Tax season is not yet here; in fact, there is quite sometime between now and it, but that gives you a lot of time to start thinking about how to best prepare for your filing needs. All of that is necessary to make sure you are properly reporting all of your income, earnings, and declarable assets to keep the pesky IRS from snooping or the dreaded audit. What may be most enticing about tax season is your tax return.
Yes, the tax return is so coveted because it seems like free money being gently placed right into your lap, but sadly it is not actually free money. Regardless of the qualms against taxation and having to do all the work, you are still receiving a decent sum, depending on how much you earned and paid to taxes. The biggest question regarding your return is what to do with it all? You could splurge on something fun or be practical; there are plenty of choices, and here are some of the best ways you can use that tax return to help you.
1. Purchase Shares/Stocks
You always read about some genius making a fortune in the stock market by investing some money and knowing when to make the right purchases. Sometimes these people are just average Joe’s who knew to reinvest their returns into something that could return a profitable yield, and you could be one too. Taking that tax return and buying into some shares or mutual funds, like ETFs, you can potentially increase that return and make a profit. Remember to consult with a financial advisor and do your homework because individual shares/stocks can be volatile to novice investors.
2. Invest in a Retirement Fund
Shares or stocks definitely have the potential for a great return, but many of them are risky, so a safer route for you is to throw it into your retirement fund. Using a calculator at https://taxfyle.com/income-tax-return-calculator/ to figure out your expected return, you can find out how much to put into your 401(k) or Roth IRA. Putting this money aside in a safer investment for your future helps you keep the money from being splurged on things that likely will not help you retire earlier than expected.
3. Beef Up Your Vacation Fund
Still, where is the fun in having some money if you are not going to use it? While splurging may not be the most prudent use of your tax return, it could end up being a memorable one. You only live once so enjoy it by improving your vacation fund or starting one, allowing you to go see that dream locale you always hoped to visit. Vacationing is still useful; you can consider it an investment in your happiness if you will.
4. Buy Something Nice for Yourself
If you want to keep the expenditures a little more low-key than a vacation, try buying something nice for yourself that will get you repeated use. You can buy a new TV, a new laptop for work, maybe even a nice piece of jewelry like a watch or earrings; there are a lot of ways to spend the tax return that will give you something you can enjoy on a daily basis. Just because it is not an investment does not mean that it is not worth it, it is your money after all.
5. Add it To An Education Fund
Back to the more “fiscally responsible” side of tax return usage, your kids could be the beneficiaries of your annual tax filing. School is not cheap and parents who are prospective about sending their kids off to college know this all too well. You may be already building an education fund for them, still, the best way to make cushion it for any unexpected changes to tuition costs, supply costs, or the hope they make it to a ritzy, and thus more expensive school, is to invest in the fund continually. Adding your tax return could add up big over the years and give you some financial breathing room.
6. Pay Off Some Bills
Death and taxes – and bills. These should be the real three constants in life and you are well aware of how much your utilities, car payments, and cellphone plan cost you on the monthly and annual level. It means a lot to be able to keep these payments from piling up and it can be disastrous to your credit to miss bills constantly. Using your tax return, you can help alleviate some of this worry from your mind by paying off many of your bills. You may even get a sizable enough return to help cover your car insurance, it all depends on how much you make, but this is definitely a very useful way to spend your return in a responsible manner.
7. Donate to Charity
Doing good makes you feel good, and sometimes you just need to give back to help other people through a tough time. You might not be able to fix all of the world’s problems, even if you are doing your best efforts, but small gestures can make a big impact. One way you can use your tax return for altruistic reasons is to donate to charity. Not to get moral, but maybe the money could be better used to someone who needs it, rather than for selfish reasons like a new wardrobe? Donating to charity is easy and requires as little as a couple of dollars, or you could really help out and donate the whole return. This is merely a suggestion, but helping others is all about giving back if you do not need the money should make you feel all warm and fuzzy inside.
The tax season usually does not give us much reason to be happy, but one silver lining is knowing you will be getting a nice little refund for your hard work, both in filing your documents and for the income you generated to get that return. After browsing some of these ideas, you now have some options for what to do with that tax return, once it ends up in your hands!