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Tax Return Refunds

Tax refunds are funny. The social norm tells us that they are a good thing. You get a check that you weren’t necessarily expecting and feel like you now have “free money” to spend. But in reality, tax refunds should be met with an opportunity to mitigate them as much as possible.


                The reason you want to mitigate your tax refund and get as close to zero as possible (Zero = Don’t owe money & don’t receive a refund) is because that is YOUR MONEY. Your refund is not free. It is not a donation from the government. Those dollars that you overpaid to the government should have been in your possession throughout the entire year. Meaning you could have spent more on things you enjoy, saved more for your retirement, etc.

What do I do if I received a refund?

                Now that you understand, refunds aren’t so great after all…What am I supposed to do now? Well, there are two actions items that come to mind. First, consult your tax advisor on how to mitigate your refund for next year. Could be as simple as decreasing your federal tax withholding. The second action item would be to consult your financial advisor to discuss where best to place those funds. Whether that’s savings more money towards your investment account/529s, building up your emergency bucket OR maybe in the end the refund still goes toward spending those dollars toward whatever you’d like.  

If you have any questions, please visit our website at www.thrivewealth.com or contact your Thrive Financial Advisor.