Debt repayment is similar to saving for retirement but in reverse. The sooner you start saving money for retirement, the longer you give compound interest time to operate in your favor. Consider contributing a portion of your refund check to a regular or Roth IRA. In 2023, you can contribute $6,500 plus an additional $1,000 if you are at least 50 years old.
3. Invest in a house. For many people, owning a home may provide financial security and stability. So, consider contributing your refund to a down payment fund if you aspire to acquire a home. Alternatively, if you are a homeowner, you may begin a maintenance fund that you could utilize to replace an old roof, furnace, or air conditioner.
4. Invest in yourself. Sometimes, a human investment outperforms a financial one. Therefore, the wisest use of your funds might be a course of study or conference that advances your abilities or expertise.
5. Donate to a good cause. Giving your refund to a charity benefits others and, if you itemize, qualifies you for a tax deduction on your upcoming return.

Financial considerations

Finally, think about setting aside some of your refund for enjoyment. If you implement a few of the above suggestions, you may be confident that you are handling your return thoughtfully.

In addition, you must be wary of scams. Con artists often employ different strategies to steal people’s tax refunds every year. Remember that IRS officials will never call you and demand quick payment for any reason. Contact our RRBB accountants and advisors if you have further questions.

*Source: IRS 2023 tax filing season statistics, cumulative through March 10, 2023.