Maximizing your tax refund
Taxes. Just the word brings a little shudder for most of us -- at least it does for me! From gathering the appropriate documents to actually filing by April 15, we've all heard the Benjamin Franklin saying that in life there are only two certainties: death and taxes. Yikes!
While most of us dread tax time, we're also all hoping to make the most of our tax refund. It's almost like a bonus when you get back something unexpected. The question at tax time is always: Did I do enough to ensure I get something back or at least to ensure I don't owe an arm and a leg?
According to the latest IRS data, nearly 8 out of every 10 Americans will receive tax refunds. If you're so lucky to get a return, be sure you use your return wisely so your money continues to work for you. University of Georgia Cooperative Extension suggests using these smart strategies to help you maximize your refund.
Use your tax return to catch up on bills. If you have outstanding or past-due bills that are accruing interest and late fees, put your return toward these first. Assess your overall debt and credit situation. Who are your creditors? If you have multiple accounts to choose from, begin with the one with the highest interest rate to save the most money in the end.
Maybe your rainy day savings is not where you would like it to be. You can use your refund to create or increase your emergency savings. When the tire goes flat, the car battery needs replacing, or the washing machine breaks, money in an emergency account will let you pay for these expenses without adding to your debt load.
Invest in your retirement. I cannot stress enough the importance of ensuring your golden years are great years. Opening an Individual Retirement Account (IRA) or making extra contributions to an existing retirement fund is an excellent use of tax returns -- think of it as surprise money you never had.
Invest in your home. Tax returns can be used as a down payment for a potential home or to pay an extra mortgage payment for your current one. Making an extra mortgage payment or two per year on the principal provides huge savings on interest as well as decreasing the principal amount of your loan. It's also a great time for home improvement, or as I like to call it, the "honey do" list. For example, adding a new roof, an energy-efficient window or door, hot water heater, or even a new room are all considered improvements, as is landscaping. All of them add to the overall value of your home.
Don't' forget to share. Donate a portion of your tax refund to the charitable organization of your choice. You'll improve the lives of others, and your charitable gift may reduce next year's tax burden.
Finally, splurge a little to reward yourself. If you're like me, rewarding myself is no problem. After completing a major task, or achieving a goal -- in this instance, making your return work for you -- make a pleasure purchase like a new television, a family vacation or that new spring dress you've had your eye on.
Contact county Extension agent Keishon J. Thomas at 478-751-6338 or thomaskj@uga.edu.
This story was originally published April 13, 2016 at 9:09 PM with the headline "Maximizing your tax refund ."