These tips from the Illinois CPA Society can help you make the most of your tax refund.

CHICAGO, April 21, 2025 – Tax Day is behind us, and if you’re getting a tax refund this year, hopefully it’s already in your bank account or will be shortly. Whether large or small, there are some smart money moves you can make with a tax refund to set yourself up for financial success in 2025 and beyond. Here, the Illinois CPA Society (ICPAS) shares three recommendations for putting your refund to work for you.

1. Secure your emergency savings. Bankrate’s 2025 Annual Emergency Savings Report highlights that 27% of U.S. adults have no emergency savings at all, the highest percentage since Bankrate began measuring this in 2020. Another 29% of Americans have some savings, but not enough to cover three months’ expenses. If you fall into either category, using your tax refund to solidify your savings could be your best bet. It’s generally recommended to always keep at least three months of living expenses available to help you weather a job loss or major unexpected expense. Over time, growing your emergency savings to cover 12 months of living expenses is often recommended to ensure you can comfortably cover even substantial setbacks. With this in mind, a great place to park your emergency fund is in an accessible, interest-bearing savings vehicle, like a high-yield savings account or callable certificate of deposit.

    

2. Pay down debt. In February, the Federal Reserve Bank of New York’s Center for Microeconomic Data reported U.S. household debt climbed to an all-time high of more than $18 trillion by the end of 2024, including more than $1.2 trillion in credit card debt. If you’re incurring high interest expenses on loans and credit cards, using your tax refund to pay down a chunk of debt is like giving yourself a raise. Think of it like this, if you have $10,000 in credit card debt incurring an 18% interest rate fee each month, you need to earn $2,250 a year (pre-tax) just to pay the interest! If you were to get a $5,000 tax refund and use it to pay down your credit card debt so you incur less interest, it would be the same as if you earned a raise of more than $1,000. Also consider how making an extra mortgage payment toward the principal will lower the loan amount immediately, reducing both the length of time to repay the loan and the amount of overall interest paid. It’s often recommended to pay down debts incurring the highest interest rates and charges first, followed by those with interest rates greater than what your savings accounts are yielding. Going from being an “interest payer” to an “interest earner” is one of the most important financial transition points in your lifetime, and the faster this happens, the sooner you can allocate more income toward your future well-being.

    

3. Invest for the long term: Making long-term investments is critical to having a healthy financial future. With your emergency savings established, and your debt manageable, funding retirement accounts and making other investments should become your next priority. Great places to park a tax refund could be an individual retirement account (traditional or Roth IRA), health savings account (HSA), TreasuryDirect account, or even a taxable brokerage account. While each of these accounts offer access to different types of investments (i.e., stocks, bonds, mutual funds, etc.) and have different income and tax considerations to account for, the bottom line is that investing for the long-term is a savvy savings strategy.

Overall, the importance of setting yourself up for financial success cannot be discounted, and your tax refund might be the perfect way to get your savings on track. Of course, a CPA—a certified public accountant—can help guide you toward the best place to park that cash. A CPA can help you maximize your tax refund, make a financial plan, and manage your finances well into the future. ICPAS’ free “Find a CPA” directory can help you find the trusted, strategic advisor that’s right for you based on location, types of services needed, and languages spoken. Find a CPA at www.icpas.org/findacpa.