What to do with your tax refund
Getting a tax refund is a great opportunity to put your money to work! Instead of thinking of it as extra cash, consider how it can help you build a stronger financial future. Before you start spending, take a moment to explore the smartest ways to make the most of it. 💰
Step 1: Pay Off High-Interest Debt 💳
If you have credit card debt or any other high-interest loans, this should be your first move. Interest rates on credit cards can be as high as 20% or more, meaning that debt is costing you big time. Using your tax return to pay off debt can save you hundreds (or even thousands) in interest.
Focus on debt with the highest interest rate first.
If you have multiple debts, consider the snowball or avalanche method.
Always pay off your credit card in full each month to avoid interest charges.
Step 2: Build or Boost Your Emergency Fund 🚨
Unexpected expenses happen—car repairs, medical bills, or even job loss. Having 3-6 months of living expenses in an emergency fund gives you a financial safety net and keeps you from relying on high-interest debt when things go wrong.
Start with a small goal, like $500 to $1,000, and build from there.
Keep your emergency fund in a dedicated savings account to ensure it's there when you truly need it.
The fastest way to grow your savings? Automate transfers and use Step’s Savings Goals feature to stay on track.
Step 3: Invest for Your Future 📈
Already tackled debt and savings? Now, it’s time to grow your money. One of the best ways is to invest in your future through a Roth IRA, which allows you to grow your money tax-free and take advantage of compound interest. The max contribution for individual income tax refunds is $7,000 for 2025 for those under 50, and the earlier you invest, the more your money can grow over time. If you’re new to investing, starting with a low-cost index fund is a simple and effective strategy.
Step 4: Split the Rest—50% Savings, 50% Fun 🎉
If you’ve checked off all the above, you can now spend guilt-free! A good rule of thumb:
Put 50% toward savings goals (down payment for a house, travel fund, or even next year’s taxes.)
Spend 50% on something fun—a trip, a new gadget, or whatever brings you joy!
Watch Out for Tax Refund Scams 🚨
Before you celebrate, remember that the Internal Revenue Service (IRS) never calls, emails, or texts about your refund status. Identity thieves love tax season, so:
Check your refund process through the official IRS website.
If you file an amended return, track your processing time through the IRS.
Direct deposit your qualifying state and federal tax refunds into your Step Account instead of choosing to receive a paper check
Never share your Social Security Number unless it’s with a trusted tax professional.
The Bottom Line
Your tax refund is a powerful tool to improve your financial future. Whether you're paying off debt, building savings, or investing, making smart choices now can set you up for long-term success.
And here’s an extra perk—Step lets you file your taxes for FREE! It’s fast, easy, and guarantees your maximum refund. Plus, if you direct deposit your refund into your Step account, you’ll automatically be entered to win $1,000. Five lucky filers will win big! 💸
How to enter:
File your taxes for free with Step.
Direct deposit your qualifying state and federal tax refunds into your Step Account by April 29, 2024.
Sit back and imagine all the ways you’d use your winnings!
Learn more about the sweepstakes here.
Winners will be randomly selected, and the money will be deposited directly into their Step accounts.
