How will you spend your tax refund? We've got some ideas
This year, due to the Making Work Pay Tax Credit and other tax breaks, nearly 90% of Americans may receive refunds. Early data indicates that those refunds will be even bigger at an average $3,036, up more than 10% from last year.
If you're one of the lucky many to receive a refund, your first reaction may be to run out and buy something fun ... the first on your block to own the iPad? A new pair of Jimmy Choo shoes, perhaps?
But that doesn't appear to be the trend. Apparently, splurges are so last year. For 2010, most taxpayers appear to be using their refunds for more practical purposes, like paying down debt. Just ask freelance journalist P. Kim Bui. She intends to use her refund to pay off existing credit card debt. But she's not going to be completely practical. She's splurging on a tattoo, as well. "But mostly credit cards," she says.
Patricia Hansley, a mother of four, is already using her refund to pay off a few bills. The remainder, she says, will be put into savings "for helping with more bills later if we need it." Consultant Jennifer Cranford Walker has her refund earmarked for medical bills, while sales associate Ann Hurd is also paying off bills -- and buying new tires.
Another practical way to spend your refund: to pay off next year's taxes -- that's what my family used our rare tax refund (we always owe) last year to do. Elder law attorney Robert Slutsky plans to roll his refund into his first quarter estimated payments next year. Animal rights activist Sally Andersen and tax preparer John "Urbie" Kafalas both intend to put their refunds toward local taxes.
Also popular this year: Fixing up the house -- a good investment if you ever plan to sell. Newlywed Liz Majewksi plans to use her refund to renovate her home, adding, "Although we didn't qualify for the first-time homebuyer's tax credit, since we purchased it from my mother, every dollar is going into the house." Smart thinking. Quality Assurance Auditor Suzanne Olah plans to use her refund for a bathroom or kitchen remodel. Attorney Rebecca Reinhart is going one step further and buying new windows for her house -- for even more tax savings next year. And not surprisingly, the environmentally-friendly bGreen tweeted that they'll "be spending some of [their] tax refund on remodeling & greening [their] own homes rather than [their] customers' homes."
Some refund recipients are getting even more creative. California CPA Karen Cloonan Cassidy is using her refund to help pay for the cost of adopting two older children in Ethiopia. The mother of two understands a refund won't cover it all. She says that "it'll be a drop in the bucket, but every little bit helps." Hopefully, she'll get a little extra help next tax season.
Of course, not everyone is getting a refund this year. When asked about a refund, patent attorney Steve O'Donnell was in disbelief. He tweeted, "Refund? I'm gonna have to sell one of the kids to pay my bill this year."
If you are one of the majority of Americans getting a refund (unlike Steve) and haven't yet seen it, you can use the IRS online tool to track the status. Just visit the IRS Web site with your Social Security number, filing status and the amount of your refund. You can check on the status of your refund 72 hours after you e-file. If you filed a paper return, you'll need to wait at least three weeks before you check.
Want to let us know what you're doing with your refund this year? Participate in our poll or tell us exactly how you plan to save or splurge in the comments. Even better: do both!