Why You Should Get an Income Tax Refund

Income tax time is approaching.

Around this time of year the internet is buzzing with articles and blog posts on why getting an income tax refund is a bad decision.

I was officially self-employed during the last three months of 2013. This year my taxes are going to be a bit different. I’ve already began calculating my best and worst case scenario for my income taxes and it looks as though I’ll still receive an income tax refund. (This is due largely in part because I paid in taxes three quarters of the year and have done extensive research on what I can claim as business expenses.)

Nevertheless, this makes me pretty happy. I have always received an income tax refund and if you have trouble saving money I think you should, too.

Here’s why.

You Get a Lump Sum of Money

There are a lot of self-proclaimed personal finance experts who believe getting a tax refund is a horrible idea. They say things like “why give the government an interest free loan?”

The trouble is though, that most people are not disciplined enough to set back a small portion of money each week. But when that sum of money is being taken out in taxes each paycheck they don’t even notice.

It’s much easier to do something meaningful with a large sum of money than it is to save a small amount each week.

You Can Improve Your Personal Finances

Since most people don’t have the discipline to save small amounts themselves, getting a large amount of money in the form of an income tax refund can do wonders for their finances.

For example, this time of year many people have credit card debt due to excessive Christmas shopping. When they receive their income tax refund they can pay the debt off (or at least a portion of it) and start fresh.

In addition to paying down debt income tax refunds can be used to start emergency funds, invest in the stock market, save for down payments, or home repairs.

It’s Psychological

If we want to get mathematical, sure, you’re going to earn some interest if you save your money yourself rather than letting the government save it for you. But with interest rates on savings accounts at less than 1 percent, why take a chance with money you may or may not be able to save yourself.

When it comes to getting an income tax refund it’s all about personal preference. If it’s easier for you to have the government save your money for you, then let them. However, if you’re disciplined enough to make that extra money work for you throughout the year, then that’s great too!

Do you get and income tax refund?