5 Best Places to Put Your Tax Refund in 2023

What will you do with yours?

The IRS has issued over 42 million tax refunds for 2022 so far, and there's a lot more left to come. Whether you've gotten yours or not, you've probably started thinking about how you want to use it. You have a lot of options, and at the end of the day, it's your call. But here are a few possibilities you may want to consider.

1. Your emergency fund

Those who don't have any emergency savings should consider using their tax refund to jumpstart their emergency fund. This will help you be better prepared for unexpected costs that may arise in the future, whether that's a hospital bill, an insurance claim, or a job loss.

Ideally, you should keep at least three months of living expenses in your emergency fund, and some people like to have six months of savings or more. So your tax refund may not be enough on its own. But you can add to it a little each month until you get it to the level you want.

2. Debt repayment

Those with high-interest credit card or payday loan debt may be able to breathe a little easier if they put their refund toward their debt repayment. If the total amount of your debt exceeds your refund, put it toward the account with the highest interest rate first. When you pay that off, move onto the debt with the next-highest interest rate, and so on.

You may want to try using a balance transfer card or a personal loan to help you get rid of the remaining debt. Balance transfer cards temporarily halt the growth of your balance by saving you from interest charges, so any payments you make go toward the principal. Personal loans give you a predictable monthly payment, so you know exactly how much you'll pay in interest over time.

3. Professional development

Taking a professional development course or pursuing additional training for your job isn't the most exciting way to spend your tax refund. But it could be worth it if it helps you secure a higher-paying job in the future. That would give you additional income and could pave the way for more financial freedom.

Look at what sorts of credentials are respected in your field or in the field you'd like to break into. Then, see what sort of training you need in order to earn them. There are a lot of online programs available these days, so chances are, you won't even need to leave your couch to get started.

4. A high-yield savings account

If you plan to make a big-ticket purchase within the next five years or so, a high-yield savings account is probably your best home for your tax refund. You'll still earn interest here, and you won't have to worry about losing money like you would if you invested in the stock market.

Savings account annual percentage yields (APYs) vary by bank and over time. But right now, the best savings accounts are paying about 4%. That could make you tens or even hundreds of dollars per year in interest, depending on your balance.

5. A retirement account

If you have an emergency fund and don't have any high-interest debt or major upcoming expenses, you might prefer to keep your money in a retirement account. Doing so could earn you a nice tax break, either now or in retirement, depending on the account type. It'll also help you better prepare for your future.

Investing your money can help it grow much faster than it could in a savings account. There is some risk of loss, as the stock market can be volatile in the short term. But this usually doesn't matter if you plan to leave your savings alone for at least a decade before withdrawing it.

You don't have to pick just one

You can split your tax refund between several of the goals above if a few of them are jumping out at you. Or you could decide to use some of your refund for one of the goals above and spend the remainder on things you enjoy. You can figure out what works best for you.