Tax returns are often treated as windfall income: people tend to spend them on things like vacations or paying off debts. Some might choose to put this amount into a savings account and though it won’t earn much interest, it is, at least, money that can be used for emergencies. There is nothing wrong with spending whatever extra money you have but why not put it into something that can make you more money?
Create an Investment Account
Instead of just leaving your savings be, why not use some of it to build an investment account? Once you have saved enough for emergencies, the extra money from your tax returns can help you jumpstart one. Where to invest depends entirely on what you are interested in. If you like real estate, then use the money as part of the down payment for a house you might be interested in to either flip or lease out. You can also use the money to start a stocks portfolio, or even as seed money for a business.
If you are operating a business, you can use the tax return to pay for some business expenses such as rent or maybe your satellite service provider. Keep in mind that expenses in a business usually lead to business income. If you don’t have a business then consider setting up a home office. The expenses you accrue with the home office can be used as tax deductions. Of course, that will reduce your future tax returns but that still translates to money that stays with you instead of money the government has to return.
Consult a CPA
If you do try to reduce your tax returns by creating a business entity make sure you consult with both a lawyer and a CPA. You definitely don’t want to go to jail for tax evasion instead of being able to enjoy increasing your income using your tax returns.
Keep these things in mind to enjoy financial freedom. Always plan carefully and do thorough research.