Tax season can feel like a stormy spring, bringing clouds of paperwork, gusts of deadlines and occasional downpours of stress. But for about two-thirds of U.S. taxpayers, there is a financial bright spot — the much-anticipated refund.
As of February 21, 2025, the IRS has already doled out more than $102 billion in refunds, with an average refund of $3,453.
Of course, there’s no one correct way to use your tax refund — everyone’s financial situation is different — but you can put this extra cash to work for you according to your personal needs and stage of life.
Here are 6 smart ways to use your tax refund.
#1: Pack a financial umbrella
You never know when you’ll get hit with a costly car repair, health emergency or other unexpected expense. When you do, a rainy-day fund provides a financial cushion, shielding you from high-cost alternatives like credit cards and payday loans. Kick-start an emergency fund — or boost your current savings — by depositing your refund money into a savings account.
A rule of thumb when building an emergency fund is to aim for at least three months’ worth of living expenses in this account. If that seems overwhelming, start with $1,000 and build from there.
#2: Dig out of debt
Give high-interest debt the heave-ho by using your tax refund to pay down the balance on credit cards and other expensive debt. Even if the size of your refund is more like a garden trowel when you need an excavator, taking a chunk out of your total debt will yield sizeable savings in interest payments.
#3: Add a nest egg
Direct your refund to fund an IRA or Roth IRA and watch it blossom over the long term. Even if you already have a 401(k), an Individual Retirement Account can give your savings a big boost. As with a 401(k), you won’t pay annual taxes on capital gains, dividends, and other distributions from securities held in your IRA. Beyond that, there are different tax advantages, depending on which type of IRA you open.
#4: Tackle spring maintenance projects
Maybe you never had the money to replace that old furnace, patch the leaky roof or replace the worn tires on your car. Use your refund to complete maintenance projects that can cost you even more if you wait.
#5: Cultivate your future
Like tending to a garden, cultivating a career can help it grow. Use your tax refund to invest in your future by enrolling in continuing education courses, pursuing an advanced degree or taking an online class. Start or add to a 529 Plan college savings account, where your money grows free of federal and state income taxes.
#6: Budget for a modest splurge
Rather than letting your entire tax refund evaporate like dew on a spring morning, consider setting aside a small portion for something you want. If you can afford it, budget a portion of your windfall for a modest splurge while applying the lion’s share to set yourself up for a better financial future.
Let Zions Bank help you achieve your financial goals. Find a Zions Bank branch where our team is ready to answer any questions or support you in any way you need.
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Content above is offered for informational purposes only and does not constitute tax, legal, financial, or business advice. Contact a specialist about your specific needs and circumstances.
