Expecting a Tax Refund? 5 Smart Ways to Use It

More than 120 million Americans received tax refunds in 2024, according to the IRS. If you expect to receive one this year, it may be helpful to start thinking strategically about how you can use your refund to help achieve your financial goals.

Getting a refund after filing your tax return may feel like a windfall, but it’s money that you earned and overpaid in taxes. So it makes sense to use that earned income wisely, just like you would use other earnings. Consider five uses that might make sense for your tax refund this year.

If you’re carrying high-interest debt such as credit card balances or personal loans, a tax refund may be just what you need to jumpstart repayment. High-interest debt can cause a drag on your finances, requiring you to use a significant percentage of your earnings for interest payments and leaving you without the funds to meet your savings and other goals.

Consider using your refund or part of it to pay down debts, so you can free up monthly income to save more or splurge more often.

If you’re thinking about using your tax refund to boost your savings, you’re not alone. Almost 30% of Americans expecting a refund last year said they planned to add it to savings, according to Bankrate. It’s always a good idea to set aside savings for a rainy day or a specific purpose, such as building an emergency fund.

When you add your tax refund to a high-yield savings account like Growth Savings, the higher interest rate allows your savings to grow faster. A high-yield savings account offers flexibility with higher returns than a traditional savings account, making it a good place to store emergency funds or save for an important purchase. If you receive a performance bonus at work, that’s another opportunity to boost your savings as well. And with Growth Savings’ unlimited number of transfers and no account fees, you can set up recurring transfers to keep your savings growing all year. To see how much you can save over time, scroll down to the savings calculator on our Growth Savings page.

Many of us have a financial wish list, such as building an emergency fund, maxing out your retirement plan contribution, or funding a 529 for a child’s education. You may want to use your tax refund to make progress toward one of the important goals on your financial wish list. Check a goal off your list and feel good knowing you accomplished your goal.

After working hard all year and filing your tax return, you probably deserve to splurge a little. You may want to use a portion of your tax refund to treat yourself, whether it’s for a special meal out, a home improvement project, or a weekend getaway. Enjoying the rewards of your hard work can be refreshing and motivating.

Finally, think about taking a portion of your tax refund to donate to your favorite charitable organization. You can feel good about making a difference and building a brighter future, while also getting to take a deduction on next year’s taxes.

Disclaimer: This article is for general information and education only. It should not be considered
financial or tax advice.