7 Ways to Use Your Tax Refund
From investing in your education to catching up on bills, Fifth Third highlights 7 smart ways to use your tax refund this year.
Have you received your tax return yet? Now that the April 15 deadline has passed, if you’ve submitted your return, you’re likely eagerly waiting for your refund to land in your bank account. As of March 2025, the IRS has issued $145.06 billion to the nearly 44 million Americans who sent in their returns for processing. That’s an average return of $3,324 per person—about 6% more than it was last year. Not bad!
However, due to a variety of factors, it’s difficult for the government to deduct the exact right amount throughout the year. Marginal tax rates and brackets may change, for instance. Your earnings throughout the year may rise or fall, or there may be new ways to reduce your tax burden for the year, like if you have a child or qualify for other credits.
Therefore, if you end up paying more than your fair share over the year, the government will give you some of your money back. That’s your tax refund.
Instead of splurging on a lavish vacation or shopping spree, there are several ways to make that money work harder for you—and last longer.
Whether you’re looking to pay down debt, save for the future, or fund a personal goal, here’s how to spend tax refunds to improve your financial situation.
- Pay Down Debt
Use your refund to tackle high-interest debts, like credit cards or student loans. Not only will this lighten your monthly burden, but it could also improve your credit score.
- Save for Emergencies
Treat your refund as a bonus and set it aside in an emergency fund, which is specifically meant to cover unexpected expenses. Whether it’s a surprise car repair or an emergency medical bill, this safety net could be a lifesaver. You can also stash the money in a savings account where it can earn interest until you need it.
- Invest In Your Future
Put your refund to work by funding a goal like retirement. Retirement is often the biggest expense people face, so any savings now will pay dividends later. Or focus on a shorter-term goal by investing in a certificate of deposit (CD), which has the potential to grow in value over time.
- Supplement Your Budget
If you’ve been struggling to keep up with essential monthly expenses, your refund can help ease the pressure. One way to do that is to divide the refund by 12 (for each month of the year) and add that amount to your budget. For example, if you were to receive the current refund average of $3,324, you could allocate $277 a month toward your expenses for the next year. This could help offset rising costs due to inflation on such things as groceries or other household bills.
- Invest In Your Education
Want to level up your career or learn something new? Use your refund to pay for certain courses, certifications, or workshops—whether it’s an online program or an in-person class at your local community college. This investment in yourself could lead to new career opportunities or even a fun, profitable side hustle.
- Make Upgrades to Your Home
A large tax refund could be the perfect excuse to boost your home’s curb appeal or tackle a home improvement project. To start, create a budget for your home improvement project—and stick to it to avoid overspending. If your project’s cost exceeds your refund, consider pairing it with a home equity loan or line of credit.
- Treat yourself
Assess your current financial situation—are your bills paid and savings on track? If so, feel free to use your tax refund on a short-term goal. Take a much-needed vacation, go to a concert with your friends, or do a little maintenance on your car (which will save you money on upkeep down the line).
Once you decide how to use your tax refund, the key is to make it work for you and your goals. Whether you’re paying down debt, building savings, or treating yourself to something special, a little thoughtfulness now can lead to big benefits down the road.
Two Things to Do
- Get your refund up to five days sooner utilizing Early Pay – a featured benefit of the Fifth Third Momentum®Checking account.
- Discover more tips and tools for tax season in Fifth Third’s Tax Resource Center.