15 Smart Things to Do With Your Tax Refund

The majority of people who file a tax return wind up with a refund each year. If you're expecting a nice payday from the IRS this year, here's how to make the most of it.

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Ideally, you should have enough money in your savings account to cover three to six months of living expenses. If you haven't yet hit the lower end of that threshold, put your tax refund into the bank so that money is there for you when you need it. After all, you never know when an unplanned bill might strike.

If you're carrying unhealthy debt, your tax refund could help you chip away at it. It pays to use that money to knock out a credit card balance, or pay off a personal loan ahead of schedule.

Sometimes, long-term savings can fall by the wayside when pressing expenses come up. But if you're getting a nice refund this year, it pays to put some of it into an IRA or 401(k) so it's there for you once you retire.

If you're doing well savings-wise and don't have any unhealthy debt in your name, it pays to consider investing this year's tax refund, as doing so could turn that payout into a much larger sum over time. You can open a brokerage account and start reading up on how to get started as an investor.

Maybe there's a skill you're lacking that's prevented you from getting promoted thus far. Or maybe you feel you can benefit from a professional license. Your tax refund could help pay for some courses, or cover the cost of a certification program.

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As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.

Many people have been working from home for a year now, and at this point, a lot of companies are making plans to keep their staff remote. If you'll be working remotely on a long-term basis, consider investing your tax refund in a more comfortable setup. Buy a better chair, upgrade your monitor, and add lighting to your home office.

If you've shied away from getting life insurance because of the cost, your tax refund could potentially cover your first year of premiums, or multiple years' worth, depending on your coverage and refund amount. Getting life insurance is a good way to provide yourself and your loves ones with peace of mind.

If you've put off estate planning due to financial constraints, your tax refund could help you get back on track. You can use that money to pay an attorney to draw up a plan for your family and put a will into place for you.

If there's an issue with your home you've been neglecting due to a lack of funds, your tax refund could make it possible to get it fixed. And the sooner you do, the less likely it'll be to escalate further, thereby costing you more money.

Maybe there's nothing wrong with your home but it could stand a cosmetic overhaul or another upgrade. Your tax refund may be just the thing that allows you to replace old carpeting, install new bathroom countertops, or buy a better water heater.

Our credit card expert uses this card, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.

Unless you live in a city with ample public transportation, you need a reliable vehicle to function. If your car is on its way out, your tax refund could serve as a down payment on a replacement vehicle.

It's important to do what you can to stay in shape -- for the sake of your health, but also for the sake of your wallet. Health problems can be expensive to deal with, so you might consider using your tax refund to purchase fitness equipment, like a stationary bike or treadmill, that allows you to work out from the comfort of home.

If you have a side hustle that costs money to operate, your tax refund could help you expand upon that venture. If you do IT consulting on the side, that money could buy you the equipment to service more clients. And if you're a crafter, you can use your refund to build a new workshop.

Many people have spent the past year struggling with the mental and emotional impact of the pandemic, and your tax refund could be your ticket to a much-needed getaway that helps alleviate some of the stress you may be feeling. You can use that money to rent a cabin in the woods and escape daily life, or to spend a week relaxing at the beach.

If you're doing well financially, you might consider donating some or all of your tax refund to charity this year. There are so many people whose finances have taken a beating during the pandemic, and many organizations and food banks are starved for donations. Sharing the wealth might give you something to really feel good about.

Our credit card expert uses this card, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.

Whether you're getting a modest tax refund this year or a larger one, it's important to use that money wisely. All of these options are worth considering once the IRS sends that refund your way.