Eight out of 10 taxpayers will end up getting a refund this tax season, with the average in recent years about $2,800. If you're among those expecting to get money back from Uncle Sam, here are some ideas about what to do with it, from the practical to the borderline extravagant.
Take a Repositioning Cruise
Your ship may literally come in with your tax refund! So-called repositioning cruises are super-bargain-priced voyages offered by many cruise lines when they move their fleets to different locations around the globe, usually in the spring and fall. Most are one-way trips, but the cruise line can often help you arrange return airfare. You might snag a further discount by booking a repositioning cruise or other last-minute vacation package for travel this spring.
It may not be the most exciting way to spend your tax refund, but investing in a home freezer or more energy-efficient refrigerator can save you money throughout the year, and they're frequently on sale in the spring. Although the best prices on most appliances are usually found in the fall, refrigerators and freezers are the exception. New models are released in the spring, so old-model inventory is often discounted. Particularly if you have a large family, investing in a chest-style freezer (about $500, plus $10 or so per month in electricity) can help you save by stocking up on sale items and freezing inexpensive home-cooked batch meals for future use.
Get Started on Your 2017 Deductions
Why not donate at least a portion of your tax refund to a worthwhile charity? Remember, donations to qualified nonprofit organizations are usually tax deductible, so your tax refund next year may be even bigger! Check out websites like CharityNavigator.org and CharityWatch.org to find nonprofit organizations with missions that match your interests, and consult IRS Publication 526 for more tax information on charitable giving.
Spring for Some Bling
If you're debt-free and can afford a splurge, you may want to head to a jewelry store with your refund. According to the website Cheapism.com, there are lots of bargains on bling this time of year, as jewelers compete to liquidate leftover inventory they had stockpiled for Valentine's Day. It can pay to shop now for upcoming occasions such as Mother's Day, anniversaries or birthdays.
Prepay for December Holidays
Consider taking part or all of your tax refund and socking it away in an old-fashioned Christmas Club account at your bank or credit union. When holiday shopping time rolls around, you'll be glad you did. Or use your tax windfall to pad your emergency fund — or start one, if you've been putting it off. Most personal finance pundits suggest that you have enough in an easy-access emergency fund to cover three to six months of living expenses.
Investing your tax refund in your health and fitness is likely to pay big dividends, not just with savings on health care costs, but also (more importantly) in a better quality of life. With warm weather coming on, you'll find the best selections of outdoor exercise gear like bicycles and running shoes, and Consumer Reports says you can probably score a sweet deal on a gym membership as more people want to be outdoors. (Bonus tip: Wait to buy a gym membership until late in the month, when many gyms may be anxious about meeting sales quotas.)
Pamper Your Ride
Show your car some TLC by investing part of your refund in a new set of tires or other overdue maintenance or upgrades. April is National Car Care Month, so you're likely to find a trunkful of sales on parts and services. Now also is a good time to shop for a used car if you want a wide selection.
Pay Off Debt
Call me a party pooper, but if you have any debts, probably the best thing you can do with your tax refund is to turn it over to your creditors and pay down your debts. Start with those lenders — notably credit card companies — that charge you the most to borrow money. It may not be the sexiest thing you can do with your refund, but you'll sleep a lot better once you're debt-free, and that is a truly priceless luxury.
Check Out the Thrift Stores
Even if your refund is small, it can still buy a lot if you shop right. Shopping at thrift stores — as well as yard and garage sales — usually yields good values any time of year. But in the spring, you're likely to find a bumper crop of used-but-not-abused merchandise at many thrift stores. Because people are in spring cleaning mode, donations to thrift stores spike, as do the number of yard sale signs populating the roadsides.
Talk to a Tax Accountant
Last but not least, if you're getting a fat refund this year, you may want to spend part of it on a chat with a qualified tax accountant. Remember, a tax refund likely means you've been paying too much in taxes throughout the year, giving Uncle Sam an interest-free loan. You can ask your employer to adjust your tax withholdings so less money is taken out of your check each pay period. And consulting with a tax professional may help you discover overlooked tax breaks — which could boost your refund next year.