More than 40 million Americans have already received good news — not only have they cleared their debts with the taxman but they are about to get a fairly sizable 2013 tax refund check.
1. Buy health insurance.
So taxpayers signing up for private insurance plans may want to use the extra cash to pay for some of their health insurance costs this year, says Lisa Greene-Lewis, a certified public accountant at TurboTax.
(MORE: 7 Ways to Avoid an IRS Audit)
Taxpayers could also hold on to the money to pay for deductibles, or the amount consumers need to pay on doctors visits, prescriptions and other services before their full insurance kicks in.
2. Buy a gift card.
Consumers can also use their refunds to find discounts or bonuses on gift cards from other retailers. As MarketWatch’s Charles Passy recently reported, people can find discounts of 10 percent to 20 percent on gift cards for AMC Theatres and Regal Cinemas on Gift Card Granny, a site where people can buy and sell gift cards.
3. Take a class.
Parents of students may be able to claim the Lifetime Learning Credit, which maxes out at $2,000, even if the person taking the class isn’t working toward a degree.
Not ready to sign up for a course just yet? Put the money in a 529 savings plan for your children, says Greene-Lewis.
Workers should also check with their bosses about how much a class or certification might help their career before they go to the expense. Some credentials are costly and may not provide an immediate benefit, career coaches warn.
4. Prepay your bills.
But it can also make good financial sense when the expense — say, buying new tires or brakes for the car — can lead to lower spending down the line, he adds. “That way you can keep the car longer,” he says.
Spending the cash on home improvements could also help maintain, if not lift, the home’s property value. “You never lose money by investing in your home,” says Steber. And people who make changes to make their homes more energy-efficient may qualify for a tax break.
It can also be a reward for paying down debt and other expenses, he says.
“If you’re taking care of your home and your family and some of your other liabilities, splurge a little bit on yourself,” he says. But be aware, Steber cautions: Some taxpayers may end up losing money in the long run if they spend the cash instead of using it to pay down debt, since interest will continue to pile up.
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