As of May 6, the IRS reported they are holding 29 million tax returns, which means many Americans are still waiting for their refunds. So let’s talk about some smart ways to spend your refund when it comes.
Invest in Your Side Hustle or New Business
Many people created side hustles in 2020 or started thinking about starting that business they’ve been dreaming about. Why not make that refund money fuel for that dream?
Investing your tax refund into a side business is a great way to diversify your income and start building up your new business!
Focus on Your Debt
Another great way to put your refund to work is to contribute a lump sum to one of your big loans or credit card bills. Paying down those debts with your refund can decrease the total amount of interest you’ll pay over the lifetime of that debt source.
Put It in a Retirement Account
Saving for retirement is always important, and after a year of income and job loss, it’s also a smart idea to take that refund and put it into a 401(k) or another retirement account.
If you don’t have anything pressing that needs to be paid (big debts or upcoming expenses), putting that extra money into your future is always a solid plan.
Put It toward Your House
Saving for a home? Use that refund to increase your down payment amount. Looking to sell your home in the next few years? Take your refund and choose a home renovation project that you can put that money toward.
Make Forward-Looking Investments
There are tons of great options for investing in your future. This can include real estate, a tech startup, or stocks.
It can also mean putting that money to use by spending it on products and services that either make your life easier or save you money in the long run. Update old appliances in your house – maybe you need a new refrigerator or air conditioning unit that is more energy-efficient.
Research meal delivery kits that save you time and money on groceries, or purchase those big-ticket items that can really enhance a space or make your life easier. Examples of these include printers, new gadgets for your house (smart thermostat, smart assistant stations, video doorbells, home protection system, smart locks, automatic kitty litter cleaner, etc.)
Get a Credit Card with Rewards
If you have your essentials paid, you can also switch credit cards to one that earns you points or comes with other rewards programs. Keep in mind, many of these credit cards have an annual fee that allows you to have all the cool perks, but it’s a great way to level up your spending – if you’re using a card for lots of purchases and bills anyway, you might as well be accruing points or earning cash back while you spend!
Give a Tax-Free Gift
If you are of retirement age, or near it, you can also consider giving your refund as a large gift to family members, caretakers, or other companions or important people in your life. As of 2020, you can give a gift amount of up to $15,000 per recipient without them having to file a gift tax return.
eFile360 Wants to Help You Get a Refund Next Year, Too!
eFile360 can offer you tax help at an affordable price. This allows you to save money and rest easy knowing your 1099s, 1098s, and ACA forms have been properly and quickly filed.
Need help with your taxes? Questions about next year? Sign up for a free account today.