Tara Holloway, the IRS Special Agent in Diane Kelly’s book, Death, Taxes, and a French Manicure, fantasized about what to do with her tax refund. She noted that the $400 she was due was “enough to pay for the bikini I’d ordered and then some. Woo-hoo!”
Over the years, I’ve heard lots of great ideas for what to do with a tax refund. We’ll start with the boring and sensible ones. That’s the responsible thing to do, right?
Sensible tax refund uses
- Deposit your refund electronically into an IRA. Do it before April 15 and you’ll get a tax break on this year’s tax return. (You may even get a double tax break if you qualify for the Retirement Savings Contributions Credit, also known as the Savers Credit.)
- Pay off debt. Start by applying payments toward your debts with the highest interest rates.
- Get that health checkup you’ve been putting off.
- Take a class that can improve your skills and help you get a raise or a better job.
- Get your will written—especially if you have children.
- Set aside money for an emergency fund.
Fulfilling tax refund uses
Life has been tough for a while, hasn’t it? You’ve probably been dealing with cuts in income, earnings, or benefits. If you’ve been lucky enough not to be hit, it’s likely several people close to you have been—and you may even have been helping them. Regardless, you’ve probably put off indulging yourself for a while. Perhaps it’s time to do things you love.
- Call up your favorite small theater and ask if it has any discounts on season tickets this time of year. Many arts organizations have lost substantial amounts of their government funding, and they might be happy to give you deep discounts to fill their seats.
- One couple I know uses their tax refund to buy a pair of annual passes to Disneyland. If you live near a major theme park or have something similar to that in your area, this could be a great option.
- Get a Kindle Fire, iPad, or other nifty tool that gives you more than just a reader or communication tools but also a way deal with day-to-day entertainment and note-taking needs. A tablet costs less than a computer but gives you most of the fun and functionality you need.
- Take a trip. You can find low prices on JetBlue, Southwest, and other airlines. Use a discount travel service to look for bargains. If you’re really adventurous, take a chance on a last-minute deal. TravelZoo has some nice offers.
- Need some fun ideas for a change of pace? Get ideas and discount tickets using Goldstar, Groupon, or the Entertainment book site. Visit BottomLine Publications for more low-cost ideas.
For larger refunds, split the funds up between the sensible and the self-indulgent uses. Consider donating some of the money to your favorite charity. And don’t hesitate to use some of the money on someone you love.
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Last-Minute Ideas for Saving Money on Your Taxes
Documenting Your Donations for Tax Deductions
Tax Deduction for Claiming Elderly Relatives and Dependents
Tax Tips: Tax Implications of a New Baby
Paying Taxes on Self-Employed or Side Income