If you are one of the millions of Americans expecting a tax refund this year, have you made a plan for how you will use that money?

Each year around tax time, U.S. Bank helps educate clients on the many ways they can put their tax refund to work to improve their financial situation.

So what’s the right move for you? Experts say it depends.

Derik Farrar, head of Everyday Banking & Borrowing at U.S. Bank, oversees consumer strategies around tax and bonus season. This year, he’s sharing the following tips to help clients get the most out of their tax refund for near and long-term financial priorities. 

1) Build financial security with high-interest savings strategies.

Using your tax refund to create financial security can help you be more prepared for a financial emergency – whether that’s a car repair, medical bill or loss of income. Having three to six months of expenses in savings is a good rule of thumb, but starting with $1,000 or $2,000 can be a great first step.

A high-interest product like a U.S. Bank Smartly Savings account can help you earn an attractive annual percentage yield interest rate on your tax refund, while keeping your money accessible. If you don’t need access to some or all of your tax refund, consider a certificate of deposit, which can help you earn a set rate for a fixed amount of time. 

2.) Pay down high-interest debt to save on interest costs. 

Paying down high-interest debt can not only help you save on interest costs, but can prevent you from falling further into debt when emergency expenses arise. Using your tax refund to pay off a $3,000 credit card balance with a 20% annual percentage rate can save you $600 in interest in just one year. 

3.) Set it aside to fund large upcoming expenses. 

If you typically turn to your credit cards to finance large purchases and then slowly pay off your debt, consider saving up for that vacation or shopping spree in advance. You can still use your credit card to earn rewards and benefits, but paying all or most of it off reduces risk of interest charges. 

4.) Invest your tax refund in a retirement and tax-advantaged account. 

Investing your tax refund in a retirement account is a powerful way to grow your money over an extended time. Tax-advantaged accounts like IRAs, 401(k)s, or Health Savings Accounts (HSAs) help lower your taxable income while providing long-term growth.

For example, investing $3,000 with a 7% annual return could grow to over $12,000 in 20 years. In 2025, you can contribute up to $7,000 to an IRA ($8,000 if you’re 50 or older) and up to $4,150 to an HSA ($8,300 for families).

5.) Create new savings habits. 

Start a new ritual at tax and bouse time that uses those funds as a catalyst to improve your financial well-being through saving for the near-term or more long-term investments.

Learn more about the many ways to save at usbank.com. 

Disclosures:

Investment and insurance products and services including annuities are:
Not a deposit • Not FDIC insured • May lose value • Not bank guaranteed • Not insured by any federal government agency.

Deposit products offered by U.S. Bank National Association. Member FDIC.