How to Use Your Tax Refund

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W-2? Check. Taxes done for free? Check. Tax refund in your bank account? Check! When you’re counting on some extra cash this time of year, waiting until April to file your taxes just isn’t an option. A tax refund is the biggest paycheck of the year for many filers, but it’s important to think carefully about how you want to use these extra funds. Refunds only come once a year! Here are my top tips for how to spend your refund wisely:

Save That Money

Planning a big trip this year? Want to buy a car? Just need an emergency cushion? All are good reasons to put your refund in your savings account. Experts suggest having at least six months of living expenses saved up for emergencies, like losing a job. Does that amount sound like a pipe dream? A tax refund is a great way to get started on building a solid safety net for yourself.

Kill Your Credit Bill!

This may not seem like the most exciting way to spend your refund, but building and maintaining a good credit score takes discipline. Start by paying off a credit card bill with the highest interest rate – you’ll be thankful in the future.

Invest in Your Future

Is your bank account already feeling pretty solid? It could seem like a long way out, but your refund is a great way to boost your retirement fund. The earlier you invest, the more gains you likely reap in the long-term – that’s the beauty of compounding interest! Plus, 401(k) and IRA contributions reduce your taxable income, so you may lower your taxes for next year! Two birds, one stone.

Give Yourself Some Love

There’s nothing wrong with putting a portion of your refund aside to #TreatYoSelf! You work hard every day, and you deserve to take care of yourself. Register for a gym membership, go out to a nice dinner, or even splurge on a new pair of shoes. Don’t forget to have a little fun this tax season!

How are you going to use your tax refund? Let me know in the comments!

Chelsea Krost is the founder and host of #MillennialTalk, a weekly Twitter Chat for the Millennial generation. This Tuesday, January 26 at 8 PM EST/5 PM PST, TurboTax will be joining #MillenialChat to talk how to “Make This Your Best Tax Season Ever.” Join in and ask your burning tax season questions!


Comments (6) Leave your comment

  1. My son turned 19 oct 2015, he lives at home, we his parents provide over half his support, however he had worked and made over 4,500 , can We claim him on our taxes or should he file his own ?

    1. Hi Cindy,
      You would only be able to claim him with that income if he was a full-time college student at least 5 months. If you have a college student under 24 you can claim him as a “qualifying child” even if they have income over $4,000. If he is not a college student you have to look at tests for a “qualifying relative” and his income would be over the limit of $4,000. If you are able to claim him he should still file his taxes if he had federal taxes taken out of his paycheck he would just not take the personal exemption for himself.
      Thank you,
      Lisa Greene-Lewis

  2. If my 4 year old son stayed with me until August-September. Will I be able to claim him still since he’s no longer staying with me?

    1. Hi Kela,
      Who claims him would depend on who provides over half of his support and typically who he stays with the most unless you have an agreement with his father or a legal document that says you can claim him.
      Thank you,
      Lisa Greene-Lewis

  3. If I made 18,000 this year, how much money would my parents have had to provide as financial support in order to claim me?

  4. If you are 17 years old and you live with an older sister and you have no income at all . and you are also preganent can your sister claim you as a dependant and how much will she get back for me .

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