6 Experts Share Advice for Putting Your Tax Refund to Good Use

Ah, the sweet joy of tax season—said no one ever, right?

Except perhaps when that tax refund deposit hits. Suddenly, all that number crunching and receipt gathering feels worth it.

This year, Americans are seeing an average federal tax refund of $3,028._[1] Now the real fun begins: deciding what to do with this unexpected windfall.

Before you sprint to the nearest Target or book that impulse spa weekend, let’s pause and think strategically. Your tax refund isn’t just a rebate—it’s an opportunity. With a little planning, this lump sum can boost your financial health, propel personal projects, or even multiply in value over time.

Let’s explore some clever and calculated ways to put your tax refund to work.

Invest in Your Business — or Start One

Who says tax refunds can’t be your business’s mini-stimulus package? Pouring that extra cash back into your own venture could be the smartest move you make this year. Think upgrading technology, enhancing services, or maybe something a bit more…green?

Take a leaf out of Ray Pierce’s book—literally. As the CEO of Zippy Cash for Cars, Ray used his tax refund to add an eco-friendly twist to his fleet of tow trucks.

“I’m allocating a portion of my tax refund to enhance our fleet of tow trucks with eco-friendly upgrades. This not only reduces our carbon footprint but also sets an example for environmental responsibility in the industry,” says Ray.

This green investment not only boosts his business’s efficiency but also polishes its reputation, proving that sustainability and profitability can go hand in hand.

Investing in your business with your tax refund is about thinking big and acting boldly—whether that means going green like Ray or simply sharpening the tools you already have.

Related: 48 Small Scale Business Ideas for Beginner Entrepreneurs

Invest in Yourself

Personal development and career advancement are excellent channels for using that extra cash, whether it’s for acquiring new skills, gaining certifications, or even transitioning to a new career path.

Consider the proactive approach of Lacey Muinos, a freelance writer who decided to boost her credentials. “I’m obtaining my certifications in personal training and nutrition to boost my credibility and authority as a health writer. And to do so, I had to shell out some cash.”

Her investment in education not only enhances her expertise but also opens new doors for her career, allowing her to stand out in a competitive field.

“Getting a tax refund this year was an unexpected surprise, and since I’d been putting this off for a couple of years, the timing seemed perfect,” Lacey added. 

Continuous learning is not just a boon for those in creative fields. Sherman Standberry, a CPA at My CPA Coach who plans to take an online course, emphasizes the importance of staying updated in the finance industry. “As a CPA, I know the value of continuous learning and staying updated in my field. Since the finance industry is constantly evolving, I need to make sure that I am equipped with the latest knowledge and skills to succeed in my career.

My clients trust me to handle their finances and I want to make sure that I am providing them with the best service possible,” explains Sherman.

Make Strategic Financial Moves

David Ciccarelli, CEO of Lake.com, is a prime example of using a tax refund strategically. He and his wife are preparing for the day when they decide to refinance their mortgage and ditch the high interest rate environment that they bought their home in.

“We’re setting it aside for when it’s time to refinance our mortgage. Rates are significantly higher than they were a few years ago, and many homeowners like us face nearly double interest rates. We’re stashing away our tax refund toward a lump sum payment at renewal time to keep our monthly payments low and minimize the interest we have to pay,” David explains.

Using your tax refund to pay down mortgage principal, or save for future home-related expenses, can be a smart decision. It reduces future interest costs and can potentially shorten the life of your loan, leading to substantial long-term savings. 

While strategic investments in your mortgage are wise, don’t overlook the basics. An emergency fund is your financial safety net, ready to catch you in times of unexpected expenses or economic downturns.

If your safety net has been looking a bit threadbare, consider bolstering it with your tax refund. Financial experts often recommend having three to six months’ worth of living expenses tucked away, but any amount you can add will help with the inevitable bumps in your financial journey.

On the flip side, if you’re carrying a balance on your credit cards, your tax refund offers a prime opportunity to pay down high-interest debt. It’s not the most glamorous use of your refund, but the satisfaction of seeing those balances drop can be a major stress reliever.

Paying off credit card debt not only improves your credit score but also frees up more of your monthly budget for other priorities.

Become a Real Estate Investor

Keith Sant, Founder & CEO of Sell My Mobile Home Park, explains the strategic value of using a tax refund for real estate investment.

“Using a tax refund to invest in real estate can be a smart move, as it allows individuals to put money towards a tangible asset that can appreciate over time. It also provides an opportunity for diversification in one’s investment portfolio,” Keith notes.

This approach not only capitalizes on the potential for property appreciation but also can generate passive income through rental earnings.

Investing in real estate with your tax refund might involve making a down payment on a rental property, buying into a real estate investment trust (REIT) through a platform like Fundrise, or even funding renovations that increase property value.

Each option offers different levels of risk and return, so it’s crucial to do your homework and possibly consult with a financial advisor to align these decisions with your overall financial goals.

Related: How to Start Real Estate Investing (Beginner’s Guide)

Give Back to Your Community

Your tax refund can do more than just boost your savings—it can amplify the potential of your entire community. When you redirect that financial windfall into local initiatives or educational programs, you’re not just spending money, you’re investing in futures.

Nischay Rawal, an accountant at NR Tax and Consulting decided to do just that. He used part of his refund to nurture the next generation of number crunchers.

“Part of my refund was allocated towards starting a small scholarship fund for aspiring accountants in our community. This initiative not only invests in the future of the profession but also reinforces our commitment to giving back to the community that supports us,” Nischay explains. 

Samantha Lee, a small business owner, also plans to chip in to the common good with her refund. “With this year’s tax refund, I decided to sponsor a youth soccer league in our neighborhood. It’s a fantastic way for kids to stay active and learn teamwork, and it helps ease the financial burden on their families.”

How Will You Use Your Refund?

Whether you’re paying down debt, saving for future expenses, investing in real estate, or something else entirely, each decision should align with your personal and financial goals.

Remember, the best use of your tax refund is one that brings you closer to financial freedom and stability. So think creatively, plan strategically, and let your tax refund work for you. What will your smart move be this year?