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What to Do with Your Tax Refund

Audio version available here:

Length: approx. 1 min. 30 sec.

If you filed your 2023 federal tax return on April 15th and qualified for a refund, you should have either already received it or will be receiving it soon, especially if you opted for direct deposit. This year, the average taxpayer is receiving a refund of $2,852. With your tax refund delivered or arriving soon, what should you do with it?

The general consensus from experts is to use your tax refund for “debt and savings”. Using your refund to pay off credit card debt, even if it does not cover the full cost, is valuable. Paying a portion of the debt keeps it from snowballing. Additionally, putting the money from your tax refund into savings for retirement or emergencies helps you prepare for future inevitabilities. For emergency savings, having at least “$1,000 on hand as cash buffer” is recommended while contributing to your 401(k) or IRA is crucial to prepare for retirement.

Although using your tax refund for “debt and savings” is recommended, it may not be a realistic option for everyone. Other options include buying US savings bonds or upgrading your business equipment. Doing so may lead to a tax-deductible which could increase your next refund. Ultimately, experts suggest taxpayers use their refund to “advance [their] financial goals”.

While the average taxpayer is receiving a refund that is higher than last year, you may be dissatisfied with the amount you received and hope to have a larger one next year. Maximizing your tax refund starts with tax planning. To start your tax planning journey, read our e-book How to Grow Your Wealth Through Tax Planning, available in the XQ CPA online store. Then, make the most out of tax planning by meeting with XQ CPA’s tax professionals. Book over the phone or online today.

Phone: 832-295-3353

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Want to pay less taxes? Read XQ CPA's official tax planning guidebook! How to Grow Your Wealth Through Tax Planning.

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