I have to say that this year, I am loving big tax refunds. We will be receiving over $5,000 back in state and federal income tax refunds. Even though this means that we gave the government a $5,000+ interest-free loan, I’m so happy we’ll now have $5,000 in one lump sum. In the words of the great British intelligence officer, Austin Powers, yeaaaah baby!
This is the biggest tax refund we/I have gotten since, well, ever. I doubt we will see a similar-sized refund anytime soon. This year is an anomaly because I only worked for 1/2 of a year, and I went back to school and so qualified for the Lifetime Learning Credit. A alum told me that our tax refund would be especially high this year, and I’m glad that turned out to be the case. The money, especially in its lump sum form, will be much appreciated.
Even though many personal finance experts argue against a large tax refund and counsel folks to adjust their deductions so they have more money with each paycheck, I think that big tax refunds, when used appropriately, can be an effective personal finance tool.
Why big tax refunds deserve some love:
- It forces you to save for a big-ticket item such as a down payment on a car or a summer vacation, or even topping off your Roth IRA contributions.
- By being conservative on your deductions, it minimizes the risk of having to make up taxes at filing time.