Christian Financial Planning, Budgeting & Investing

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4 Ways to Make the Most of Your Tax Refund

  • Steve Smith CEO of Finicity
  • Updated Feb 05, 2024
4 Ways to Make the Most of Your Tax Refund

Tax season is upon us once again, and whether you embrace the chance to claim a few extra dollars, or would rather hide under a rock to avoid the process altogether, it’s inevitable. But once you make it through the grueling task of the filing process, the grass is typically greener on the other side. In fact last year, the average federal tax refund was $2,700.

According to TurboTax, the best-selling tax software, only 16% of its customers surveyed last year said they used their refunds to splurge on vacations or shopping. Nearly 50% used their refund to pay bills or catch up on paying down debt and 17% used the money from their tax refund to save. While many choose a healthy combination of the three, what’s actually the best way to make the most of your tax refund?

Give and It Will Be Given Unto You

Mark 12 demonstrates what Biblical giving should look like through the story of the widow’s offering. Giving out of poverty—or at least feeling like you’re being stretched a bit—can enable a true trust in God to provide for your needs.

Mark 12:41-44: Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. But a poor widow came and put in two very small copper coins, worth only a few cents. Calling his disciples to him, Jesus said, “Truly I tell you, this poor widow has put more into the treasury than all the others. They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on.”

After receiving your tax refund in the mail, it’s tempting to be concerned about future bills, but God will continue to provide and remain faithful in the same way He has throughout the past year. Take a leap of faith and vow to give away some of your tax return, and you will be blessed in return.

Luke 6:38: “Give, and it will be given to you. A good measure, pressed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you.”

Provide and Invest in Your Family

There is not better investment than in the future of your extended and immediate family. In fact, in 1 Timothy 5:8 God calls us to provide for our relatives, and especially for our own household. While “providing” is a relative term, as most people who are receiving tax refunds have their basic needs met, perhaps it’s time to use your extra cash to make investments in the future.

Jumpstart an investment in your children’s college education with part of your tax refund. Every state offers a “529 plan,” an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. Some states even offer breaks on next year’s taxes if you invest in a 529 plan this year.

Outside of a college education, what other ways can you invest in your family? Little gestures can go a long way in letting your family know you love and care about them. A tax refund may provide the means you need to take your husband or wife out on a date, take a small family vacation or spend a weekend road-tripping to see extended family living a few hours away. While these might seem like small gestures now, time well spent with family means you are investing in your family’s future.

Pay off Debt

Using your tax refund to pay of debt can help you save large amounts of money, of course depending on the amount you currently owe. The interest on some house and car loans might seem minimal now, but paying your loans off early can save you hundreds—or even thousands—of dollars in interest the bank would have collected. And more aggressive debt, such as unpaid credit card bills, should be paid immediately to avoid paying high interest fees. According to, the average interest rate on credit cards so far in 2013 is nearly 15%, a rate that has the potential to eat away future dollars and destroy your credit rate if you are unable to pay your bills on time. Consider using your tax refund to jumpstart paying credit card debt, or even house and car loans.

Save or Invest Strategically

June 2011 research with Financial Advisors, conducted by Harris Interactive on behalf of the Principal Financial Group, revealed that “individuals need to save approximately 15 percent of their pay, including employer contributions (if applicable), to have enough income during retirement.” But don’t feel limited to a basic bank account when looking ahead towards retirement. While every day life may leave you feeling the need to stash money in an easily accessible place for emergencies, vacations, house renovations and rainy day fun, your money will actually grow more if it “lives” somewhere else. Considering buying old-fashioned saving bonds or investing in a traditional IRA or Roth IRA. The American Tax and Financial Center reveled that only 1% of TurboTax customers in 2012 planned to use their refunds to fund an Individual Retirement Account or Roth IRA, although these funds are an easy way to grow your retirement portfolio and strategically invest in your future.

Making the most of your refund happens when you plan ahead, and decide where you see the greatest need for your money—and this might vary from year to year. Perhaps it’s simplly not feasible to give away part of your tax refund this year, but with proper planning in 2013, you can make giving a part of your tax refund spending in 2014. But in all cases we’re called not to worry, and to trust in God to be our ultimate provider. 

Matthew 6:31-34: “So do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ For the pagans run after all these things, and your heavenly Father knows that you need them. But seek first his kingdom and his righteousness, and all these things will be given to you as well. Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own.”

Steve Smith is the Chief Executive Officer of Mvelopes and Money4Life Coaching, as well as, the Author of Money for Life: Successful Money Management and Financial Fitness in Just 12 Weeks! and the Money for Life Success Planner: A 12-Week Companion to Achieve Financial Fitness. He has strong strategic and tactical business skills and combines them with a passion to develop products and services that make a positive difference in people’s lives.

Photo credit: ©Getty Images/Photography by Phillip Rubino

Publication date: April 15, 2013