• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

The College Investor

Student Loans, Investing, Building Wealth

  • About
  • Podcasts
  • Research
  • Contact
  • Save For College
      • How To Start

      • How To Save For College
      • How To Pay For College
      • What Is the Average Cost of College?
      • What Is A 529 Plan and Where to Open One in Your State
      • How Much Should You Have In A 529 Plan By Age
      • How To Use A 529 Plan For Private Elementary And High School
      • What Are Qualified Expenses For A 529 Plan (And What Doesn’t Count)?
      • The Best Brokers To Open A 529 Plan
      • Tools + Accounts

      • 529 Plans: The Ultimate College Savings Plan
      • 529 Plan Contribution Limits
      • Prepaid Tuition Plans | What To Know
      • Understanding And Using 529A ABLE Accounts
      • Using A Roth IRA To Save And Pay For College
      • FAFSA Deadlines for Financial Aid
      • CollegeBacker Review
      • Upromise Review
      • UNest Review
      • Other Options

      • Student Loan And Financial Aid Programs By State
      • The Guide To Military And VA Education Benefits
      • How To Fill Out The FAFSA
      • How To Find College Scholarships
      • The Best College Scholarship Search Websites
      • How To Find Grants To Pay For College
      • Pell Grants: What They Are And How To Qualify
      • Understanding Federal Work-Study
      • How To Use A 529 Plan If Your Child Doesn’t Go To College
  • Student Loans
      • Borrowing

        • How Student Loans Work
        • How To Apply For A Student Loan
        • Best Student Loans And Rates In June 2023
        • 10 Best Private Student Loans Of June 2023
        • Best Student Loans To Pay For Graduate School
        • Best Student Loans For Medical School
        • Parent Loans To Pay For College
        • No-Cosigner Student Loan Options
        • Guide To Income Sharing Agreements (ISAs)
        • Best International Student Loans
      • Get Out Of Debt

        • Best Student Loan Refinance Companies In June 2023
        • Best Student Loan Repayment Plans
        • Best Student Loan Refinancing Bonuses And Promotional Offers Of June 2023
        • Student Loan Forgiveness Programs (The Complete List)
        • The Full List Of Student Loan Forgiveness Programs By State
        • Public Service Loan Forgiveness (PSLF)
        • Top Student Loan Scams
        • Average Student Loan Monthly Payment
        • Average Student Loan Debt By Year
      • Reviews

        • Credible Review
        • Splash Review
        • Ascent Review
        • Citizens Bank Review
        • Earnest Review
        • ELFI Review
        • Laurel Road Review
        • LendKey Review
        • SoFi Review
        • Sallie Mae Review
  • Investing
      • How To Start

        • How To Start Investing in High School
        • How To Start Investing In College
        • How To Start Investing In Your Twenties For 22 – 29 Year Olds
        • How To Start Investing In Your 30s For 30 – 39 Year Olds
        • How To Start Investing With $100 Or Less
        • How To Give Kids The Gift Of Stock
        • What Is Dividend Growth Investing
        • IRA Rollover Chart
      • Tools + Accounts

        • Best Online Stock Brokers
        • The Best Traditional And Roth IRA Accounts
        • The Best Robo-Advisors
        • The Best Investing Apps
        • The Best Places to Trade Options
        • The Best Places To Open A Health Savings Account
        • The Best Solo 401k Providers
        • The Best Self-Directed IRA Providers Of 2023
        • Best Cryptocurrency Exchanges
      • Reviews

        • Vanguard Review
        • Fidelity Review 2023
        • M1 Finance Review
        • TD Ameritrade Review 2023
        • Charles Schwab Review
        • Robinhood Review
        • Webull Review
        • Betterment Review 2023
        • Wealthfront Review
  • Earn More Money
      • Extra Income

        • 20 Best Side Hustles You Can Start Earning With In 2023
        • 54 Side Hustle Ideas To Make Money Fast In 2023
        • 100 Ways To Make Money In College In 2023
        • 80 Ways To Make Money From Home In 2023
        • 5 Quick Money Making Ideas (That Take Less Than 1 Hour)
        • 10 Interesting Ways You Can Make Money Driving
        • High-Paying Side Gigs That Earn $1,000 or More Per Month
        • The 10 Best Money-Making Apps
        • Best Paid Survey Site List: Earn Money For Giving Your Opinion Online
        • 10 Crazy Ways To Make $10,000 You’ve Never Heard Of
      • Build Wealth

        • 40 Passive Income Ideas For 2023
        • 3 Ways To Make $50,000 Per Year Without Working With Passive Income
        • How To Become A Real Estate Investor With Just $500
        • 15 Best Online Business Ideas
        • Residual Income: 7 Super Smart Ways to Build It
        • The Most Common Multiple Income Streams
        • How To Become A Real Estate Mogul With Only $10,000
      • Reviews

        • Fundrise Review
        • RealtyMogul Review
        • FarmTogether Review
        • AcreTrader Review
        • Swagbucks Review
        • Survey Junkie Review
        • TopCashback Review
        • DoorDash Review
  • Personal Finance
      • Banking

        • 10 Best High Yield Savings Accounts Of June 2023
        • 10 Best Money Market Accounts Of June 2023
        • 10 Best Free Checking Accounts In June 2023
        • Best Bank CD Rates Of June 2023
        • 10 Best Business Checking Accounts In June 2023
        • Best Online Banks Of June 2023
        • Best Credit Unions Nationwide Of June 2023
        • Best College Student Checking Accounts Of June 2023
      • Insurance

        • Best Life Insurance Companies
        • Renters Insurance
        • Car Insurance
        • Pet Insurance
        • Umbrella Insurance
        • Disability Insurance
        • Tuition Insurance
        • Travel Insurance
      • Credit Tools

        • Best Budgeting Apps
        • Cash Advance Apps
        • How To Get A Free Credit Score Report
        • Best Credit Monitoring Services For 2023
        • Debt Settlement: Inside The Secret World
        • Credit Repair Explained: Should You Pay For Help?
        • Best Personal Loan Companies And Lenders
        • Online Loan Companies To Borrow From Home
      • Tax

        • Best Tax Software
        • Free Tax Software
        • IRS Tax Refund Calendar
        • Common IRS Questions and Errors
        • Federal Tax Brackets
        • Capital Gains Tax Brackets
        • 401k Contribution Limits
        • IRA Contribution Limits
        • HSA Contribution Limits
  • Awards
  • Search
Home / Money / Financial Planning / 7 Investment Ideas To Get The Most Out Of Your Tax Refund

7 Investment Ideas To Get The Most Out Of Your Tax Refund

Updated: March 19, 2023 By Robert Farrington

115Shares
  • Facebook
  • Twitter
  • LinkedIn
  • Pinterest
  • Email
  • Print

At The College Investor, we want to help you navigate your finances. To do this, many or all of the products featured here may be from our partners. This doesn’t influence our evaluations or reviews. Our opinions are our own. Any investing information provided on this page is for educational purposes only. The College Investor does not offer investment advisor or brokerage services, nor does it recommend buying or selling particular stocks, securities, or other investments. Learn more here.Advertiser Disclosure

There are thousands of financial products and services out there, and we believe in helping you understand which is best for you, how it works, and will it actually help you achieve your financial goals. We're proud of our content and guidance, and the information we provide is objective, independent, and free.

But we do have to make money to pay our team and keep this website running! Our partners compensate us. TheCollegeInvestor.com has an advertising relationship with some or all of the offers included on this page, which may impact how, where, and in what order products and services may appear. The College Investor does not include all companies or offers available in the marketplace. And our partners can never pay us to guarantee favorable reviews (or even pay for a review of their product to begin with).

For more information and a complete list of our advertising partners, please check out our full Advertising Disclosure. TheCollegeInvestor.com strives to keep its information accurate and up to date. The information in our reviews could be different from what you find when visiting a financial institution, service provider or a specific product's website. All products and services are presented without warranty.

Invest Your Tax Refund

If you received a tax refund from Uncle Sam this year, you shouldn't celebrate just yet. Aside from the fact that it was your money to begin with (not a friendly gift from the government), you may have some adjusting to do before next tax season rolls around.

If you are having too much withheld from your paycheck, you are basically lending the government your money for free. What's worse is that you are losing out on time that your money could be growing for you. If this is the case, be sure to adjust your federal income withholding allowances or revisit your W-4.  That is not to say that a lump sum of cash from the government doesn't make you feel good. With that being said, don't get caught treating your refund any differently that you would your paycheck. Your money is valuable, and just like your paycheck, each dollar of your refund should be given a purpose.

In 2022, the average tax refund payment was more than $3,039 according to the IRS. If you are one of those people who received a tax refund this year, before you squander your tax refund on a vacation or another big ticket item, first consider a few ways you can make that money work for you.

Here are several suggestions for what to do with you tax refund:

Table of Contents
1. Contribute to Your Emergency Fund
2. Pay Off Your Debt
3. Save More for Retirement and Other Goals
4. Refinance Your Mortgage or Make Home Improvements
5. Invest in a Taxable Account
6. Give to Charity
7. Start Your Own Business
Bonus: Change Your Withholdings To Not Receive A Refund
Final Thoughts

1. Contribute to Your Emergency Fund

Have you considered what would happen if you were laid off from your job unexpectedly, or faced a big unexpected expense? If you aren't prepared for this or a slew of other misfortunes that you could be faced with, you may want to consider holding on to your tax refund.

At least a few months of easily accessible "rainy-day" cash is recommended. Although it has been said by some financial experts that six months to a year of emergency cash is necessary. The extent to which you save for an emergency is largely dependent upon your situation though.  

Read our full guide to emergency funds here.

2. Pay Off Your Debt

Possibly worse than an unexpected emergency is a present day emergency otherwise known as debt.

If you are one of the many Americans faced with high interest debt, you should be focusing on cutting expenses and channeling every free dollar into your debt. Furthermore, it is often recommended to pay off your debt before even starting an emergency fund (we don't agree, but you still shouldn't avoid paying off your debt). 

The logic behind this is that if you're already in debt and you burn through your emergency fund, you will be without the financial option of borrowing money. Borrowing money on credit cards is never an attractive option, but in dire circumstances it may be necessary.

If you have student loan debt, now might NOT be the best time to pay those off (due to all the Covid-19 student loan programs). Instead, focus on other debt like credit cards or auto debt.

3. Save More for Retirement and Other Goals

If your financial house is in order and you've accumulated a healthy emergency fund and you are debt-free, another option to consider for you tax refund is to invest it.

The average American is not allocating enough money to retirement.  Many financial advisors recommend investing 10% to 15% of your annual income to retirement, but obviously with the time value of money, the earlier you invest, the better.

If you got a late start on investing, it is never too late to bridge the gap. A $3,039 tax refund will certainly help get you closer to your goals. In fact, that amount would be half of what you can contribute to your IRA this year.

4. Refinance Your Mortgage or Make Home Improvements

Mortgage rates are at all time lows. If you're financially prepared and ready to buy, there really is no better time. If you already own a home you can take advantage of these interest rates by refinancing and paying for your closing costs and fees with your refund. This will allow you to save money immediately in interest payments.

If you are really ambitious, you can keep paying the same monthly mortgage amount, and cut away at the principal you owe. Furthermore, if there is a high dollar project that you have been putting off, now may be the perfect time to knock it off the list. Home improvement projects are a great way to add value to your home and usually the benefits are immediate.

Related: Best Places To Refinance Your Mortgage Online

5. Invest in a Taxable Account

If you've already maxed out your tax-sheltered accounts you are definitely ahead of the pack and you probably don't need to hear this advice. Opening a brokerage account can be a great way to further diversify your portfolio and make your money grow for you.

Since these investments are fully taxable, it may be a good idea to steer towards low expense investments or tax efficient mutual funds or ETFs. 

6. Give to Charity

Depending on who you are this may be number one on your list. For others on a tight budget, giving to charity can be difficult. A tax refund is a chance to contribute to a charity of your choice.

Giving to charitable causes may not give back in the form of dividends or capital gains, but sometimes the benefits a donation can create are more valuable than anything money could buy. Not to mention you can deduct charitable contributions on your taxes.

7. Start Your Own Business

If you have a business idea that you've been putting off, a refund may be just what you need to get things off the ground. This is a great way to see return on your investment, and tax deductions can be taken on your small business as well.

If you don't know where to start, we have a list of the 15 best online business ideas you can start right now at home.

Bonus: Change Your Withholdings To Not Receive A Refund

An option you may not have thoughts about is simply changing your tax withholdings from your paycheck so you don't get a refund - but rather owe. That might seem crazy, but remember, a tax refund is just a refund of extra money you've paid to the IRS all year. It's your money!

If you change your W4 withholdings on your paycheck, you'll get bigger paychecks all year long. Then, at tax time, you would pay any difference you owe. This is something that most savvy investors and high net worth individuals do. Never let the IRS get extra money that belongs to you.

The only drawback here: you need to plan to write a check to the IRS in April. If you don't save or have the money, you could be in trouble. So, before you go adjusting your withholdings, make sure you have a plan.

Final Thoughts

Regardless of how much of a refund you are receiving, if you are receiving one at all, a tax refund should be treated with just as much value as any other dollar you have earned. If nothing else, it should be treated with more value, since you are basically being paid for work you did throughout the year.

Whether your refund was expected or not, it should be used in the way that is most advantageous to wherever you are in life. As tempting as it is to treat yourself to something that you want, just like all of your hard earned dollars, investing in something that will advance you in your goals is far greater than any item that could be bought in a mall.

What other investment ideas do you have for your tax refund?

Robert Farrington
Robert Farrington

Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.

He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.

He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.

Editor: Claire Tak

Invest Your Tax Refund
Editorial Disclaimer: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, or other advertiser and have not been reviewed, approved or otherwise endorsed by any of these entities.
Comment Policy: We invite readers to respond with questions or comments. Comments may be held for moderation and are subject to approval. Comments are solely the opinions of their authors'. The responses in the comments below are not provided or commissioned by any advertiser. Responses have not been reviewed, approved or otherwise endorsed by any company. It is not anyone's responsibility to ensure all posts and/or questions are answered.
Subscribe
Connect with
I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree
Notify of

I allow to create an account
When you login first time using a Social Login button, we collect your account public profile information shared by Social Login provider, based on your privacy settings. We also get your email address to automatically create an account for you in our website. Once your account is created, you'll be logged-in to this account.
DisagreeAgree

5 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments

Primary Sidebar

Investing Resources

Featured Broker Reviews

>  Fidelity (recommended)
>  Robinhood (recommended)
>  Webull
>  M1 Finance
>  Schwab
>  Vanguard
>  Public

Featured Robo-Advisors

>  Wealthfront (recommended)
>  Betterment
>  WealthSimple
>  Vanguard Digital Advisor

Annual Contribution Limits

  • 401k Contribution And Income Limits
  • IRA Contribution and Income Limits
  • HSA Contribution and Income Limits
  • 529 Plan Contribution Limits

More On Investing

  • Best Online Stock Brokers In 2023
  • Best Brokerage and Investing Bonus Offers In June 2023
  • Best HSA (Health Savings Account) Providers Of 2023
  • 5 Best Investing Apps Of 2023
  • How To Buy Stocks Online For Free
  • The Best Robo-Advisors Of 2023
  • The Best Self-Directed IRA Providers Of 2023
  • The Best IRA Accounts (Traditional and Roth) Of 2023
  • Comparing The Most Popular Solo 401k Options
  • Best Automatic Investment Apps Of 2023

Footer

Who We Are

The College Investor is an independent, advertising-supported financial media publisher, focusing on news, product reviews, and comparisons.

Connect

  • Contact Us
  • Advertise
  • Press & Media

About

  • About
  • Our Team
  • Podcast
  • Editorial Guidelines
  • How We Make Money
  • Archives

Social

Copyright © 2023 · The College Investor · Privacy Policy ·Terms of Service · DO NOT Sell My Personal Information

wpDiscuz