Get a tax refund may seem a bit like winning a small lottery. In 2012, more than 120 million taxpayers had $ 322.7 billion in refunds, according to the Internal Revenue Service. It worked to an average of $ 2.860 per person.
A refund may be tempting to spend - in fact, a third of Americans planned to shop with their repayment in 2013, according to a survey by Capital One Bank. Of these, 30 percent are in the process it to current expenditure; 23 percent of vacation; and 15 percent of the electronics. But there are ways to use the money that can improve your financial situation now and in the future.
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pay down debts
If you are delinquent on an account, the best use of money refund is to make payments and return to rule, says Gail Cunningham, vice president of membership of the National Foundation for Credit Counseling. Then repay high interest debt.
This seems like a good idea since the average household has $ 7,122 of credit card debt according to January 2013 figures from the Federal Reserve. Yet only 37 percent of those surveyed by American Express said they would use a refund to pay off debts.
Repay credit cards with typical interest rate is actually an investment that returns 20 percent or more per year, said Kevin Gallegos, vice president of operations for freedom Phoenix Financial Network. He says that you should start with the cards with the highest rates and the lowest balances.
Invest in Yourself
You can invest in yourself by improving your professional skills or new opportunities, says Steve Siebold, author of the 2010 book "How rich people think." Business, workshops and coaching and mentoring seminars can all contribute. If these fees and education expenses add up to 2 percent or more of your adjusted gross income for 2013, they can even be considered as an itemized deduction.
You can go more formal and take a college class or two. A refund of almost $ 3,000 "is a big part of the cost of an associate degree," said Gallegos. This, in turn, can lead to tax credits for next year. The Lifetime Learning Credit provides up to $ 2,000 for an unlimited number of years, while prices of American Opportunity credit up to $ 2,500 per year for up to four years.
Boost Emergency Savings
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The survey found that American Express 26 percent of consumers plan to save the amount in 2013 , and this is up from 22 percent in 2012.
"It's a good idea to have a value of six to nine months ' expenditure allocated for unexpected emergencies ," said Crown Demmissie, managing director of retirement at TD Ameritrade.
Most people do not follow this advice . In fact, only 25 percent have six months of savings ,
according to Bankrate.com.
The existence of a financial safety net in place may help with the issue of one-time , such as an unexpected car repair . So that it can keep you if you afloat demobilized and must search for a new job . Cunningham says you should keep the money in a savings account or other liquid investment for easy access .
The existence of a financial safety net in place may help with the issue of one-time, such as an unexpected car repair. So that it can keep you if you afloat demobilized and must search for a new job. Cunningham says you should keep the money in a savings account or other liquid investment for easy access.
Fund Future Goals
Tax windfall may be saving the day tomorrow if funding a child's education or your retirement. He Demmissie contributions to a traditional individual retirement account may be deducted on your taxes in 2013. That does not fall to Roth IRAs, but the extra money will help them to grow and can be withdrawn tax-free once up to the age of retirement. The maximum contribution for 2013 is $ 5,500, or $ 6,500 if you are 50 or more.
When it comes to education, and some 529s and Coverdells have the benefits of tax depending on what state you live in, say Demmissie. Have a tax-free withdrawals as long as the money goes to qualified education expenses. IRS caps contributions to Coverdell in the $ 2,000 per year, and 529 plans for $ 13,000.
Improve Your Home
If you own your home, a refund could pay for needed maintenance, Gallegos says. That could head off bigger and more expensive problems in the future.
“These capital improvements also can sometimes create additional equity,” Gallegos said.
There are also tax breaks if you complete energy efficiency improvements by the end of 2013. Could amount to pay for such a project, and can get up to $ 500 again next year. Adding qualifying windows and doors, for example, deserves credit, or 10 percent of the cost up to $ 200. Isolate the new value of 10 percent of the cost, up to $ 500.
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