Intuit TurboTax presents 7 smart ways to invest your tax refund

Woman working in home office
Woman working in home office


Subscribe: Apple PodcastsSpotifyiHeartRadio

A tax refund is a great opportunity to set yourself up for the future. If you're expecting a windfall from the IRS this year, one or more of these 7 smart options for investing your tax refund could be the perfect fit for you.

1. Pay off high-interest debt

Handing cashier credit card
Handing cashier credit card

Has a high-interest credit card balance been a thorn in your side? Resist temptation to book a vacation with your refund and tackle that debt instead. Start with debts with the highest interest rates; eliminating these will save you the most money in the long run. If you don't have any credit card debt, use your tax refund to reduce your car or student loan debt.

2. Up your 401(k) contributions

Couple sitting down
Couple sitting down

Put your tax refund toward everyday expenses, while increasing your 401(k) contributions. If you're only putting in 3% of your paycheck, but your company matches up to 6%, you can double the pre-tax income you're investing to maximize retirement funds.

Your paychecks will be slightly lower but you can use your refund to make up the difference while investing in your retirement and lowering your taxable income.

3. Increase a home down payment or resale value

Senior couple sitting on porch
Senior couple sitting on porch

If you've been saving for a home, use your refund to increase your down payment to avoid costly private mortgage insurance payments and also to reduce the overall amount of your mortgage.

If you already own your home and have been waiting to replace a leaky pipe or start a much-needed home improvement project, getting a tax refund might be a good time to make your home more functional while increasing its resale value.

4. Make an investment

Woman working in home office
Woman working in home office

Perhaps you want to invest in real estate, a tech start-up or a stock you believe is about to soar, but you've been waiting for a little extra cushion of cash. If you've done your research and are itching to take a calculated risk, utilize your tax refund before dipping into your checking or savings accounts.

5. Make investments that save time and money

Dinner in bed
Dinner in bed

Dedicate part of your tax refund to a product or service that can save you time, money or a combination of the two. An example is finding a meal delivery service that's cheaper than grocery shopping and can help make serving dinner quicker and easier on you during your busy workweek.

6. Open a credit card account with benefits

Couple taking selfie at beach
Couple taking selfie at beach

As long as you're debt free and pay off your credit card balances every month, you might want to invest in a card with desirable perks, especially if your current credit cards don't offer any benefits.

Some cards may require an annual fee, but they often offer substantial travel and lifestyle rewards. The right credit card should save you more than—or provide services that far exceed—the cost of maintaining the account.

7. Give a tax-free annual gift

Buying raffle ticket
Buying raffle ticket

If you have a well-established financial portfolio and are near retirement age, you may want to consider gifting excess funds, such as a large refund, every year. The IRS sets an annual limit ($15,000 per recipient, as of 2019) on the gifts individuals are able to transfer to others, including family members, without filing a gift tax return.

Subscribe to the Turbo Tips podcast on Apple Podcasts, Spotify and iHeartRadio for more tax tips in 5 minutes or less!

Brought to you by TurboTax.com

Your resource on tax filing
Tax season is here! Check out the Tax Center on AOL Finance for all the tips and tools you need to maximize your return.
Filing Your Taxes Late
What do you do if you can't meet the IRS filing deadline? Learn more about filing a tax extension, late payment and late filing penalties, and what to do if you can't pay your taxes.
Read MoreBrought to you byTurboTax.com
How to File an Amended Tax Return with the IRS
Did you make a mistake on your tax return or realize you missed out on a valuable tax deduction or credit? You can file an amended tax return to make the correction. Filing an amended tax return with the IRS is a straightforward process. This article includes step-by-step instructions for when and how to amend your tax return using Form 1040-X.
Read MoreBrought to you byTurboTax.com
Taxes 2021: 7 Upcoming Tax Law Changes
Tax Year 2021 will likely bring some surprises, but some of its changes are already planned. Here's what you need to know about some of the planned phase-outs, changes and inflation adjustments the IRS will present for taxes in 2021.
Read MoreBrought to you byTurboTax.com
Ways to Increase Your Tax Refund You Never Thought About
Laying the groundwork for a tax refund requires some simple tax planning, a little research and some forethought. Reviewing your tax status, consulting your spouse when filling out your W-4s and taking advantage of several tax credits can help you increase your tax refund. TurboTax also can help decide which credits can get you the biggest refund.
Read MoreBrought to you byTurboTax.com