Getting a tax refund may seem like free money, but it’s not. It is money you worked hard to earn and overpaid to the government. So, before you rush out to buy that new TV you’ve had your eye on or upgrade your phone to the latest model, consider some other options.
Tips to maximize your tax refund and stay on budget
Here are seven things to consider before you make any decisions on what to do with your refund.
Free MilTax Software
To get a tax refund, you have to file your taxes first. That’s easy to do with MilTax’s preparation and e-filing software, available from mid-January to mid-October. It’s easy to use and guaranteed to be 100% accurate.
- Speak to a Military OneSource financial counselor. Military OneSource provides free access to financial counselors, who can assist service members and their families on possible uses for their refund ranging from making a down payment on a house to long-range financial planning. Call 800-342-9647 or live chat.
- Pay down your highest-interest credit card debt. Take this opportunity to pay down your debt and lower the overall amount you end up paying your credit card company. Or make an extra car or mortgage payment, if there is no prepayment penalty, and enjoy full ownership of your house or car a little earlier.
- Build up an emergency fund. An emergency fund is not your retirement nest egg. Set up a savings account designed to pay for unexpected expenses, like a sudden car repair or appliance replacement. Start with a goal to save $500 or $1,000 for emergencies, and aim to save up to six months’-worth of living expenses.
- Check your budget plan. This is a good time to check your budget and determine if there are any holes you need to cover with your refund. Make sure you designate a certain percentage of your income for retirement and potential college expenses through the Thrift Savings Plan or Roth Thrift Savings Plan.
- Donate to a charitable organization. Spread the benefit to a cause you hold dear. You can also claim a tax deduction when you file taxes next spring, but be sure to save the receipt.
- Invest in yourself. Have you always wanted to take a certification class, learn a new skill or earn a college degree? Consider using your refund to boost your skills.
- Save for something special. Put the money you earned into a separate savings bucket to treat yourself or your family to something nice in the future. This could go toward a vacation you were saving for or a new piece of technology, like new earphones or a laptop. Having that extra pot of money for a random day when you need a mood boost will come in handy.
Instead of spending money on commercial tax preparation software, use MilTax. Designed exclusively for the military community, MilTax software and consultant support is 100% free, with no hidden surprises. After all, you might as well try and earn some interest on that money instead of just banking it at the Internal Revenue Service. Better yet, consider taking that extra money every paycheck and invest it directly into your retirement or college savings accounts.
According to the IRS, people received on average $2,577 in direct-deposit tax refunds last year. So if you are expecting to get a refund this year, file early and replenish your savings.
And you don’t have to wait for your refund in the mail. Through Military OneSource MilTax, you can sign up to get your refund sent straight to your bank account through direct deposit.