8 Smart Ways To Use Your Tax Refund in 2025

Tax season is here, and if you haven’t filed there is still a little bit of time left (and to possibly get a tax refund!). Well, just slightly over two weeks, so I recommend starting as soon as you can! The IRS reports the average tax refund is $3,120. That is a huge chunk of…

Michelle Schroeder-Gardner

Written By:

Michelle Schroeder-Gardner

Last Updated: January 9, 2025

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Tax season is here, and if you haven’t filed there is still a little bit of time left (and to possibly get a tax refund!). Well, just slightly over two weeks, so I recommend starting as soon as you can!

The IRS reports the average tax refund is $3,120. That is a huge chunk of change, and some of you may be expecting even more money than that.

When I worked in retail I saw many people use their tax refunds on a crazy amount of clothing. I understand that people need to be clothed, but is there a better way to spend your tax refund in 2019?

After all, your tax refund isn’t just the extra money many people think of it as.  Really it’s money you have already worked hard to earn.

Here are 8 smart ways to use your tax refund. You may decide to use all of your tax refund in one area or a combination of them all. Whatever you decide, it’s your choice!

1. Put your tax refund towards retirement.

Putting all, or at least some, of your money towards retirement can be a great way to spend it. The plus side is you still get to keep your money, which is a decision I’m sure you won’t regret decades from now.

2. Pay off your debt.

If you have debt, especially at a high interest rate, then you may want to focus your tax refund on paying some of it off.

You can stop spending all of your hard-earned money on interest fees and instead be a little closer to paying off your debt. Or, maybe you can even pay off your debt completely!

Just think about how less stressful life would be without all of that debt.

3. Beef up your emergency fund.

An emergency fund is something I believe everyone should have. However, according to a report by Bankrate.com, 26% of Americans have no emergency fund whatsoever, and only 40% of families have enough in savings to cover three months of expenses!

If you don’t have a fully funded emergency fund, you should start one. They can help if you were to lose your job, have a medical expense, have a home or car repair, and more.

This will prevent stress brought on by unexpected bills or even prevent you from going into debt trying to pay them.

Related: Everything You Need To Know About Emergency Funds

4. Learn something new with your tax refund.

Investing in yourself can be another great way to spend your tax refund. You might decide to go back to school, take a certification class, learn a new skill, or something else.

Investing in yourself can be a great way to get motivated about life.

5. Start a business.

Your tax refund may be just what you need to start the business you’ve been dreaming of, and many businesses can be started cheaply.

Just look at blogging. You can start a blog for just a few bucks a month! That’s what I did, and now my blog is my business and full-time career.

Don’t get me wrong, some businesses can be expensive to start. If you’re truly dedicated, your tax refund may help you launch your business in the best way possible.

Related articles:

6. Take care of yourself.

Is there an expense you’ve been putting off for a long time because you couldn’t justify spending the money on yourself? Maybe this is a visit to the dentist, a trip to the doctor, a massage, some alone time, or something else?

If this describes you, then you may want to think about spending some of your tax refund on yourself.

7. Donate to a cause you believe in.

Is there a cause you’ve been wanting to donate to but just couldn’t afford to earlier? If you have extra money left over from your tax refund, then now may be the time.

You might even be able to claim a tax deduction on it next year.

8. Splurge a little.

Splurging isn’t always a bad thing. I believe if you can truly afford it, then splurging every now and then is just fine.

Maybe you’ll decide to go on a vacation, redecorate your home, buy yourself something you’ve been putting off, go out to a nice dinner, or any number of things.

The key is moderation and making sure you can actually afford what you are spending your money on.

Are you getting a tax refund this year? How do you plan on using it?

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Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. Aliyyah @RichAndHappyBlog

    I didn’t get a refund this year because of my freelance income. I think I’ve passed the point of receiving refunds. I’ll either break even or owe.

    Reply
    1. Michelle Schroeder-Gardner

      Ha, same here!

      Reply
    2. DNN

      At least it’s good to know you’re making money online from the comfort of your laptop working from home that you either break even or have to pay money. That means your affiliate income is on the plus side of things .

      Reply
  2. Erin

    I actually used refund to completely pay off my visa debt AND my student loan debt!! I am so excited not to have those weighing down on my shoulders anymore!

    Reply
    1. Michelle Schroeder-Gardner

      Great job!

      Reply
  3. Christine @ The (mostly) Simple Life

    We used to always use part of our tax return towards our emergency fund. We finally have that were we want it! This year we got a bit of a refund and used it to purchase a few things we needed and save for some travel. Plus, we saved a bit for our “summer fun fund”. We did this last year so we had money to go to the beach, see a few movies, and go to the water park… Stuff like that. It was so nice to have money set aside for fun things last year that we might not have money for each month, so we did that again this year!

    Reply
    1. Michelle Schroeder-Gardner

      Awesome! Where are you going?

      Reply
  4. Eric Bowlin

    I like #1 through 5. Anything about investing, saving, or starting a business.

    Unless you are already retired and generate massive yearly passive income far above what you need, then you should be saving or investing it!

    Reply
    1. Michelle Schroeder-Gardner

      Thanks!

      Reply
  5. Lindsey

    This is the first year I have an actual refund! I’m so excited. In years past I was always a dependent so I have never really had more than maybe 100 bucks to spend after my tax refund. This year I’m really looking forward to my refund, because we can finally afford to buy some clothes for ourselves, I am going to splurge on a Michael Kors bag, and get to spend some money on possibly a blog theme!

    Even after all that we’ll still have money left over to put towards savings. Words cannot describe how grateful I am to be in this situation but I’m also so excited to finally get to splurge.

    Reply
    1. Michelle Schroeder-Gardner

      Nice!

      Reply
  6. cece

    Tax refund? What’s that? We owe every year and claim the lowest we can claim. We beef up our savings contribution so that we are prepared, but it sure does suck watching that money disappear from our account.

    Reply
    1. Michelle Schroeder-Gardner

      Yeah, I’m not looking forward to seeing how much I’ll owe next year… ah!

      Reply
  7. Anita

    This year we’ll put a solar energy plant on our roof.

    Reply
    1. Michelle Schroeder-Gardner

      Awesome! How much is that?

      Reply
      1. Anita

        Depends on the size.

        We will buy 10 260 Watt (peak) Modules for 160,88 Euro each.
        And we will buy a solar inverter from SMA (best solar company ever) for 748,80 Euro.
        And 10 stands for the module for 55,08 Euro each.
        + 19% value-added tax
        = 3,461 Euro

        But I don’t know how much the assemblyman will take for installing it.

        Reply
        1. Michelle Schroeder-Gardner

          Awesome. I am super interested in solar. Definitely plan on adding it to the RV one day.

          Reply
  8. Catherine Alford

    We’ve always been pretty practical with our tax refunds in the past, but I know a lot of people find that to be “boring”, so I think it’s ok to have a balance of spending and saving your tax refund.

    Reply
    1. Michelle Schroeder-Gardner

      We’re pretty boring with ours in the past as well. I don’t think I ever splurged with it, haha.

      Reply
  9. Kristin

    Omg, I haven’t even started mine yet! I think this will be the last year I get a refund since I was still employed last year. I probably should just put it towards next years since I’ll owe.

    Reply
    1. Michelle Schroeder-Gardner

      Mine are done, thankfully!

      Reply
  10. Laura Lee

    My husband and I used our tax fund to beef up the emergency fund! We live in an expensive city, so getting to 6 months of expenses (our goal) is a challenge, but the refund got us a few steps closer.

    Reply
    1. Michelle Schroeder-Gardner

      Great idea!

      Reply
  11. Joe

    All great ideas. Anything but using that “new found” money as blow money. I’ve always been floored by those friends who get their refund and have it gone in a matter of a week with none of it invested any way in their future. It’s not “new” money, it’s money you loaned the government during the year. You certainly wouldn’t just spend a paycheck on material things? Or maybe you would, lol. I end up paying a bit every year. And I’m okay with that. I make a game of it in a way, trying to get my tax refund/over-payment as close to $0 as possible.

    Reply
    1. Michelle Schroeder-Gardner

      Yes, I agree!

      Reply
  12. Andrew@LivingRichCheaply

    I’m getting a tax refund this year which is I shouldn’t be too excited about because it really only means I gave the government a interest-free loan. But I’m not gonna lie, I like getting a refund, especially since I owed last year. I can never decide what to do with it, so I will probably put some in savings for a house and some in retirement.

    Reply
    1. Michelle Schroeder-Gardner

      Great ways to use your tax refund 🙂

      Reply
  13. Tyler @ Oddball Wealth

    I like number 1 and 5. Putting your tax refund towards retirement or starting a new business are both excellent investments for your future!

    Reply
    1. Michelle Schroeder-Gardner

      Yes!

      Reply
  14. Katherine Jaroszewicz

    I used my refund to catch up on some bills so I could have a little breathing room. I hope one day I can save my refund!

    Reply
  15. Betsy Barnes

    Yes, we are getting a tax refund this year. We will put around 90% of the amount right in our retirement and use a small amount to treat ourselves to a nice, weekend getaway, close to home 🙂

    Reply
  16. Amy @ DebtGal

    We netted about $2,000 this year, after paying the accountant. Unfortunately, before the refunds even hit our account, we had to spend $1,100 on new tires and other maintenance of one of our cars. The rest will go toward debt repayment.

    Reply
  17. DNN

    As you mentioned it’s good to wisely use money from a tax refund because a person never knows when they will need on hand emergency funds. Yes, having a nice tax refund check allows someone to splurge a little but they have to look at the big picture in terms of possibly using that money growing into more money for the future such as retirement or whatever. The beauty about getting a tax refund check for those people getting started in launching an online business and affiliate marketing is they can use some of the monies from their tax refund to purchase a domain name and a dedicated web hosting server package to host their blog or website on. Many people nowadays are transitioning from the day job scene into online marketing and blogging as their sole source of income because the Internet is quietly producing online marketing and blogging millionaires off of the strength of selling someone’s products or services on a blog or website in the form of an advert. A meaty tax refund check allows someone to begin their life all over online by launching a business and becoming financially stable potentially within the next five years. Do you agree with this Michelle? 🙂

    Reply
  18. Laurie Bolduc-Cadieux

    We plan on doing some renovations and buying a small fishing boat

    Reply
  19. Nutty Hiker

    This is what we do every year! I have tried to teach my kids these same principals. We pay off any small debt we may have (credit cards, etc..) then use the extra to make an extra payment or two on the house. Our goal is to pay off a 30 year mortgage in 8 years =) Now if only I could stop buying stuff for the house and coming up with projects for my husband to do to the house lol.

    Reply
  20. kymi a

    I will be getting a tax refund, I’m using it to lower our debts so we can raise our fico score.

    Reply