Housing Counselor’s Corner: Making Your Tax Refund Work for You

With 2020 moving along and April quickly approaching, it’s time to start thinking about filing your taxes and how you’re going to use your tax refund. In 2019, the average tax refund in Virginia was $3,073. For many community members that earn the child tax credit and the earned income credit (EITC), your tax refund could be much higher! It is easy to see your tax refund as a time to splurge on yourself and your loved ones. However, your tax refund is a great time to invest in your personal financial goals. Here are five things you could do with your tax refund this year:

• Catch up on bills. Your tax refund can be a great way to pay off or pay down debt. This can be a great time to negotiate a one-time lump sum payment to debt collectors; pay off past due debt; or, pay down credit cards. Not sure how to negotiate with debt collectors? Check out this website or set up a meeting with one of Piedmont Housing Alliances Housing Counselors.

• Save for emergencies. We all know that emergencies come up. Your car may need expensive repair, your hours may get cut back or you may need to take an unexpected trip to the doctors. It is recommended that you have three to six months of living expenses set aside. For most people, that’s easy to say and hard to do. If that’s not possible, set something aside. Anything is better than nothing and when that emergency comes up you’ll be glad you set something aside. 

• Save for long term financial goals like buying a home, a car or retirement. For most people, it takes time to save up enough money to purchase a home, save up for a car or fund their retirement account. Use your tax refund as a way to speed up that timeline.

• Create educational savings account for your children and grandchildren. You have goals for the children in your life and you want to set them up for success in the future. Consider a Virginia 529 plan as a way to help them attend college or university in the future.

• Save for occasional expenses like summer activities, vacations, holidays and birthdays. Not sure how much you’ll need to save for things like summer activities for the children in your life, vacations, holidays and birthdays? Take a look at what you spent last year or sit down and figure out what you want to spend this year. Create a spending and savings plan for occasional expenses. Not sure how to create a reasonable spending and savings plan? Reach out to your local housing counseling team at Piedmont Housing Alliance. 

Not sure how you’re going to file your taxes this year? The United Way offers free tax preparation for community members making less than $55,000/year. Check out this website for more details.