Home > Taxes > Smart Ways to Use Your Tax Return This Year

Comments 0 Comments

NOTE: Due to the COVID-19 coronavirus pandemic, the IRS has extended the federal tax filing and payment deadline to July 15, 2020. The recent relief package passed by Congress may have additional tax implications. Please contact a tax adviser for information you may need to complete your taxes this year. Learn More.

You prepped early and thoroughly for tax season and beat the rush to submit your paperwork to the IRS. Now it’s just a matter of waiting for that “free money” to show up in your account.

But taxpayers should be aware that the latest data from the IRS shows that tax refund totals are, on average, down 17% from refunds received in 2018. This is in part due to an increased standard deduction as a result of The Tax Cuts and Jobs Act. Only time will tell the numbers by the end of tax season, but this decreased refund average gives Americans an even bigger reason than usual to use those funds wisely.

If you’re inclined to buy a new toy or splurge on a vacation with your tax return, that might end up being a fantastic choice. But before you let the money burn a hole in your pocket, consider a range of ideas to make your money work smarter for you—and positively impact your overall financial health now and in the future.

Make a Dent in Your Debt

It might not be the most exciting use of your refund, but the relief that comes from freedom from debt is indescribable. So take the baby steps necessary to put yourself on the path to financial freedom!

Come up with a plan to pay off your debts by accurately identifying debts with a free credit report card from Credit.com, determining your eligibility for a debt consolidation loan or lower interest rates based on your credit score, and creating a strategy based on your total payoff number.


The suggestion to make an extra mortgage payment is repeated often because it’s tried and true and makes financial sense in most situations. The long-term interest savings can benefit you even if you’re not sticking around for the full extent of the loan. But communicate with your lender first to ensure you’re not charged a prepayment penalty.

Keep in mind that order matters when it comes to making debt payments. Non-housing, high-interest debts should generally be paid off before making additional mortgage payments. And sufficient emergency savings should always be set aside for urgent and unexpected expenses.

Save for Rainy—and Sunny—Days

An alarming recent survey revealed that only 39% of Americans have enough savings to cover a $1,000 emergency. The other 61% of respondents say they would pay for an emergency by financing with a credit card, reducing spending on other things, borrowing from family or friends, or taking out a personal loan.

Considering 34% of Americans reported an unexpected emergency in the past year, it’s a no-brainer to make saving a priority, as difficult as it may sometimes feel. But receiving a tax refund is the perfect opportunity to save—if you file online you can have the money sent straight to your savings account so you won’t be tempted to spend it.

Perhaps you’ve been putting off setting up your investment portfolio or you’re waiting until you get a higher-paying job to contribute substantially to your retirement. Stop waiting and examine your options for growing your nest egg with your return.

If you’re not yet a homeowner, you can use your refund to prepare to become one by saving the money for a down payment, closing costs to bolster an offer or points to buy down the rate on your mortgage. Your FICO score influences your APR, so checking your credit score and taking action to bolster it will benefit you when it’s time to mortgage shop.

Invest in Your Home and Experiences

A new year is a perfect time to tackle a home improvement project like upgrading lighting, cabinetry or an inefficient appliance. These are things you can feel guilt-free about spending money on because your investment will return in both your enjoyment of the home and resale value.

Consider putting your refund towards education in the form of a certification that moves you closer to a career goal or even a small-scale entrepreneurial endeavor.

And if you do decide to spend your money on travel, after all, maximize every penny by taking advantage of credit cards with optimal traveling perks like airline miles, hotel discounts, cash-back rewards, and other bonuses not available with regular credit cards.

The top travel credit cards require an excellent or good credit score to qualify, so before you set your travel plans in stone:

  • Check your credit score for free on Credit.com
  • Pay down high credit card balances, dispute errors on your credit reports, and address delinquent items
  • Apply for your travel credit card of choice and thoroughly read all terms and conditions

About the Author

BestCompany.com Home Loans Content Manager Rebecca Graham

Rebecca Graham is the home loans content manager at Best Company, an independent review site where companies don’t “pay to play” and consumers can access real customer reviews and educational materials. In her free time, Rebecca enjoys hiking with her family and sampling flavors of the week at the local cookie shop.

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team