The Best Ways to Put Your Tax Dollars to Work for You

Did you know the average taxpayer took in a tax return of more than $3,000 this past year? People who are able to bring home a good chunk of change in their tax returns are often left wondering what they should do with that money. It’s essentially free money you weren’t banking on getting back, so where should you put it?

Here are some tips from a tax service in Des Moines, IA to help you answer that question:

  • Pay off debts: High-interest debts can really do a number on your personal finances. These debts are typically credit card debt, and their compounding interest can rack up quickly. Therefore, if you have any credit card debt, using your tax refund to help pay them off is perhaps the best investment you can make, as it delivers an excellent return on your money. Even if the refund doesn’t cover the entire balance, you could roll your remaining debt over into a balance transfer credit card with a lower rate, then use whatever you have to pay off some of the balance on that.
  • Put it in a rainy day fund: While everyone knows the benefits of having a rainy day fund for unexpected expenses and emergencies, many people simply are not able to feasibly put money into such a fund each month. If you’re looking for a responsible way to use your tax return money, there are few better options than just stocking it away in savings.
  • Pay for big-ticket items: Have any expensive items you’ve been looking to purchase this year? It could be a down payment on a new car, braces for your kids or a big home project. A tax return is unexpected money that you weren’t planning for, so it makes sense to put it toward these big-ticket items that you would have otherwise had to carve out room for in your budget.
  • Invest: Invest the money you get in your tax return and let it grow. You might use it to purchase stocks, put it into your retirement accounts or start a brand new IRA. If you want to save the money for later but don’t intend to put it in a rainy day fund, you may as well give it the ability to grow over time much more than it would in a standard savings account.
  • Go on a trip: Have you been in need of a getaway? Why not use your tax return to pay for all or most of a big trip, whether it’s just you going or your entire family? Everybody needs a vacation every now and then, so using your tax return on a trip can be a good way to repay yourself for all the hard work you put in over the last year.

For more tips about what to do with your tax return, contact the team at Accounting & Tax Professionals, PLC. Our tax service in Des Moines, IA looks forward to assisting you soon!

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