5 Great Ways to Spend Your Tax Refund

When tax season arrives, many people eagerly anticipate their tax refund — and for good reason! In 2024, the IRS issued over 103 million tax refunds, totaling more than $309.9 billion. The average refund was $3,004. If you’re one of the lucky ones receiving a refund, you may be wondering how best to use it.

Got a Tax Refund?

Deciding how to use your refund can be tricky. While it’s tempting to splurge on a vacation, clothes or that new computer you’ve been wanting, there may be smarter ways to use your windfall that can help improve your financial future.

Build or Replenish Your Emergency Fund

An emergency fund is your financial safety net. Ideally, it should cover three to six months’ worth of living expenses. If you’ve had to dip into your emergency fund recently, your tax refund is a great way to replenish it and ensure you’re prepared for unexpected costs. Plus, you might even earn interest on it.

Pay Down High-Interest Debt

If you have credit cards with large balances, using your tax refund to reduce them can save you money on interest. Credit cards often come with high interest rates. Lowering those balances can help you get ahead financially.

Invest in Your Retirement

Boost your retirement savings by contributing to your 401(k) or opening a Roth IRA. Both options allow your money to grow tax-deferred, with the Roth IRA offering tax-free withdrawals in retirement. Investing in your future is a powerful use of your refund.

Save for Education

A 529 account is a great way to save for a child’s education. Contributions to a 529 account grow tax-free and can be used for qualified education expenses. Depending on your state you may also receive a state income tax deduction.

Make Home Improvements

While a refund might not cover major renovations, it can be used for smaller improvements that enhance your living space. Consider projects like painting a room, replacing faucets, installing a programmable thermostat or upgrading to energy-efficient appliances.

Avoid Overpaying on Taxes

Instead of waiting for a tax refund each year, consider adjusting your withholdings so you can receive higher paychecks throughout the year. By doing so, you can invest that extra money earlier — whether in your retirement fund, savings or elsewhere — allowing your money to grow over time.

To adjust your withholdings, simply contact your HR department and update your tax forms. Use past tax returns to help estimate your deductions and enjoy more control over your money year-round.

Get Help With Your Taxes

Still need to do your taxes? We offer members up to 10% off on TurboTax® federal products! TurboTax® helps you accurately and efficiently calculate your taxes to take the stress out of filing. Just log in to digital banking and look for My TurboTax® under Additional Services to get started!

Read more articles like this on HZCU’s Financial Knowledge Hub.

At Horizon we’re great at banking, but we’re not tax professionals! If you have questions about your specific tax situation, make sure to consult a tax expert. You can also learn more on the IRS website.