Maximizing Your Tax Refund: Smart Ways to Use Your Refund This Year

For most people, the prospect of filing taxes is less than exciting. But just remember—the sooner you file your taxes, the sooner you may see a tax refund in your mailbox! The average tax refund last year was around $3,000, with over 100 million Americans receiving a refund. But no matter the size of your tax refund, it’s important to spend it smartly. Read on for five ideas on how to maximize your tax refund in 2025. 

Pay Off High-Interest Debt 

If you’re living with high-interest debt, usually the result of credit card spending, pay off as much of this debt as possible before doing anything else. High-interest debt becomes more and more expensive every month you don’t pay it off; and meanwhile, the negative impact on your credit score makes it difficult to secure the best and least expensive financial products. Just remember: credit card debt is different to mortgage debt, and you don’t want it hanging around. So, before you do anything else, use your tax refund to tackle high-interest debt.  

Max Out Retirement Funds 

Opting to put your tax refund into a savings account is a smart idea—but what’s even smarter is using that money to max out your retirement savings. If you already have an Individual Retirement Account (IRA), make sure you’ve put in the maximum funds for last year and this year. Remember: IRA funds are tax-advantaged, so you’re both saving for the future and saving money. Some employers also offer matching funds when employees put their own cash into a workplace fund, such as a 401(k), so be sure to check with your employer about any such opportunities.  

Buy Now, Save Later 

Going on a shopping spree is rarely the best way to spend a tax refund. However, it may be smart to consider any purchases wherein spending money now could save you a chunk of money in the future. Car repairs or home repairs are a good example, so if you’ve been putting off a brake replacement or plumbing issue—that could be a smart use for your tax refund. In addition, it’s worthwhile to consider cost savings measures such as energy-efficient window replacement or even solar panels, to lower your energy bills in the future.  

Determine Your Risk Profile and Invest 

Investments help you build wealth, so that your savings don’t lose value in the future. If you’ve paid off high interest debt and feel secure in your current savings accounts, plus you’ve already maxed out all retirement accounts, it could be time to consider investing. Harvard FCU members can take advantage of personalized investment services, including a free consultation with a CFS financial advisor. For investors looking for a short term, lower-risk option, Harvard FCU also offers Term Share Certificates (also known as CDs) with higher interest rates and a variety of terms, depending on how long you’re looking to commit your funds.  

Kick Start a New Savings Account 

Receiving a tax refund could be a sign that it’s time to start a new savings account. Maybe you want to save up for a vacation, plan ahead for holiday shopping, start a college fund or start an emergency fund. Either way, designating a new account and funding it with your tax refund can be a good way to formally kick start your new savings goal. Always choose an account that offers security and convenience, and look for a good interest rate so your money will grow even as it remains accessible. You might check out Harvard FCU’s Money Market Accounts, while offer tiered interest rates that increase with the balance of the account.