Personal Resource Center

5 Smart Ways to Use Your Tax Refund

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While a large tax refund is good news, it's also a sign you may be having too much money withheld from your paycheck each week.

1. Catch up on your bills

Paying your bills should be your first priority. If you're behind on any payments or know that a major expense is on the horizon, your refund should go toward settling that up before devoting it to anything else. That's because racking up debt or missing payments can not only lead to late fees and interest charges, it can also negatively impact your credit— which can cost you even more money in the long run.


2. Pay off high-interest credit card debt

Once your day-to-day finances are in order, a good way to spend your refund is by paying down — or paying off — any outstanding credit card debt you might have. By reducing or eliminating high-interest debt, you get a lot of bang for your buck. You're sure to save more than you would earn if you put that money into a savings account.

Even better, you can either reduce — or eliminate — the monthly payments you were making on that credit card debt. And because you'll have less debt, your credit score will ultimately improve too.


3. Build up savings

If you're not behind on your bills and have no credit card debt, you should devote at least one-third of your refund to beefing up your savings. That starts with an emergency fund to protect yourself against life's unexpected costs. While you may not get there with your refund check alone, over time you should aim to build an emergency fund that could cover three to six months' worth of living expenses.


4. Invest in your future

As long as your immediate finances are in order and you don't have a lot of high-interest debt, consider devoting a third of your refund to an IRA or 401(k) for the 2024 tax year. Not only will this help you reach your retirement goals, it also may help lower your tax bill, since these contributions are often tax deductible. That means the money you put into them can often be subtracted from your annual income when you calculate what you owe the federal government in taxes.


5. Treat yourself

While it's not wise to spend your entire refund, you could reserve up to one-third of your refund for a special treat for yourself or your family. Whether it's a new sofa, a nice meal out, or tickets to theater performance for the whole family, it's OK to have a little fun with your refund. Before you splurge, just be sure you're caught up on bills, have paid off any high-interest consumer debt, or have devoted a significant portion of your tax refund to retirement and savings.


Use this opportunity to fix your withholding problem

Now that you've figured out what to do with that big refund, it's time to fix your withholding problem. What you're looking for here is the Goldilocks of federal income tax withholding – not too much, but not so little that you owe money when your taxes are due. After all, who needs an extra unexpected bill? And if you owe too much, you may owe a penalty as well.

If you're expecting a large refund, check out this handy Withholding Calculator from the IRS.3 This can help you figure out what your federal income tax withholding should be, especially in light of recent changes in the tax law. Then you can submit a new W-4 form to your employer. The combination of allowances you claim and additional money (if any) that you specify you want withheld will determine just how much your employer withholds from your pay check.

Everyone's financial situation and goals are different, so the above suggestions are simply guidelines. If you'd like personal assistance in finding the best way to use your IRS refund — or any other large sum of money you may receive — visit your local Synovus branch to talk to a professional about it. We're here to help.

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Important disclosure information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. eFile.com, "Income Tax Return Statistics," published January 12, 2024, accessed January 21, 2024.   Back
  2. Experian, "What Affects Your Credit Score?" Updated July 29, 2023; accessed January 21, 2024. Back
  3. IRS.gov, "Tax Withholding Estimator," updated November 9, 2020. Accessed November 24, 2020. Back