Tax returns offer a significant influx of capital for the average American homeowner. Many choose splurge purchases as their go-to when the check clears their checking account in late April or early May.
This can feel like a uniquely liberating time of the year, as thousands of additional dollars hit your checking account. Shopping trips, visits to the salon for press-on nails, or putting a down payment on a new car might sound like great uses for this cash, and luxury purchases are indeed a great way to gain some additional satisfaction out of this repayment.
In 2020, the average United States taxpayer return was over $2,700—and almost $3,200 for Texans, who came out at the top in terms of cash owed back. That’s a lot of money that can be leveraged for long term investments, warranty payments for appliances or RVs, motorhomes, or other homeowner necessities, quality of life improvements, and of course, a few spur-of-the-moment purchases that bring joy in the short term like an upgrade at home or manicure. Here are just a few smart things you can do with your 2021 tax return.
Smart Ways To Spend Your Tax Return
Consider long-term purchasing needs with your tax refund.
A tax refund is simply a return of money that the government owes you (check the fine print for more comprehensive information here). Throughout the year, deductibles in the form of paid taxes are skimmed off the top of each paycheck you receive, and then the IRS squares its running tally come tax time. Often, Americans have paid too much in taxes and are owed a refund. This functions nearly as a mechanical failure in the way that taxes are collected, yet it provides the United States government with millions of interest-free dollars throughout the year. However, it’s important to note that, during some years, you may have to pay an additional tax to the IRS to make up for short and long term capital gains as a result of stock market sales, profits from a move, or winnings from the lottery or another vehicle that isn’t immediately taxed upon your receipt of the funds.
Many recipients of tax return funds choose to improve their homes with the additional cash. Many people square this in their minds as yearly, short-term savings proceeds. The money is yours (meaning this isn’t a hand-out or gift from the government); it just needs to be returned to you every spring. Leveraging this payout from the IRS to maximize your kitchen budget on an upcoming renovation, for instance, is a great way to increase your home’s value through a remodel without breaking the bank.
Adding the thousands received from your refund to a pool of cash to be used for DIY or contractor-led remodel projects that bring in new countertops, cabinets, or a long-overdue refrigerator or other appliance replacements is a good idea that can boost your comfort and peace of mind at home. In addition, this pushes the refund directly into an investment that boosts your home’s value as a financial asset.
Fund the purchase of a vacation asset with your refund.
Many families choose to use these proceeds to fund a vacation during the summer. However, thinking long-term can help you make the most of a single refund check for many years to come. With an RV purchase, you can head out on the open road with your loved ones every year once school lets out for the summer. And with an industry-best RV extended warranty, you can be sure that your investment will remain a protected year in and year out as the refund checks continue to pour into your checking account for additional long-term family purchases.
A warranty is an important addition for RV owners. Warranties ensure that breakdowns on the road won’t affect your checkbook and can get you the replacement parts or repairs on the RV that will get you right back out on the road in your motorhome for more family fun. Warranties, especially warranties that cover motorhome or RV investments, are crucial for maintaining your asset for the long term.
No matter how you choose to use this refund, make sure you are thinking about your future for maximum enjoyment.