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Getting a big tax refund this year? How to make your money go further

Pay down debt, start a college savings account for your child -- there are so many options

It's tax season!
It's tax season! (Photo by Acharaporn Kamornboonyarush from Pexels)

You work hard for your money, going to work day after day and week after week.

When tax season rolls around, you fill out the paperwork, collect the documents and hope for a decent refund.

If you’re expecting a generous refund this season, you’ll want to make that money work as hard as you do -- and with a few strategic investments, you can maximize the value of your tax refund, lowering your future taxes, boosting the value of your home and improving your finances in many different ways.

Here are some smart ways to put your tax refund to work:


Contribute to an IRA or Health Savings Account

If you want to use your tax refund effectively and lower your taxes for next year, contributing to an IRA or health savings account will make your money do double duty. Contributing to an IRA today will jump start your retirement savings later, and potentially lower your taxable income in the process.

Contributing to an HSA will accomplish the same goal, helping you save for the future while providing real protection. The money you contribute to a health savings account is fully tax deductible, and you can use it to pay for qualified health care expenses now and in the future.

Pay down debt

If you have $3,000 in credit card debt at 18% interest, using your $3,000 tax refund to pay it off is the same as earning 18% on the money. It’s impossible to get that kind of risk-free return anywhere else, so paying off your debt is a true no-brainer. Do it!

Even if you cannot pay off all your debts with the proceeds from your tax refund, every little bit helps. Chipping away at your debt is a great use of your refund, and it’s the perfect way to make the money work harder.

Make some smart home improvements

If you’ve been putting off necessary home improvements, you can use your tax refund to finally get them done.

A home improvement project is a great use for your tax refund money, especially if the changes increase the value of the property.

A few strategic home improvements could boost your value, which is an important consideration if you plan to sell in the coming year.

Even if you plan to stay put, using your tax refund to put in a new kitchen, put down a new floor or buy new furniture could be a very smart move.

Boost your emergency savings

You never know when a financial emergency will strike, and it’s important to be ready. If your emergency savings could use some help, boosting that cash cushion is a great use of your annual tax refund.

You can further enhance the value of your tax refund by stashing the cash in a high-interest savings account or money market fund. The harder your money works, the more you will have of it -- if an emergency strikes, that is, which we hope doesn’t happen. But preparation is key.

Invest in a stock market fund

If you can afford to leave the money alone for an extended period of time, investing your tax refund in the stock market could help it grow. While it is impossible to predict short-term stock market moves, the long-term trend for stocks has historically pointed upward.

Investing your tax refund in a low-cost stock market index fund, exchange-traded fund or similar vehicle could enhance the long-term value of the cash, especially if you can leave the money to grow and compound for many years. If you already have a suitable investment, you can use your tax refund to add to it.

Start a college fund for your kids

It’s never too early to start saving for college, especially considering the already-steep tuition costs.

If you have a child, no matter how young, using your tax refund to start looking toward the future is just smart.

Many college savings vehicles receive favorable tax treatment on both the state and federal level, so you could get a triple benefit from that single investment. If you do not already have a college savings plan in place, you can use your tax refund to open one. If you already have a fund for your child, you can add to it every year, and let your tax refund cover the cost.


Tax season is here, and filing can be a stressful experience. With all that hard work behind you, now is the time to make plans for the money you have worked so hard for.