What should you do with the money? A look at some choices.
Each year, about 70% of taxpayers receive federal tax refunds. The average IRS refund is substantial—$2,800. What could you do with a refund sent to you?
You could invest that money. It could go into your workplace retirement plan, an Individual Retirement Account, or a college savings plan—preferably, some form of tax-advantaged account.
You could pad your emergency fund with it. The larger it grows, the better. If you don’t have one, you could start one with your refund.
You could pay off a debt. Your biggest debt, the debt with the highest interest rate—it is your call. One less debt improves your personal finances.
You could contribute it to charity. If you itemize deductions, you can claim a current-tax-year deduction for the whole amount as long as you don’t receive anything in return for the donation. Make sure you get a receipt and make sure the organization is a qualified charity under the IRS definition.
Kevin Foster, CFP ®
Comprehensive Wealth Manager | Tax Advisor
Chandler, AZ 85226
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC