Tax returns may come as a pleasant surprise to many people. Quite often, it occurs when you least expect, and there may be no prior plans on how to spend it. Perhaps you may want to clear off existing loans and debts. However, investing money is a wise decision since you can reap more returns in interest or profits. Below, we explore three ways to invest your income tax return:
Increase your retirement contribution
Increase the amount you contribute to your retirement kitty, either to 403(K) or 401(K). This is a wise decision that will keep you off from squandering any extra money. The advantage of saving in a 401(K) plan is that you can also benefit from a tax break. Also, the contribution is tax-deductible and will not add to your yearly income. Besides, your contribution will grow tax-deferred. It means that by increasing the contribution, your taxable income will reduce while your retirement savings will increase.
A charitable gift is in the form of a cash transfer or a property. You can be a donor where, upon the cash transfer, you will receive a tax benefit or deduction on your IRS. The amounts you save can be set aside for use even in your retirement or by your beneficiaries in case of death. By giving to a charitable organization, you benefit by contributing to a worthy cause, and your taxable expense decreases.
Interest Saving / CD (Certificates of Deposits)
You may save the money in a bank as fixed deposits and earn interest income. You can divide the money into small amounts and invest in a CD ladder where the return rates are higher than the regular savings account. An income tax return will earn you money in the future if invested wisely. However, just like any investment, it requires patience to realize the full benefits.
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