Turn Your Tax Refund into an Investment

Turn Your Tax Refund into an Investment

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How did your taxes turn out this year? If you haven’t finished them yet, you have until April 18th to file them! Brian and I wrapped up our taxes a few weeks ago. It’s a nice weight off our shoulders, especially since we don’t owe any this year. We have a few ideas on how to use our refund, but haven’t quite pulled the trigger on divvying it up yet.

Will you be receiving a tax refund? If so, here are some ways you can turn your refund into an investment and make your money work for you.

Individual Retirement

Stash your cash for the long-term. Invest in a Roth IRA, Traditional IRA, or HSA. Use your tax refund to purchase stocks, bonds, or even mutual funds.

College Savings

Open a 529 College Savings Plan for your child. If you already have one, then consider contributing a portion (or all) of your refund to this tax-advantaged account. Alternatively, you can save for college through an individual brokerage account, a Roth IRA, or real estate.

Certificate of Deposit

A Certificate of Deposit (CD) earns a higher interest rate than a savings account, but the caveat is that the deposit must remain untouched for a predetermined length of time.

High Yield Savings Account

If you haven’t hopped on the HYSA train yet, tax refund time is the perfect time to do so! A High Yield Savings Account ensures liquidity while earning a high interest rate. It can be a great place to park your emergency fund and other short-term savings for big purchases.

Home Improvement

Have you been looking to add a valuable update to your home? Your tax refund can offset or even cover the cost of an upgrade. Consider making improvements that will offer the best return on the cost of the project.


Apply your refund towards the cost of a certification or course to advance your career. Or, if you are a business owner, make an investment in something that will increase your productivity and earning potential.

Rental Property Down Payment

Boost your down payment for a new rental property using your tax refund. Real estate is an excellent long-term investment option. Buying a rental property can generate passive income and eventually build long-term wealth.

Series I Savings Bonds

Series I Savings Bonds are issued by the United States Government and are designed to protect against inflation. They earn monthly interest with both a fixed rate and a variable rate that changes every 6 months with inflation. The current inflation rate of 6.89% applies to savings bonds issued through April 30, 2023.

The money cannot be touched for at least one year. If the bonds are cashed under 5 years, then you would lose the last 3 months of interest.

You can purchase up to $10,000 worth of Series I Bonds each year electronically through the TreasuryDirect website. Additionally, you can also purchase up to $5,000 worth of paper I Bonds with your tax refund directly, although you must do so when filing taxes.

Open a Rewards Credit Card

A credit card as an investment? I know that might seem strange to some, but I believe that a credit card can definitely serve as an investment, depending on your discipline and interests. A rewards credit card can actually “pay you back” for its use. For example, our Chase Sapphire Reserve helps us earn reward points and great benefits that offset the cost of travel.

Oftentimes, reward credit cards will offer sign-up bonuses, such as cash back rewards, points, or miles. These rewards serve as an incentive for reaching spending minimums once a credit card is opened.

Use your tax refund to meet the spending requirements for your sign-up bonus or even the credit card’s annual fee.

Should You Invest Your Tax Refund?

Before you choose to invest your tax refund, it’s a good idea to determine if it can be applied more effectively elsewhere. It’s important to ensure financial stability before experimenting with investments.

Can you comfortably afford your essentials? Do you have enough cash stashed away for unexpected expenses? Consider the following points:

  • Unpaid bills
  • Important home or vehicle maintenance/repairs
  • High interest debt
  • Emergency fund
  • Proper insurance coverage

Covering these bases first creates more financial flexibility. With the essentials taken care of, there is more freedom to invest your tax refund and have your money work for you.

Will you turn your tax refund into an investment this year?

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