Smart Ways to Invest Your Tax Refund

Posted on Apr 10, 2020


There are many ways to spend a tax refund; however, here are our top smart ways to invest your tax refund.

Up your 401(k) contributions.
Put your tax refund toward everyday expenses, while increasing your 401(k) contributions. If you're only putting in 3% of your paycheck, but your company matches up to 6%, you can double the pre-tax income you're investing to maximize retirement funds.

Your paychecks will be slightly lower but you can use your refund to make up the difference while investing in your retirement and lowering your taxable income.

Increase a home down payment or resale value.
If you've been saving for a home, use your refund to increase your down payment to avoid costly private mortgage insurance payments and also to reduce the overall amount of your mortgage.

If you already own your home and have been waiting to replace a leaky pipe or start a much-needed home improvement project, getting a tax refund might be a good time to make your home more functional while increasing its resale value.

Give a tax-free annual gift.
If you have a well-established financial portfolio and are near retirement age, you may want to consider gifting excess funds, such as a large refund, every year. The IRS sets an annual limit on the gifts individuals are able to transfer to others, including family members, without filing a gift tax return.

Seed the college fund.
If you have children or grandchildren, you’d be doing them a huge favor by saving your refund in a college fund for their benefit. Setting up a 529 plan can help them afford a higher education. Please call our office to schedule an appointment with one of our knowledgeable financial advisers to establish a 529 Plan.