$15k tax return. What to do?

[princessoflight]

I ended up with a $15k return this year. I don’t need the cash, have my emergency funds and everything in order, and don’t know what to do with the lump sum. I could dump it in a HYSA, I could pay down my home loan (my only debt, 6.125% rate), or I could get a new car (not an immediate need but I drive a 20 y/o car that costs me money to maintain). Thoughts?

edit: by return I mean refund

edit 2: to quell some of the questions, my refund is high this year because my state (OR) has a giant kicker this year, and I bought a home late 2023 which allows for interest deduction. I am 26 y/o and a single filer with no dependents.

 

[myles0]

@princessoflight Pay down debts, build up retirement accounts.

What caused such a big refund? You may need to adjust your withholdings. Giving the govt an extra 15,000 each year just to have them give it back to you is a waste.

 

[princessoflight]

@myles0 My state has a big kicker this year, I bought a house and pay interest on the loan.

 

[lordismylight]

@princessoflight Nice, haven't been able to file yet but waiting for mine too.

 

[hamuda]

@myles0 This. Time value of money. Look it up.

 

[dorajan31]

@myles0 Going to assume there's an EV rebate in there at least.

 

[kevinshouse]

@dorajan31 He said he drives a 20 year old car so…unlikely.

 

[dorajan31]

@kevinshouse Damnit, I should file for some reading comprehension

 

[ann72]

@princessoflight Change your withholdings and stop leaving money on the table at 0%

 

[princessoflight]

@ann72 Mentioned in other comments, but it was a weird year. My state (OR) is kicking back a bunch of money from last year (~3500 for me), and I bought a house late 2022 that seems to boost my deductions more than expected. I’m 26 and recently started making non-trivial amounts of money, so I haven’t even considered adjusting withholdings until today.

 

[ez_fx]

@princessoflight So if your wages have increased significantly recently don't mess with your withholding or you could end up owing

 

[princessoflight]

@ez_fx that makes sense. increased a fair bit over last year

 

[ez_fx]

@princessoflight And you won't get the kicker next year. A CPA or EA could estimate your 2024 situation fairly close, and they could recommend changes but I wouldn't just go and do it yourself

 

[april_0718]

@ez_fx Especially since I've heard the new W-4 is really confusing. I haven't had to adjust, so unsure why. But, I've seen some griping about it.

 

[asklife]

@princessoflight The house deductions still put you over the standard deduction? That’s rare. Almost 80% of people don’t itemize anymore.

 

[lordking]

@asklife You can deduct up to 750,000 in mortgage interest. For the last 10 or so years, mortgage rates haven’t been high enough for that to matter but now that they’re up around 8% a lot of the time it really wouldn’t take a lot to hit the single filer deduction and I think most mfj returns could probably swing the standard deduction if they have a new home.

 

[twinkiemama]

@asklife Single filer deduction is $13,850. That's easily hittable between local and state taxes and mortgage interest.

 

[ez_fx]

@asklife Not rare for young single people who buy a house

 

[justauser]

@princessoflight I’ll differ from some other comments here. A 20 year old car will just continue to have more and more problems. Unless you don’t need a car for your daily life, I would get a good reliable recent used car w that money. Safety standards on the car will be much better too

 

[jwright63125]

@justauser Yeah, if you drive at least 3 days a week id suggest a new car. Or lightly used one. They are generally safer, more efficient, and less maintenance.