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Check out these ways to put the money from the average federal tax refund into use.
Take note of these ways to use your money from the average federal tax refund to good use. (Photo: CNBC)
What To Do With Your Average Federal Tax Refund
The average federal tax refund is over $3,000, with many tax filers receiving refunds from both the federal and state governments.
Instead of squandering this money from the average federal tax refund, consider using it to pay off high-rate debt or start an emergency fund.
Consider using your average federal tax refund to prioritize paying off high-rate debt and building up your emergency savings.
Making extra payments on your high-rate mortgage can save you money in the long run by reducing the amount of interest you pay on your principal.
According to a published article by SmartNews, investing in a Roth IRA allows your money from the average federal tax refund to grow untaxed until retirement, with tax-free and penalty-free withdrawals after age 59-1/2.
Contribute enough to your 401(k) to get the full employer match, as this can maximize your retirement savings.
What Are Tax Refunds?
In a published article by Time Magazine, tax refunds are given to taxpayers who have overpaid their income taxes.
The amount of refund you receive can be affected by how much is withheld from your paychecks, which is determined by the information you provide on your Form W-4.
Major life changes like marriage or divorce should prompt you to update your W-4. The average tax refund in 2023 was $2,753. The average refunds in the last five years have ranged from $2,729 to $3,012.
Wyoming had the highest average refund in 2020 at $4,877, while Maine had the smallest at $2,920. High-income taxpayers in the $500,000 to $999,999 bracket received the biggest refunds in terms of the total amount.
While low-income taxpayers in the $10,000 to $24,999 bracket received the biggest refunds as a percentage of their income.
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