Are Tax Refunds Good?

Why tax refunds are not always a good thing

I used to love getting a tax refund. For some reason, it felt like free money to me and it made me feel good to receive a lump sum of money from the government. I hadn’t yet connected the dots that the money was mine long before the government gave it back to me.

If you’re an employee and you’re getting a tax refund, you may want to take a look at increasing your W-4 withholding. A refund usually means you paid too much in taxes throughout the year, and the government is returning the money you overpaid. Another way of putting it is you gave the government an interest-free loan, and they’re paying you back what you lent them. According to Bankrate, the average refund amount was greater than $2800. If loaning money to the government interest-free is your goal, then I am sorry to have wasted your time. Otherwise, keep your money and build an emergency fund or invest.

The IRS provides a Tax Withholding Estimator to help you make sure you are having the right about of tax withheld from your paycheck.

Agree? Disagree? Have something to add? I’d love to hear your thoughts.

Disclaimer: The above is just an opinion intended for information purposes only. Seek a licensed professional for financial advice.