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What Will You Do with Your Tax Refund?


According to, there were 82.8 million tax returns filed in 2012 that utilized the IRS’ direct deposit option for $247.2 billion in refunds. With the average refund hovering right around $2,985 last year, it’s clear that some careful planning is in order if you’re expecting to receive (or have already received) your own tax refund this year.

In years past, I’ve always advocated a mix of saving your refund money, paying down debt and investing in a bit of personal enrichment. This year is nothing different, but the totals are heavily skewed as I decided to put around $1,2000 of my $1,800 tax return towards the purchase of a new laptop (in case anyone is wondering, I mostly receive a refund solely because of the property taxes and mortgage interest I pay. If it wasn’t for these two factors, I’d most likely owe the IRS money as I hate the idea of the “interest-free government loan” that some people refer to tax refunds as being).

While the laptop was a necessity given the fact that I’m primarily self-employed these days and my old laptop was 7 years old (and took no less than 20 minutes to load one single Firefox browser window), it was still a hard pill to swallow to not put that money directly towards my savings goals for the year.

If you’re currently planning what to do with your refund if you receive one, consider some of the following ideas for creative ways to put your tax refund to good use. Speaking of planning, I sure hope you have a plan or will make one because the statistics around saving vs. spending tax refunds are grim: upwards of 70% of Americans spend their refund without thinking about it. If you don’t have a plan, that money will be gone before you know it!

Saving Your Tax Refund Money

There are tons of great options for saving your tax refund:

  • Beef up your E-fund. If you don’t have a cushion for emergencies, create one today!
  • Invest in your child’s future. Start a 529 savings plan today to cut down on education-related expenses tomorrow.
  • Create a dedicated savings account for upcoming expenses. If you know your car needs repairs soon or you’re going to need a new roof this summer, start saving now!
  • Start that vacation fund. We all need some R&R from time to time—put away your pennies for that dream vacation because every bit counts.

Paying Down Debt with Your Tax Refund

If you have any of the following debts, consider putting the bulk of your tax return towards paying them off or down:

  • Pay down your HELOC. Help dig yourself out from any housing-related debts and invest in your home’s equity.
  • Slash the credit card balances. Anything on the cards should be tackled ASAP—especially the higher interest rate balances.
  • Pay down your student loans. With student loan balances and defaults at an all-time high, it’s a great idea to get rid of these ASAP.
  • Pay down/off any personal loans or medical bills. Do you owe a friend or family member money? Don’t let money come between you—pay it off now!

Investing in Personal Enrichment

If you have your savings and debt bases covered, feel free to spend a bit of that refund money:

  • Invest in yourself. Perhaps there’s a class you’d like to enroll in or a hobby you’d like to take up. Use some of the money to invest in your future enjoyment—it will do wonders for your stress levels!
  • Invest in your relationship. Ditto about the stress here. Relationships, whether it’s with your spouse, partner, friends or family, all deserve to be given some attention. Whether it’s a romantic weekend away or a fun date night, consider putting some money towards strengthening your bonds.
  • Invest in your home. Energy efficient appliances, new windows, plumbing updates, the list goes on. Fix it before it breaks and save yourself hundreds!
  • Allow yourself a small, frivolous purchase. If you’ve been on the financial straight & narrow for a while, it’s OK to allow a small purchase here and there—as long as it fits in the budget, won’t derail your other efforts and won’t be a catalyst for more mindless spending!

What are you doing with your tax refund this year?

This post was written by Jen, a staff writer from The Happy Homeowner



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. My tax return will be going towards our adoption fund so my wife and I can adopt another child!

    • That’s amazing…congrats! Best wishes for a smooth, successful process.

  2. It’s best to either save or invest it. Though, the later is riskier, it is also a better alternative to putting your money in a bank to earn less interest.

    • Absolutely! Saving and/or investing is the only way to ensure you’ll have that money for future needs and will be able to make money from it in the form of interest, dividends, etc.

  3. Saving and next year investing it.
    Didn’t everybody file their taxes on Feb 1st, and get the refunds back already?

    • You’d be amazed how many people still have yet to file!

    • Thanks, Tony!

  4. I will used it to invest. I will buy gold coins or silver tt bar while the price of gold is less.

    • Great choice to invest–would love to hear more about what decision you end up making!

  5. I’m surprised that no one has brought this up yet… Shouldn’t we be striving to NOT earn a tax refund. After all, if we are getting $2,500 back this year, that means we overpaid the government by $2,500! Think of what you could have been doing with that money during all of last year! You just got ripped off by the government…

    • Yes! That’s exactly why I mentioned the bit about why I even get a refund in the first place. Thanks for adding this 🙂

  6. Ha! Our refund (if we ever get one and we usually try not to) goes towards first quarter federal estimated tax….we never see it smell it or touch it!

    • Oy…taxes…boo! 🙂

  7. Some will pay down the car loan, the rest will go into savings for both us and the kids future. None will go into checking or be spent frivolously, even though we are in the middle of a bathroom remodel.

    • That’s great! Way to go with the self-restraint…I’m not sure everyone would make the same great choices. Good luck with the reno!

  8. Though I want so badly to spend it on a vacation (because I LOVE to travel), the wise thing to do is invest it. We are planning to use it as part of a down payment for a rental property. I guess Bora Bora will have to wait!

    • Haha…I know what you mean–I’m a travel junkie. Bora Boar is also on my list…

      That’s exciting about the rental property–best of luck during the search/buying process.

  9. I haven’t had a refund in years, but it would go into investments if we did get one.

  10. My refund went towards savings. In the past I would break it out between debt and savings, but with no debt now, it all goes to savings.

    • That’s awesome that you have no debt! I look forward to saying the same thing some day after I slay my mortgage 🙂

  11. For me it will be used to increase my emergency fund. My wife is going back to school so I want to add a few more months to the fund to make sure we’re covered!

  12. I’m going to save it for a deposit on a house!! I’ve got a real nice one in mind!!

    • Congrats Will. Good luck with the house project!

  13. I am new to your site and love it! Such helpful advice. I took a big chunk of my refund to pay off a credit card. I exhaled deeply when the debt was paid and put the card in my locked safe. No more credit card use!

    I am paying off one more and should be (fingers crossed) debt free by the end of summer. A relief for sure.

    Thanks for such a great blog!

    • Well thanks for reading Talia! I’m always happy to get comments like yours to know that this blog is making a difference in people’s lives. I’m hosting a giveaway tomorrow with gift card and cash prizes, so be sure to enter! Who knows, maybe you’ll win and pay off your debts even faster!

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