The 2022 tax season is already underway, and many individuals have already received their tax refunds. Even if you’re still going through the motions of preparing your 2021 taxes, the IRS may be sending you a substantial sum of money once they get your return.
The average tax refund granted by the IRS as of mid-February was $2,300. However, when additional returns come in between now and the April 18 filing deadline, that number might grow. In reality, the average tax refund last year was almost $2,800.
How to use your tax refund productively?
You could be tempted to spend that money once you get your hands on it. But what if you could just sit back and wait for your return to rise to ten times its initial amount? It is very possible to do so, and it does not need a great deal of skill or effort.
Investing your money is an excellent strategy to increase its value over time. But, let’s face it, not everyone is capable of picking stocks by hand. To do so, you’ll need a lot of time, expertise, and investigation. And if you make a string of terrible decisions, you can wind yourself losing money instead of making it, according to The Motley Fool via MSN.
However, the good news is that you may be a successful investor without understanding much about stocks. All you have to do is put your money in a wide market ETF, such as an S&P 500 ETF, and let it grow year after year.
The S&P 500 index is made up of the 500 largest publicly listed firms in the United States. As a result, by purchasing S&P 500 ETFs, you are basically investing in the full stock market.
Before we go any farther, let’s get one thing straight. Investing in S&P 500 ETFs does not ensure that you will gain money. We don’t know how the stock market will perform in the coming years or decades, and investing in ETFs entails a certain amount of risk.
A tax refund may appear to be free money, but it is actually money you earned but did not get. As a result, it’s better to put that money to good use rather than squander it.
Even if you have no experience investing, you can leverage the strength of the wide market to transform your return into ten times its original value. This might be one of the smartest financial decisions you’ll ever make.
Need assistance in filing your taxes?
Another key reminder: If you don’t ordinarily have to file a tax return but have children, you must do so in order to qualify for child-related tax credits like the Child Tax Credit and the Child and Dependent Care Credit.
A taxpayer can get up to $3,600 for each kid under the age of five and $3,000 for each child aged six to seventeen under the Child Tax Credit (ages are determined at the end of 2021). The credit can be claimed without proof of income, but the eligible kid must have a Social Security number, as per Forbes.
The Child and Dependent Care Credit allows a taxpayer to claim a credit of up to $4,000 for one eligible person and up to $8,000 for two or more qualified individuals based on qualifying child or dependent care costs incurred while the taxpayer worked or looked for work. See IRS Publication 503 for further information.