Now that the tax filing deadlines are officially behind us, a good portion of you will be getting a nice refund from the tax man! Now, before you go blowing it on the latest gadget or on a weekend getaway, it’s important to remember that this isn’t free money and it really is just a refund of the overpayment of taxes you made throughout the year. Considering it comes in the form of a lump sum, there are many opportunities to invest that money which can benefit you on an annual basis. Today we are going to make a list of the prudent potential uses for that hard earned tax refund, from your friendly local real estate professional’s perspective☺
A lump sum tax refund can be a great head start towards saving for your next down payment.
Have you deferred a renovation because cash flow has been tight? With your tax refund in hand, now could be the time to address some of those outstanding issues.
Thinking about adding a bathroom or changing some flooring? Having some freed up cash to complete these tasks will not only make your further enjoy your home but increase its resale value.
Without delving into people’s personal financial situations, paying off debt is never a bad option whenever you have a cash windfall. It gives you a guaranteed return on investment (ie. interest costs saved). If you have any outstanding non-mortgage debt (credit cards, car loans, lines of credit) I would recommend you start with those as they are typically at the highest interest rate. Once those are taken care of, I would move to the mortgage on the principle residence. Lastly, I would pay down the mortgage on the income properties because of the tax deductibility of interest (as opposed to the principle residence mortgage debt).
So there you have it readers. What do you normally do with your tax refund?
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