Some taxpayers prepare and e-file their own return to save money. There are, however, benefits of professional tax preparation. A tax preparer or accountant is highly familiar with tax laws and rules. And with regards to deductions and tax credits, a professional can maximize your write-offs and help you score a bigger refund.
A hefty tax refund might burn a hole in your pocket, and you might think of a million things to do with the cash. It’s okay to treat yourself, but you shouldn’t squander the money on non-essentials.
Here are six ways to benefit the most from your tax refund:
1. Build your savings account. If you don’t have a lot of money in your savings account, depositing your money in a traditional savings, a money market account or a certificate of deposit is financially responsible. This prepares your finances for a disaster, and with the money in a high-yield savings account, you can earn interest and grow your cash.
2. Make necessary home repairs. Your tax refund may not be enough to cover all needed repairs, but it can take care of a few things around the house. Maybe you need a new roof, better windows and doors, or new appliances. Upgrade your home with energy-efficient options and you’ll not only reduce your energy costs, but also save on next year’s return.
3. Pay down debt. If credit card debt hangs over your head, free money from the government can remove this burden. Even if you don’t completely pay down your balances, your tax refund can jump start the repayment process. This reduces how much you owe, and with a smaller balance, it’ll be easier to pay off the cards.
4. Refinance your mortgage. Refinancing can lower your mortgage rate and monthly payment. Unfortunately, you’ll have to pay closing costs and other mortgage fees. A refinance isn’t possible without cash. A sizable tax refund can help you afford closing costs. Another bonus: when you refinance your mortgage, you can write off mortgage points on next year’s tax return.
5. Improve your skills. Are you tired of your job? Going back to school can give you skills to move forward in your career. If you don’t have extra money, you might consider a small school loan or use credit cards. This approach can work, but you’ll incur debt. Use your tax refund and enroll in a few courses. This can open the door to promotions or a completely new job.
6. Start your business. It takes money to get a new business off the ground. You have to purchase supplies, equipment and advertise your services. Cash flow problems can delay the start of your venture. A tax refund can be a godsend and provide the capital you need to realize your dream.
A tax refund can have a positive impact on your personal finances – if you use the cash responsibly. Rather than plan a shopping spree or dine at the best restaurants five nights a week, put your money to good use and better your life.