8 ways to put your tax refund back into your home

This year, invest your tax return in your home for some long-term returns.

 

It's tax time again and 66.2% of Americans are expecting a refund. After a year of scrimping, cutting back, and generally worrying about the economy, it's tempting to blow your refund on a vacation or some new toys.

 

As well deserved as a satisfying round of impulse spending might be, think about investing the money in your home instead. Putting your refund into your house will add long-term value to your residence and will likely save you money on expenses in the short and long term.

 

When you think about it, a tax refund isn't really the windfall that it seems anyway. Not to be a downer, but unless it's due to deductions, your refund is actually an interest free loan from you to Uncle Sam as a result of withholding too much on each paycheck. Seeing as it isn't really "free" money, you might as well not treat it like "mad money" and use it to help achieve some long-term goals.

 

Read on for a few suggestions on how to reinvest your tax return into your home.

1.) General remodeling projects

 

You will enjoy the results and some renovations actually give you as much as an 80% return on your investment when you sell your home. Even it doesn't pay off 100%, the home upgrade will improve your day-to-day life.

 

2.) Work on your curb appeal

 

Improve the outside appearance of your house with landscaping, a new coat of paint, or a new fence. Even if your return is low, you can at least afford to have a power washing company clean up the outside of your house.

 

3.) Fix up a bathroom

 

You can approach this project from many different levels. Do as many of the following as you can afford: paint, replace the floor, regrout the shower, trade out old faucets and toilets for water efficient models, and/or replace the vanity.

 

4.) Change out windows

 

New windows will add a modern look to your home and they will help with energy conservation. They add to the value of your house and cut down on cooling and heating costs.

 

5.) Install a new HVAC system

 

Unlike new window units, a new HVAC system would be counted in your adjusted basis, meaning that it adds to the permanent value of your home. Also, it will make your house more comfortable and cut down on energy bills. Have cash left over? Invest it in new insulation to help the HVAC do its job.

 

6.) Start an emergency fund for your house

 

If you don't already have one -- and you really should -- this is a great way start one. Your refund amount may not be enough to cover a real emergency, but it's a good start if the water heater breaks, your roof starts leaking, or you lose your job and need extra cash for mortgage payments.

 

7.) Prepay your mortgage

 

Take your whole refund and send it directly to your lender. You'll own your house sooner than expected and pay less interest over the course of the loan. Make one extra payment per year and you can pay your 30-year mortgage in just 22 years.

8.) Refinance your mortgage

 

If you are eligible, your refund will take the sting out of the cost of refinancing your mortgage and you won't have to think as hard about whether or not you'll be breaking even with the financing charges.

 

While these are all great ideas for what to do with a tax refund, the best idea is to adjust your withholding so that the government doesn't hold on to so much of your money next year! You won't have a windfall at the end of the year, but you'll taking home more every month that you can at least put in the bank and get some return on. 

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