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"You never know when to draw on these funds," he said.
• pay the debt. The US Federal Reserve also found that total credit card debt reached its highest point to date, exceeding $ 1 trillion. The average American has a credit card balance of $ 4,293, according to the latest data from Experian.
Start by figuring out what you need, then decide to use the "Debt Avalanche" or "Debt Snowball" method to reduce these loans in rotation.
The avalanche method lists your debts from highest to lowest based on the interest rate. In this way, you first pay the debts that earn the most interest.
Otherwise, the snowball method gives priority to your smaller debts, regardless of the interest rate. The idea is that you will gain momentum as the debts are repaid, which will motivate you to continue.
• Save for retirement, education or future health expenses. This is an excellent opportunity to open or increase contributions to a 401 (k) or individual retirement account, thanks in part to the new, higher limits for 2019.
For those with school-aged children, consider opening a 529 tax-efficient savings plan.
Otherwise, take some advance on health care costs by investing tax – free money in a health savings account, or HSA, Carlisle advised.
More from Smart Tax Planning
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• Pay off your student loans. Paying an additional payment in the "Student Loan" tab will save money on interest and reduce the length of your loan.
Specify that these additional funds are applied to the principal of the loan and not to future interest payments. (However, if you have unpaid fees, the money must first be used there.)
You can even try the same trick on your mortgage by making 13 payments a year instead of 12.
"For those who want to retire without debt, this could be an opportunity to reach that goal a little faster," Carlisle said.
• Buy savings or municipal bonds. Rather than having the refund deposited into your checking account, you can choose to use this money to buy bonds at face value through the US Treasury by submitting the 8888 form.
"You've made an interest-free loan to the government – it's an opportunity to get a return," Carlisle said.
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