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By Heritage Bank on April 08, 2024
2 minute read

Maximizing Your Tax Return: Smart Ways to Get More Out of This Windfall

For many people, tax season means a refund from the federal government. In Kentucky, 81 percent of taxpayers will receive a federal tax return. In Ohio, 79 percent of taxpayers are looking forward to a refund. Before you prepare to splurge, consider some savvy strategies for getting the most from your windfall:

  1. Build Your Emergency Fund: Financial experts often recommend having three to six months' worth of living expenses saved up in an emergency fund. If you don't have one yet, consider using your tax refund to start or bolster your safety net.

  2. Pay Off High-Interest Debt: If you're carrying credit card debt or have high-interest loans, allocate your tax refund towards paying down these balances. By reducing or eliminating high-interest debt, you not only save on interest payments but also improve your financial health and credit score.

  3. Invest in Retirement: Contributing to retirement accounts such as a 401(k) or IRA can help secure your financial future. Consider using your tax refund to max out your contributions or make a significant contribution if you haven't already done so. The earlier you start investing for retirement, the more time for your money to grow through compound interest.

  4. Invest in Yourself: Use your tax refund to invest in your personal and professional development. This could mean enrolling in a course or workshop to enhance your skills, purchasing educational materials or attending industry conferences. Investing in yourself can lead to career advancement opportunities and increased earning potential.

  5. Start or Boost a College Fund: If you have children or plan to pursue higher education yourself, consider using your tax refund to start or add to a college savings fund, such as a 529 plan. The cost of education continues to rise, and starting early can help mitigate the financial burden of tuition and other expenses down the road.

  6. Make Smart Home Improvements or Repairs: Use your tax refund for renovations, repairs or upgrades. Make your home more energy efficient. Stay on top of repairs that will only be more expensive to fix if not addressed now. Improve your home’s resale value.

  7. Donate to Charity: Giving back to your community or supporting causes you're passionate about can be incredibly fulfilling. Consider donating a portion of your tax refund to charitable organizations or local initiatives that make a positive impact. Not only does charitable giving benefit those in need, it might also provide tax deductions in future years.

  8. Invest in a Side Hussle: If you have an idea to earn some extra money in addition to your primary income, but need some start up cash, consider your tax refund your business capital. Ask your banker for some help setting up a business checking account and even applying for a business credit card.

For more ideas about how to make the most of your tax refund, make time to talk with your Heritage Banker. We’re here to help customers and other members of our community improve their financial situation.

Heritage Bank. Member FDIC.

Published by Heritage Bank April 8, 2024