If you’re not self-employed, tax season can mean money in the bank. 74% of Americans receive a tax refund of an average of $3,000, which for most taxpayers, is a significant amount of money. During the COVID-19 crisis, millions of Americans lost their jobs, which means that the tax return might need to be spent strategically to get the most out of it.
Here are five of the most fiscally responsible ways to use your tax refund money:
Relieve Your Stress by Paying Off Debts
Not only is paying off your debts extremely satisfying, but it can also help save you money in the long run. While paying the minimum amount due on your credit card each month might keep money in your pocket in the short term, debt that accrues interest can be virtually never ending, keeping you in the debt cycle.
If you can’t pay off all of your debts with your tax return, start by paying down your accounts with the highest interest rate.
Investing Your Tax Refund for a Richer Future
Whether you dabble in the stock market or you’re more of the type to make an investment in yourself, such as going back to school, using your tax refund to better yourself and your future is never a bad idea. Whether you choose to go a more traditional route like low-risk mutual funds or like the thrill of investing in a startup, weigh your options on what will likely provide the best ROI, both financially and personally. Remember, investments can be risky. Enlisting the help of a financial advisor or other financial professionals can help you decide where best to invest your money.
Stash it Away
Sometimes the best thing to do with your tax return is nothing! Deposit your money into a high-interest savings account for a way to earn truly passive income. When looking for a high-interest savings account, ask each bank about what other sign-up bonuses they offer, and you might see yourself earn even more money!
Build Equity by Completing Home Improvement Projects
If you’re stuck at home, you might as well be productive. Your home is a large investment; spending your tax refund replacing the building equity in your home protects that investment. A well-maintained home is worth more than a house in disrepair, even in economic recessions. Every home improvement project should be done with the resale value of the house in mind.
Some of the best ways to use your tax refund to build equity in your house include:
- New Siding – Installing new siding on your home isn’t just an aesthetic improvement; it can save you money and protect the integrity of your home. Replacing old and worn siding can prevent termites and other wood-boring creatures that are more likely to make their nests in water-damaged compromised siding. Another benefit of adding modern siding to your home (such as insulated concrete form siding) is the low-cost maintenance and the money it saves over time. Modern siding is energy-efficient, keeping your utility bills low.
- HVAC Upgrades – Using your tax refund to replace or upgrade your current HVAC system is not only a financially responsible investment but also aids in your overall quality of life. An inefficient or outdated HVAC system causes your heating and cooling bills to skyrocket and can still leave you feeling uncomfortable.
- Fixing Up Outbuildings – outbuildings in disrepair aren’t just unsightly; they lower your property values. Spending your tax return on replacing or repairing old outbuildings can make your home more appealing to prospective buyers should you ever want to sell.
- Installing New Windows – purchasing modern, energy-efficient windows lowers your utility bills and increases your property values. Spending your tax refund on new windows is definitely a good investment.
- Energy-Efficient Appliances – Appliances with an Energy-Star rating only increase property values and reduce your energy bills (and your carbon footprint!) you can actually get a tax break next tax season for making the switch!
- Investing in new gutters – Gutters are one of the biggest ways homeowners can protect their homes. Houses without gutters are more prone to wood rot and foundation problems. If your house doesn’t have gutters, using your tax refund money to install them is a great idea.
- Add Solar Panels – another way to add value to your home, reduce energy bills, and possibly get a tax break is to add solar panels onto your home. Depending on the size of your home (and your tax refund), you may not be able to install an entire system at once, but even some solar power is better than none.
- Build a backyard garden and greenhouse – growing your own food is not only healthy and can save you money on groceries, adding a greenhouse to your backyard can increase your property values as well as allow you some self-sufficiency.
What is The Best Way to Spend Your Stimulus Check?
This year due to the COVID-19 global pandemic some Americans saw a stimulus check of $1200 in their bank accounts (and people with children received more). As with your tax refund, you should carefully consider what to do when you receive a chunk of money. Using your stimulus check to pay your rent in advance or put it away to ensure you have it in case of an emergency is an intelligent thing to do in these economically uncertain times.
If you are experiencing wage garnishments, liens, asset seizures, or levies, we can help. At getataxlawyer.com, we create a comprehensive plan to resolve your tax problems and keep you protected in the future.