Personal Finance: Spend Your Tax Refund Wisely

Summary

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Save for Education. Open a 529 Qualified State Tuition Plan, where you contribute to an account to fund a child's or grandchild's education. Account earnings are exempt from federal taxes when withdrawn if used for qualified expenses. Go to the U.S. Securities and Exchange Commissions Web site (www.sec.gox/investor/pubs/intro529.html) to learn how 529 Plans work.

Don't overpay taxes. Your primary goal should be to pay your fair share of taxes throughout the year no more, no less. Ideally, the amotmt being withdrawn from your paycheck all year falls within a few dollars of your final tax bill. If you get hundreds or thousands of dollars in refunds that means you're basically giving the government an interest-free loan all year. Fill out a new W-4 form and recalculate how much is being deducted each pay period. Someone in your employer's benefits department should be able to help.

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Personal Finance: Spend Your Tax Refund Wisely

For many of us, the agony of filing taxes each April is partially offset by knowing that a few weeks later well get a nice refund from Uncle Sam (assuming you ...

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