Three-fourths of filers get a tax refund every year, with the average check weighing in at $2,972* so far this tax season. Here are some ideas to put that money to good use.
1. Pay off debt.
Part (or all!) of your refund could be used to reduce or eliminate debt. With interest on credit cards skyrocketing due to inflation, this is a great place to start. Or an extra payment on your mortgage or vehicle could put more money in your pocket over the long haul.
2. Save for retirement.
Saving for retirement works like debt, just in reverse. The sooner you set aside money for retirement, the more time you give the power of compound interest to work for you. Consider depositing some of your refund check into a traditional or Roth IRA. You can contribute a total of $6,500 in 2023, plus an extra $1,000 if you are at least 50 years old.
3. Save for a home.
Home ownership can be a source of wealth and stability for many people. If you dream of owning a home, consider adding your refund to a down payment fund. Or if you own a home, start a maintenance fund you can use to replace an aging roof, furnace, or air conditioner.
4. Invest in yourself.
Sometimes the best investment isn’t financial, it’s personal. A course of study or conference that improves your skills or knowledge could be the best use of your money.
5. Give to charity.
Donating your refund to a charity helps others and gives you a deduction for your next tax return if you itemize.
6. Beware of fraud!
Finally, consider saving some of your refund to have a little fun. If you use some of the ideas mentioned here, you can feel comfortable you are taking a balanced approach with your refund.
*Source: IRS 2023 tax filing season statistics, cumulative through March 10, 2023.