Get the Most Out of Your Tax Refund—For Yourself and Others

April 11, 2019

As Tax Day approaches every year, most people have a pretty good idea of what to expect. Unless your income jumped or dipped significantly, or you had a big life event such as a marriage, divorce, or the birth of a child, your tax return probably will look similar to how it always does, even after you factor in recently enacted tax legislation.

If you’re receiving a refund on your income tax this year, there are any number of ways you can use it. Indeed, people who have grown accustomed to expecting a refund might even plan big purchases around it, knowing that they’ll have some extra cash on hand come springtime.

When you’re younger, these temptations tend to revolve around instant gratification, such as funding a trip or upgrading your laptop or flat screen TV. But financial advice columns often pour cold water on these impulses, urging you instead to plan ahead by using the windfall to pay down high-interest debt or put aside the money for an emergency fund.

If you’re among the wise few who have their debts and rainy day accounts under control, you might consider doing something a little more novel than treating yourself—donating your tax refund to someone else. Research has shown that performing (or in this case, funding) acts that benefit others are the only category of behavior—specifically, prosocial behavior—that reliably increases one’s happiness and enjoyment. This is one reason that many financial advice columns include making charitable donations in the “responsible” category of financial behavior.

Colorado has no shortage of charitable causes and organizations, and Charity Navigator or Great Nonprofits are good places to find the ones that speak to you. (Enter “Colorado” or a specific community or interest into the sites’ search field.) The Colorado Secretary of State’s site also has a searchable database of local and regional charities; and although Colorado Gives Day happens every December, its sponsoring organization runs year round and offers multiple ways for you to give something back to your community or your favorite cause.

Finally, Denver’s Impact Finance Center is part of the recent trend around leveraging charitable donations as investments. These donations are designed to generate measurable social and environmental returns in areas such as health care, housing, and education, among others, so whatever amount you give will likely end up growing even more.

In short, as tempting as it might be to use your tax refund to treat yourself, using it to help others can be more rewarding in the long run.