What to Do With Your Tax Refund

1. Pay Off Debt

Paying down debt is one of the most impactful ways to use your tax refund. How can you boost your finances by paying off debt? Let us count the ways:

• Save money on interest charges. A lower credit card balance reduces what you'll pay in interest, saving you money.
• Kick off a long-term debt payoff strategy. Tackle your debt systematically once and for all, giving yourself a quick boost with one large payment.
• Lower your monthly credit card payment. A lower balance means a lower minimum monthly payment. If your refund is big enough, you may even eliminate a payment altogether.
• Improve your credit score. Lowering your credit utilization, or the amount of credit you're using compared to your total credit limits, can help raise your credit score.
• Free up available credit so you have it in an emergency. While credit cards are not a substitute for emergency savings, they're handy when you need to cover an urgent care visit or surprise home repair. Keeping your balance low gives you the cushion you want when you need to pay for something now.

Learn more: How Your Tax Refund Could Improve Your Credit Score

2. Add to Your Emergency Fund

Make sure your emergency fund is in fighting shape. If you've neglected it, raided it or failed to designate funds for it, now could be the time to give your emergency savings the cash infusion it needs.

Consider opening a high-yield savings account or money market account online to house your funds. High-yield savings accounts offer higher rates than traditional savings accounts. Money market accounts also typically pay higher interest rates than regular savings and let you write checks or make debit transactions when you need money in a pinch.

3. Save for Big Goals

In addition to having emergency savings, you may want to create a sinking fund to save toward specific goals like paying for this summer's vacation or putting a down payment on a car or house. Your tax refund might be large enough to get you a long way—or even all the way—toward your savings goal.

A few tips to remember:

• Use a high-interest savings account. Earning a higher interest rate helps you reach your savings goals faster.
• Automate your savings. Having a set amount transferred to savings with every paycheck guarantees consistent savings.
• Keep funds separate. You can open different accounts for each goal: There's no limit to how many savings accounts you can have.

4. Contribute to a Retirement Plan

Contributing to a tax-advantaged retirement account is an excellent use of your tax refund. In 2025, you can contribute up to $7,000 to a traditional or Roth IRA; $8,000 if you're age 50 or older. The contribution limit for 401(k) plans is $23,500, with catch-up contributions of $7,500 for people ages 50 and older, and super catch-up contributions of $11,250 for people ages 60 to 63.

If you meet IRS income requirements and don't need an additional tax deduction, you may want to consider contributing to a Roth IRA or Roth 401(k). Although you can't deduct your contributions to a Roth account—as you can with a traditional IRA or 401(k) contribution—money in a Roth grows tax-free and offers tax-free withdrawals in retirement. The money you contribute to a Roth can be withdrawn at any time without penalty as well, making it a bit more flexible than a traditional retirement account.

Learn more: How to Open an IRA in 4 Easy Steps

5. Fund Major Improvements

Using your tax refund to repair or improve your home could be a smart investment in your home's value—and livability. Postponing needed repairs and maintenance often leads to bigger and costlier problems down the road. Meanwhile, spending on some home improvements (like kitchen upgrades and hardwood flooring) may add to your home's value in the long run.

A similar principle applies to your vehicle. If you've been deferring maintenance, use your refund money to keep your car in good running order. You'll save money on repairs over the long haul.

6. Invest It

Use your tax refund to try your hand at investing. A taxable brokerage account allows you to buy and sell individual stocks, mutual funds and exchange-traded funds (ETFs), bonds and bond funds, and more. Although investment returns aren't guaranteed, adding investments can help you diversify your portfolio and grow your money.

Smart investing requires some basic know-how, but many brokerages offer information on how to invest, access to advisors and robo-advisors that automate your investment choices.

Learn more: How to Start Investing

7. Invest in Yourself

Don't overspend on yourself but do consider investing in experiences that pay dividends in terms of your quality of life. Here are a few examples:

• Well-being: Buy yourself some good running shoes or sign up for fitness classes. Get dental work done, pick out a new pair of glasses or catch up on medical tests and procedures you've been putting off.
• Education: Polish up your career skills, study a new language or take up a hobby you've always wanted to explore.
• Fun: If you feel disconnected from your real-life social network and activities you enjoy, host a dinner out with your mates or take an overnight trip to a favorite getaway spot.

8. Donate to a Good Cause

Donating to a favorite charity (or charities) with your refund money offers benefits that casual giving may not:

• Make a substantial donation. You aren't limited by the cash you have on hand or "extra" money in your monthly budget when you make a donation using refund money.
• Choose a charity intentionally. Instead of reacting to an endless stream of solicitations, find out which organizations are doing good work that speaks to your values and priorities.
• Get a tax deduction. If you itemize deductions and choose an IRS-recognized charity, your donation may be deductible on your current-year taxes.

Frequently Asked Questions

The Bottom Line

Before you earmark your tax refund, you'll need a place to hold it. The fastest and safest way to receive your tax refund is through IRS direct deposit to a bank account. If you don't have a checking account, consider the Experian Smart Money^™ Digital Checking Account & Debit Card, which can help you build credit without debt by linking to Experian Boost^®ø. Start building credit with eligible bill payments after three months of payments. See terms at experian.com/legal.

​​Finally, a big tax refund may be a sign that you should consider adjusting your withholding (or estimated tax payments if you're self-employed). A tax refund isn't a prize; it's money you overpaid to the government throughout the year.

On the other hand, getting a tax refund provides you with an annual opportunity to do something meaningful: pay down debt, amass savings, contribute to retirement, donate to a good cause or even splurge on something you needed but couldn't afford in the past year. While the money itself isn't a gift, the opportunity to do something significant with it certainly is. Enjoy!