What To Do with Your Tax Refund

That long-awaited Maryland or federal income-tax refund is finally in your hands, or direct deposited into your checking or savings. The Internal Revenue Service says that by early February 2025 it had already processed 23 million refunds. IRS says mailed refund checks during this period averaged $2,165.

As you start to think about what to do with that rebate of a portion of your hard-earned pay, temptation sets in. Maybe a trip to the casino? A sparkling night out on the town? Splurging on new clothes or big-screen TV? Pay off debts? Invest in a white-hot stock?

At Securityplus Federal Credit Union we would love to help you make the most of your tax windfall.

We are here to help you explore some profitable options to consider not only for this year’s income-tax rebate, but for tax seasons to come.

• Build your emergency fund – Financial advisers recommend a fund totaling at least six months’ worth of household expenses – mortgage or rent; food; utilities; transportation, among your other regular monthly outlays. They add up fast. Stashing all or part of that refund into a savings account or short-term certificate of deposit, and then contributing to them regularly, is a good idea. Taxpayers using direct deposit can allocate their refund into multiple accounts using IRS form 8888, which offers flexibility in financial planning.

• Buy a home – Earmarking your refund for a home down payment can speed the path to obtaining mortgage financing for one of your biggest personal investments.1 The larger your initial stake the less you have to borrow, meaning lower monthly mortgage payments. That stake, plus your credit history, also could mean a better mortgage rate.

• Purchase a new car – Like a home, earmarking your refund to purchase a new or used vehicle can pay dividends, especially if you need an auto loan to seal your deal.¹ A down payment lowers the borrowed sum, saving you on principal and interest. A higher down payment also may help borrowers with less than stellar credit to qualify for a loan to buy or refinance.

• Pay down debt – The reasons for reducing the amount of debt you owe are obvious: More flexibility in putting your money to work; an improved credit score; greater peace of mind. You could apply all or part of your refund to pay off a high-interest credit card, or reduce or retire the balance of an credit card or personal loan.

• Open or increase your Health Savings Account – Tax-deductible, lump sum payments into an HSA Savings Account are permitted, within legal limits.² Offered through banks, credit unions, insurers and other approved issuers, HSA accounts enable users to manage their healthcare outlays in conjunction with their employer-sponsored healthcare coverage.

• Save for retirement – Your refund is today’s money. An Individual Retirement Account (IRA), Certificates of Deposit (CD), or other savings plan from Securityplus Federal Credit Union can grow those funds into a retirement nest egg that ensures your financial security well into your Golden Years.

• Start an education fund – Opening an education savings account is a great way for young families to begin financial planning for their children’s education – college, kindergarten through Grade 12, and apprenticeships. 529 savings plans and other qualified education savings accounts allow tax-free withdrawals for eligible education expenses such as tuition, for your designated beneficiary.

• Donate to your favorite charity – Financial support for your Maryland community’s nonprofit service and support organizations never goes out of style. Sharing your refund with groups is uplifting for you and your neighbors who rely regularly on that support. Your donation, too, may be deductible if you itemize your state and federal income taxes. Ensure the charity is a registered 501(c)(3) nonprofit organization for your donation to qualify for tax deductions.

Contact Securityplus Federal Credit Union and let our financial advisers assist you with exploring which of our financial products and services can help you make the most of your income-tax refund.