Tuesday, March 28, 2023

If you are getting a tax refund this year, you might eagerly await receiving it. While it can be tempting to want to use it to treat yourself, there are several ways you can put it to work for you. Whether it is investing in the stock market, paying debt off, or even starting your own business, there are lots of great was to put this money to work for you.

Put it Toward a New Business

if you have dreamed about being a business owner, your tax refund could help you fund that dream. You might need money for startup costs, such as acquiring a location, buying supplies, or hiring employees. Of course, a tax refund can only go so far when you are starting a business, so you might need to seek out other sources of funding as well. You could consider taking out a small business loan. There are small business loans available that often come with flexible repayment options, and the right lender can help support your venture.

Matching Your Employer’s Match

Ensure you are contributing as much as you can to get the full match an employer might offer. Consider increasing the percentage of your salary that is going toward retirement savings. One way of doing this would be to put your tax refund toward other living expenses so you don’t need as much take-home pay. If you consistently get a tax refund, you might not need as many taxes withheld from your paycheck. Decreasing your tax withholding can allow you to increase your retirement contributions.

Funding Your Health Savings Account

You might consider putting some or all of your funds into a health savings account if you have the right health insurance plan. You can put the money in before taxes if it is coming directly out of your paycheck. Even if you put money in after you have received your paycheck, you can likely deduct this from your taxes and it will grow tax-free. Plus, when you take it out, you will not have to pay taxes, assuming you use it for qualifying medical expenses. You can often save quite a bit of money on healthcare costs when you go this route. And if you are reasonably healthy now, you can simply allow the money to grow until you need it. If you don’t use it, you can withdraw it at the age of 65 the same way your 401(k) works since it will be taxed at that time.

Investing in Your Kids

If you want to help your kids through school, you can put your tax refund toward a 529 college fund. It works similarly to an IRA since after-tax dollars go toward that, and they will grow without you having to pay taxes on them. If the funds are used for qualifying educational costs, you will not need to pay taxes on them when you withdraw them. Depending on your state and the plan you have, you could get a break on your taxes.

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