MOST LIKELY TO SUCCEED-Screening and Panel Discussion, APRIL 25th at 7pm, HHS
Expanded Format Starts Today, April 24th

Four Ways to Double the Power of Your Tax Refund

by Jay Marsden
March 22, 2017

The IRS expects that more than 70% of taxpayers will receive a refund in 2017.¹ What you do with a tax refund is up to you, but here are some ideas that may make your refund twice as valuable.

Solares Hill Advisors

Jay Marsden
847 Washington Street, Holliston,
MA 01746   
v.617-306-1572

jmarsden@solareshilladvisors.com

The IRS expects that more than 70% of taxpayers will receive a refund in 2017.¹ What you do with a tax refund is up to you, but here are some ideas that may make your refund twice as valuable.

Double your savings

Perhaps you'd like to use your tax refund to start an education fund for your children or grandchildren, contribute to a retirement savings account for yourself, or save for a rainy day. A financial concept known as the Rule of 72 can give you a rough estimate of how long it might take to double what you initially save. Simply divide 72 by the annual rate you hope that your money will earn. For example, if you invest your tax refund and it earns a 6% average annual rate of return, your investment might double in approximately 12 years (72 divided by 6 equals 12).

This hypothetical example of mathematical compounding is used for illustrative purposes only and does not represent the performance of any specific investment. Fees, expenses, and taxes are not considered and would reduce the performance shown if they were included.

Split your refund in two

If stashing your refund away in a savings account or using it to pay bills sounds unappealing, go ahead and splurge on something for yourself. But remember, you don't necessarily have to spend it all. Instead, you could put half of it toward something practical and spend the other half on something fun.

The IRS makes splitting your refund easy. When you file your income taxes and choose direct deposit for your refund, you can decide to have it deposited among two or even three accounts, in any proportion you want. Qualified accounts include savings and checking accounts, as well as IRAs (except SIMPLE IRAs), Coverdell Education Savings Accounts, health savings accounts, Archer MSAs, and TreasuryDirect® online accounts. To split your refund, you'll need to fill out IRS Form 8888 when you file your federal return.

Double down on your debt

Using your refund to pay down credit card debt or a loan with a high interest rate could enable you to pay it off early and save on interest charges. The time and money you'll save depend on your balance, the interest rate, and other factors such as your monthly payment. Here's a hypothetical example. Let's say you have a personal loan with an $8,000 balance, a 12% fixed interest rate, and a 24-month repayment term. Your fixed monthly payment is $380. If you were to put a $4,000 refund toward paying down your principal balance, you would be able to pay off your loan in 12 months and save $780 in interest charges over the remaining loan term. Check the terms of any loan you want to prepay, though, to make sure that no prepayment penalty applies.

Be twice as nice to others

Giving to charity has its own rewards, but Uncle Sam may also reward you for gifts you make now when you file your taxes next year. If you itemize, you may be able to deduct contributions made to a qualified charity. You can also help your favorite charity or nonprofit reap double rewards by finding out whether your gift qualifies for a match. With a matching gift program, individuals, corporations, foundations, and employers offer to match gifts the charitable organization receives, usually on a dollar-for-dollar basis. Terms and conditions apply, so contact the charitable organization or your employer's human resources department to find out more about available matching gift programs.

 

E-mail This Article

Comments (0)

Advertisement

Advertisement

Recent Articles by Jay Marsden:

Quarterly Market Review: January-March 2017

Riding the momentum following the presidential election, stocks surged for much of the first quarter of 2017. Solares Hill Advisors Jay Marsden 847 Washington Street, Holliston, MA 01746 v.617-306-1572 jmarsden@solareshilladvisors.com

Continue ...

How can I prepare financially for stormy weather?

Take some commonsense precautions to safeguard your home, vehicles, and other possessions against damage. Solares Hill Advisors Jay Marsden 847 Washington Street, Holliston, MA 01746 v.617-306-1572 jmarsden@solareshilladvisors.com

Continue ...

Annual Market Review 2016

Solares Hill Advisors Jay Marsden 32 Wendy Lane Holliston, MA 01746 617-306-1572 jmarsden@solareshilladvisors.com www.solareshilladvisors.com Following the results of the presidential election, stocks surged to new highs. Whether this trend continues in 2017 remains to be seen following President-elect Trump's first few months in office.

Continue ...

How can I pay off the credit card debt I racked up over the holidays?

Solares Hill Advisors Jay Marsden 32 Wendy Lane Holliston, MA 01746 617-306-1572 jmarsden@solareshilladvisors.com www.solareshilladvisors.com You reluctantly look at your credit card statement and wince at all the purchases you made over the holidays. Fortunately, there's no need to panic. Consider using one of the following strategies to help pay it off.

1

Continue ...

Playing Catch-Up with Your 401(k) or IRA

Solares Hill Advisors Jay Marsden 32 Wendy Lane Holliston, MA 01746 617-306-1572 jmarsden@solareshilladvisors.com www.solareshilladvisors.com A recent survey of baby boomers (ages 53 to 69) found that just 24% were confident they would have enough money to last throughout retirement.

Continue ...

Advertisement

Recent Articles in Comments:

Earth Day is Shredding Day for Vesta Real Estate Group

by Paul Saulnier

Fran Pleska waits at the back of the line for her turn to unload her shreddable offerings on Earth Day 2017 at the Holliston High School parking lot.

1

Continue ...

MOST LIKELY TO SUCCEED-Screening and Panel Discussion

by Anne Buckley

Join us for this compelling community-wide event to learn more about the history of education in the United States and explore how we can encourage creativity and innovation in our schools to equip students for the changing needs of the future.

Continue ...

Earth Day is April 22nd - Shades of Green

by Jason Dione

From individual choices to our collective actions, each of us has the power to be “green” and make a positive difference for ourselves and our planet. There is always something we can do, and there is always something more we can do.

4

Continue ...

The Best Stuff

by Paul Saulnier

A catalog arrived in the mail yesterday. Apparently I have been identified as a person who wants only the best stuff available, regardless of price or necessity.

1

Continue ...

Holliston Newcomers Club Easter Basket Project with the Food Pantry Update:

by Press Release

Holliston Newcomers Club Easter Basket Project with the Food Pantry Update.

Continue ...

Advertisement