3 Things to do with your Tax Refund
April 15th is coming up, and if you live in the United States, you know that means tax returns are on the horizon. Here are 3 things that I recommend you do with your tax return:
1. Pay Down Debt – If you have accumulated debt, now would be a good time to start paying it down. I actually have a debt reduction form that you can use by clicking here. On it, list your debts smallest to largest, regardless of the interest rate. This method is known as the Debt Snowball which was created by Dave Ramsey. The idea is that you build up momentum by being able to pay off the small debts first and take the payment you were making on the previous debt and rolling it into the next one. My wife and I used this method and paid off $52k in 18 months.
2. Establish an Emergency Fund – If you don’t have at least 3 months of expenses saved up in an emergency fund, I would get rolling on that. To determine the amount you need to save, total your monthly expenses including your mortgage/rent payment, then multiply that number by 3. Why do I say 3 months? Don’t most people say 3-6 months? Yes, but I am all about making goals that are attainable and that people would be motivated to do. Therefore 3 months is a lot more realistic in a short period of time. I would love for everyone to have 6 months worth, but let’s set the initial bar at 3 months.
3. Do Something Memorable – Do something that tells your family you love them. If you have no debt and you have already established an emergency fund, this would be a great option for you. Take a trip with your family, go out to dinner, or do something on your Bucketlist. In the end it is not how much money you have, but how much value you added to those you love.
As a closing note, if you are getting a large refund, in effect what you are doing is loaning your money to the government for 1 year with 0% interest. I would suggest that you adjust your withholding’s with the goal of getting nothing back. This way you have the use of the money instead of the government and you can put it towards getting your financial house in order.
P.S. If you are wondering your refund you can find out the status by clicking Where’s My Refund?
Last Minute Giving is Still Worth Doing
Do you know someone who is going to a Public or Private school? Do you have a heart for those in need and want to help out? If so, let me tell you about a couple of opportunities available to you. There is a way in which you can give to a worthy cause AND get your money back. Sounds like a gimmick, right? That there has to be strings attached. Well it’s not a gimmick but there are strings attached. There are Tax Credits offered by each state that will give you each dollar back you give. If you live in Arizona, here are some Tax Credits available to you and their guidelines:
Working Poor Tax Credit – You can give up to $400 to a non-profit organization that helps the poor. The limit is $200 if you’re single and $400 if you’re married. The deadline is 12/31.
Private School Tax Credit – You can give up to $1000 to a private school to help pay for a students tuition. The limit is $500 if you’re single and $1000 if you’re married. You actually have until April 15th of the following year to take advantage of this one.
Public School Tax Credit – You can give up to $400 to a public school for extra-curricular activities that require students to pay a fee to participate, i.e. football, band, cheerleading, etc. Limits are $200 if you’re single and $400 if you’re married. The deadline is 12/31.
So here is the deal, you have to actually owe taxes to the state of Arizona. So if you don’t pay state income tax, then this doesn’t apply to you. But for the rest of you, all you have to do is provide the donation info to your accountant (or online tax service) and you will get the money back.
Click here to go directly to the Arizona Department of Revenues site for more information. Please seek the counsel of your accountant to make sure you qualify. For those of you reading that don’t live in Arizona, check your state governments website to see what may be available to you.
Merry Christmas!
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