5 Great Uses for Your Tax Return

Depending on your line of work, tax season is either a joy or a pain a joy for those who received or have yet to receive a return, and pain for those who had to pay taxes out. For those who expect to receive a substantial return (parents with numerous dependents, anyone?), it’s helpful to have a plan in place to maximize the long-term financial benefits of this annual lump sum. Here we will explore five excellent uses for your tax return that don’t involve squandering it on a shopping spree or a Caribbean cruise.

1.) Pay off credit card debt.

As long as you have credit card debt, a chunk of your hard-earned income is going out the window every month to pay back that debt. Why not get some relief by paying off a credit card with a low balance or making a serious dent on your highest-balance card? Your budget will thank you in the long run as you will free up more of your income to place into savings or a retirement account. Don’t have any credit card debt? Pay on the principal of your vehicle, home mortgage or student loans if you can.

2.) Kick off a college fund for your child.

The cost of higher education isn’t getting any cheaper in this country, and chances are your child will struggle to find ways to pay for his or her college education down the road. Why not meet with a financial professional to discuss opening a college fund to help alleviate some of that burden in the future? The younger your kids are when you start, the more you will be able to accumulate in a college fund over time. While it might seem like a more gratifying plan for your tax return is to take your kids on vacation or do something fun in the short-term, the long-term benefits of a college fund will far exceed short-term amusement.

3.) Home improvements.

Instead of spending money on new furniture or electronics, invest your tax return in improving your house. Not only will some landscaping, porch work or minor renovations improve the value of your house, but it will also be an investment you can appreciate every day. This is a particularly good idea for people who plan on selling their homes in the next year or so or whose home is currently for sale. A few energy efficiency upgrades such as insulation, weather stripping, new windows, sealing up cracks, or a new washer/dryer can also save you serious cash down the road on your power bill.

4.) Savings.

Is your savings account looking a little low these days? You may want to stash away your tax return for a rainy day. Having an emergency fund in place will certainly come in handy down the road when something is sure to go wrong. You never know when the engine will blow on your vehicle or a sudden storm will wreak havoc on your roof.

5.) Use toward a down payment on a home.

While there are some short-term advantages to renting for a short period of time, those who are currently renting might as well be throwing their money out the window every month because they’ll get no return on their investment. Another smart use for your tax return is to save it up for a down payment on a house. Remember: the higher your down payment, the less you will pay over the years in interest on your mortgage.

These are just a few ways you can use your tax return to your advantage. If you’ve already received your return, how did you use it? If not, how do you plan to use it?

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This guest contribution was submitted by Jamie Davis, who specializes in writing about masters degree. Questions and comments can be sent to: davis.jamie17@gmail.com.