10 smart ways to use your tax refund

If you're like most people, you're looking forward to receiving your tax refund. In 2024, the IRS refunded roughly $245 billion to more than 86 million people for an average refund of $2,850. There are a number of different ways to use that money — but do you have a plan for how to use it effectively?

While it's temping to splurge on a vacation or shopping spree, your tax refund can be a golden opportunity to make meaningful progress on your financial goals.

Even better, with a Citizens checking or savings account and Citizens Paid Early®, you can get your tax refund up to two days early by setting up direct deposit into a Citizens checking or savings account.¹ That means you can take action faster.

Here are 10 smart and impactful ways to use your tax refund.

1. Build or replenish your emergency savings fund

An emergency fund is a critical aspect of planning for your financial future. This type of fund gives you a financial cushion should life take an unexpected turn — a job loss, major car repair, etc. — that requires instant access to larger sums of money.

Consider using some (or all) of your tax refund to build your emergency savings fund — or replenish it, if you recently dipped into it. Ideally, you want to have enough saved in the account to keep you financially afloat. Take stock of all of your monthly expenses so you can get a better idea of your savings goal. Bonus tip: leverage financial tools, like Citizens Savings Tracker®², to help automate your savings so you can stay on top of your goals.

Another way to put your money aside and watch it grow is to use a money market account (MMA) or certificate of deposit (CD). These options offer the stability of a traditional savings account with higher interest rates. Either account may be ideal for saving for a short- or medium-term goal.

2. Pay down student loans

Student loan payments can be a frustrating expense, one that can hold people back from reaching other financial goals. Want to get closer to the end of that frustration? You could use your tax refund to make a larger-than-usual payment. That could put a dent in your principal balance and bring you closer to life without student debt.

Some lenders don't charge a pre-payment penalty for larger-than-normal payments, but other lenders might, so make sure you know your lender's policy before making your payment. (You could also consider refinancing your student loans to try to cut down on your monthly payments.)

3. Boost your retirement savings*

You might be more focused on planning for future financial goals rather than immediate needs. If that's the case, consider allotting your funds to your retirement account, like a traditional or Roth IRA. Using a share of or your entire refund to plan for your retirement could do your future self a big favor. Going this route allows your money to grow, thanks to compound interest — and the contribution might be a big boost to your savings.

4. Invest it*

A tax refund is a major windfall. With that in mind, investing some or all of your tax refund could either jumpstart your planning for the future or allow you to take that next big step. Yes, investing in the stock market involves the risk of losses. However, if your tax refund is invested over a long time horizon, it could help overcome any dips in performance while also creating an opportunity for potential gains.

5. Contribute to your child's college fund*

It's never too early to start saving for your child's education! So, whether your son or daughter is still in kindergarten or counting down the days until they start high school, putting your tax refund in a 529 fund or other college savings account could pay off in a big way down the road.

6. Pay down your credit card debt

Are you behind on your credit card payments? Is the interest starting to accumulate? Your tax refund could be your golden ticket to paying down your high interest debt. Your refund could either pay off your credit card or make enough of an impact that you're able to pay off the rest relatively quickly.

7. Make home improvements

A tax refund could provide the cash you need to purchase a new appliance for your house, such as a new refrigerator, dishwasher, washer, or dryer. These types of expenses are always difficult to fit into your budget; however, if you use your tax refund for such a purchase, you might not feel the financial burden as much. Also, if you put the money toward the large expense right away, you might be less inclined to miss the money since you didn’t have it for very long.

You could also use that money as part of a larger home renovation project. Remodeling your home could raise the resale value of the home, so consider the cost of the renovation project and the return on investment you can expect.

8. Save for a house or apartment

Using your tax refund to save for a down payment on a home could be the move for you. With the average tax refund close to $3,000, think about how big of a difference that could make for you and your future!

Speaking of moving, you might have dreams of renting a new apartment at the end of your lease. In some areas of the country, signing on for a new apartment comes with a lot of upfront costs — first and last month's rent, security deposit, and maybe even a broker's fee. Putting your tax refund aside to help cover these expenses could lessen the financial burden of finding your new apartment.

9. Support a charity

Do you have a qualified charitable organization you support or want to start supporting? You could make a contribution with your tax refund if your personal finances are in order. This act can give you the fulfillment of helping your community and assist you in the form of a tax deduction when next year's tax season comes around.

10. Treat yourself (within reason)

Maybe you've had your eye on a new computer, a special vacation, or a new pair of glasses. You could use your refund check to reach the goal and get that item you've been saving for. Or, if you're feeling generous, splurge on someone else and wow them with an amazing birthday or holiday gift this year!

Maximize your tax refund with Citizens Paid Early®

It's always a smart decision to have a plan for how you spend or save your hard-earned money — a tax refund is no exception!

Remember, with a Citizens checking or savings account and Citizens Paid Early®, you can get your tax return up to two days early using direct deposit. For more information, learn more about Citizens checking account options.