11 Tips for Making the Most of Your Tax Refund

Money and a check from the United States Treasury

Getting a tax refund can be a nice financial perk in the New Year. For some of us, it may seem like bonus money and an excuse to splurge. Remember this is money you worked hard to earn last year and over paid to the government. Before you book a vacation or buy that new computer, think carefully about how you can make the most of your refund.

Smart ways to use your refund


MilTax can help you get that refund you’re due. Call 800-342-9647. Ask for free tax software.

Before you start spending, consider these options:

  1. Change your W-4 withholdings if your refund is big. If you received a tax refund, it means you paid more taxes than you owed, and you may want to adjust your tax forms for the next year so you can grow interest on that money instead. MilTax, Military OneSource tax experts, can help with this.
  2. Contact a financial planner. Go to the experts for some ideas on long-range planning. Military OneSource offers free financial counseling, by phone, in person or via video chat.
  3. Pay down your debt. Use your refund to pay off that high-interest credit card or another lingering bill.
  4. Start an emergency fund. Open a savings account and try to build up enough money to cover your expenses for three to six months.
  5. Contribute to your Thrift Savings Plan. You can never save too much for your retirement, so think about making an extra contribution.
  6. Consider a Roth Thrift Savings Plan. Your pre-tax dollars usually go into the regular Thrift Savings Plan. Roth contributions let you put in after-tax dollars, too.
  7. Save toward a large expense you may be contemplating such as on a home or vehicle down payment. A larger down payment will lower your monthly payments and your interest costs.
  8. Tackle some home improvements or repairs. Minor home or car repairs now can prevent a budget-busting bill down the road, so fix that leaky pipe before it becomes a tsunami.
  9. Save for college. No matter how young your kids are, start saving for college now. One way is by adding money to a college savings plan, called a 529 plan.
  10. Make an extra car or house payment. Find out first if there is a prepayment penalty, and if there is, consult with a financial planner to see if doing so would be wise. Be sure to ask your lender to apply the payment to the principal balance, not the interest.
  11. Hold off spending your refund until you get it. Wait until you actually get your refund to spend it, even if you're sure about how you want to use the money. Paying cash for a splurge will keep it off your credit card bill and (possibly) make you think twice about the purchase.

That luxury item may be calling your name, but there are many other options for your tax refund, which could put you in better financial shape for the future. Check out more Military OneSource resources on taxes and financial planning.


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