If you are expecting a tax refund, consider how to use it to your best advantage. Here are six options for investing your windfall to obtain additional cash or bigger tax deductions in the following year.
Tax Refund Ideas
- Make energy-efficient upgrades to your home
If you’ve been putting off those energy-efficient upgrades due to lack of funds, now is the time to schedule a home energy audit to find out which specific projects might yield the best return. Not only could this save you money on your energy bill in the years ahead, but you also may be able to claim new deductions on next year’s tax return. For specific tax advice, consult your tax accountant.
- Pay down your mortgage faster
Let’s say you are a homeowner with a 30-year, $200,000 mortgage and your tax refund averages $3,000 per year. If you applied these funds each year to pay down your principal balance, you may be able to shorten your loan term by several years and save thousands of dollars in interest over the life of your loan.
- Remodel to add value to your home
Another way to spend those hard-earned tax dollars is by putting them back into your home. While not every project will add value, there are many upgrades that may help you boost equity. Here are some ideas:
- Install crown molding; it’s a fairly easy do-it-yourself project
- Increase your storage space by installing shelving units or adding a closet
- Update your bathroom
- Replace your furnace
- Build a deck
- Save or invest your money
This is by far the most traditional option. By putting your refund into a savings account, CD or other investment, you may earn a nice return to enhance your income.
- Pay off high-interest debt
If you are carrying high-interest debt such as credit cards, consider applying your refund to pay down your debt. The longer you take to pay off your debts, the more you’re going to pay in interest. By ridding yourself of this debt now instead of later, you could save a lot of money in the long run.
- Donate to charity
Using some of your tax return to donate to charities has multiple benefits. You may be able to take additional tax deductions next year while helping others in need.
For specific advice on tax deductions, contact your tax accountant or financial advisor. If you would like reliable information about home financing, visit www.freedommortgage.com.
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