Tax refund: 3 smart ways experts say to use extra money this year

This year’s tax refunds are expected to be about $300 to $1,000 higher for many Americans, and experts outline three primary uses: placing funds in high-yield savings or CDs, paying down consumer debt, or applying refunds toward mortgage principal.

Tax refunds are arriving larger for many households this year, and experts describe several ways to use the extra funds. The increase — reported as roughly $300 to $1,000 more for many Americans — is tied in part to changing tax laws, according to the Tax Foundation. The article collects advice from deposit and mortgage professionals and financial planners on how to deploy a refund to match short- and longer-term needs. Key points: - High-yield savings accounts and certificates of deposit (CDs) can be a place to park a refund while earning interest. The article reports a national average savings rate of about 0.39% and 12-month CD rates near 1.61%, while some banks and credit unions offer savings rates close to or above 4%. - Experts note that savings accounts provide liquidity and flexibility, while CDs can offer higher rates if the money can be locked up for a set period, a distinction described by Skip Skolnik of Skolnik Retirement Solutions. - Putting a refund toward consumer debt can reduce long-term interest costs. The article notes that average credit card rates are reported near 21% and cites advisers who recommend focusing on high-balance cards and using the snowball method to build momentum. - Applying a refund to mortgage principal reduces the amount of interest paid over the life of the loan. The article cites Kevin Watson of Churchill Mortgage, who gives an example that putting $3,000 toward a $350,000 mortgage each year could cut interest costs substantially, while also observing that such payments reduce liquidity. - The article frames the refund as an opportunity for longer-term financial choices rather than short-term spending, and it reports that professionals say a planned approach tends to provide more lasting value than immediate discretionary purchases. Summary: The immediate impact is that many taxpayers may receive larger refunds this season, creating a short-term increase in available cash. Reported options include parking funds in higher-rate savings or CDs, accelerating debt repayment, or making extra mortgage principal payments; the article notes that financial professionals can offer guidance on which approach aligns with individual circumstances.