The typical federal tax refund is between $2,300 and $3,200, depending on the state in which you reside.1 About three-quarters of Americans receive a refund each year. But remember, the money you got back was yours, to begin with.

You just gave Uncle Sam an interest-free loan for a whole year. The terms are relatively good for him. In addition, towards the middle of March, millions of Americans started receiving $1,400 stimulus payments. Close to 159 million homes got money out of the program .Some smart ways to spend your tax refund:

Clear Credit Card Debt

It's not cheap to live. Most of the things we buy for ourselves and our loved ones are charged to credit cards. Credit card annual percentage rates (APRs) range from 15.56 percent to 22.87 percent. In the end, it all adds up to a significant sum. With an APR of 20%, the interest charged for a $1,000 balance carried over six months is $59. That's why it makes sense to prioritize paying off credit card debt with your tax refund.

Build Your Emergency Money

The reality is that things sometimes go differently than planned. Not to mention, crises you should have counted on often pop up.

The Pew Research Center found that one in four persons in the United States experienced bill payment difficulties in the previous year and that one in three used emergency funds or retirement funds to make ends meet.

Adults with lower incomes were more vulnerable (7). On the other hand, those with secure employment saved more during the epidemic because they cut less on non-essentials like dining out, traveling, and entertainment.

Start Or Boost Your Retirement Savings

It may be easy to put off retirement. Don't be fooled by it, though. Have you been saving enough money to cover your expenses if that day arrives? Supplementing your retirement funds with a regular or Roth IRA is a good idea.

If you were under 50 years old in 2021, you might put in as much as $6,000. If you're above 50, you can get an additional $7,000. 9 These two payments represent a third to a half of the typical tax return for 2018.

Start A Company

You may have gotten exceptionally proficient at woodworking or painting while quarantined at home. So you've decided to make some extra money by turning your pastime into a company. For example, you may use the funds from your tax refund to buy merchandise or create a website for your new source of income.

Save For College

You may prepare for the future cost of higher education by putting your tax refund into a college savings account. The cost of higher education is considerable, regardless of whether you attend a private or and $9,687 for public institutions located inside the student's home state in 2020–2021. By 2020, around 42 million Americans, or one in eight, will have taken out a college debt.

Include It In Your HSA

A health savings account (HSA) may be included in a high-deductible health insurance plan (HSA). Certain medical costs may be anticipated, such as braces for your child. Of course, some are entirely unexpected, such as when your kid is hit in the face with a baseball and needs a visit to the dentist immediately.

A visit to the emergency room can be costly, especially if you have private health insurance with a high deductible plan. A high medical cost might also force you to delay other programs, such as a long-awaited family trip or a much-needed home improvement project.

Renovate

In other words, you won't be able to remodel your kitchen or bathroom with the money you get from your tax return. Still, it can pave the way for the more manageable upgrades you've meant to do around the house.

And certain upgrades might help you save cash in the long run, maximizing the value of your tax refund. One strategy is to upgrade to more modern, energy-efficient appliances. On the other hand, you've had enough of your drafty front door and are ready to replace it.

Spend On A Family

To provide for our loved ones, we must labor. It's only natural that when we get a sizable tax return, our thoughts turn to provide for their need. Once their basic needs have been addressed, the best gift we can give is quality time together doing something they like.

Our satisfaction is enhanced not just by tangible goods but also by the experiences we buy. In other words, it's the doing, rather than the having, that brings true joy.