If you are getting a tax refund this year, plan how you will use the money.

“Without a plan, you may use the money on the first important thing that comes to mind and then later realize something else was more important,” says Debra Pankow, North Dakota State University Extension Service family economics specialist.

Here are some smart uses for your money:

• Pay off high-cost debt, such as credit card bills.
• Start or replenish an emergency fund to cover three to six months’ worth of expenses.
• Start or increase deposits to tax-deferred employer savings programs, such as a 401(k) plan, and use your refund to offset the reduced take-home pay that will result from making increased plan contributions.
• Fund a traditional or Roth individual retirement account.
• Start or increase deposits to a 529 college savings plan for your children or grandchildren.
• Refinance your mortgage and use the refund to pay closing costs.
• Make extra principal payments on your mortgage to shorten its term and lower the total cost.
• Invest in home improvements, such as landscaping and kitchen upgrades, that have a high payback.
• Purchase necessary business equipment, such as a computer, if you are self-employed.
• Buy a needed ""big ticket"" item, such furniture or a major appliance, for cash instead of using a credit card.
• Purchase a few hours of a certified financial planner’s time to get advice and a financial checkup.
• Donate all or part of your refund to support a worthwhile charity and receive a tax write-off.

The IRS will allow taxpayers to direct deposit tax refunds in up to three different accounts, such as checking and/or savings, at up to three different U.S. financial institutions, but you must complete form 8888 to do it.

“There’s one more item that taxpayers should consider doing,” Pankow says. “Change your tax withholding to increase your take-home pay now and lend less money interest-free to the federal government. To do this, contact your employer’s payroll office and file a new W-4 withholding form.”

NDSU Agriculture Communication