The one area of life where most people welcome “boring” is taxes. Unless you’ve been trapped in a cycle of owing a lot of money every year, you generally hope for things to be consistent so you know what to expect.
Getting a refund is definitely exciting; who doesn’t like free money back in their hands, particularly after the holidays? But rather than just spend it and forget it, it’s worth taking a pause at this time of year to think about your tax strategy as a whole. Taxes play into your financial future more than you might think, and if you’re noticing a pattern every spring — you either continuously get a refund or owe money — it’s possible that taking a different approach to tax withholdings would benefit you more.
Below are some things to consider on both ends of the spectrum, as well as some things to think about when deciding what to do with a refund.
Want to talk through your tax strategy for 2026 and beyond? Reach out to us at Curio Wealth!
If you get a tax refund this year…
It’s worth thinking about the reason why you got the refund. If this is your first one in a while, maybe it’s because you intentionally made changes last year, perhaps as a result of owing money the previous tax season. But if this is a consistent pattern, understand what’s really going on: The IRS is holding on to more of your money throughout the calendar year only to hand it back to you every tax season.
Whether or not this approach is the right one depends on you and your life circumstances.
For some people, this is an ideal way to reach a savings goal. For example, someone might intentionally enact this strategy as part of a bigger “system” that helps them regularly put money aside for something in particular, such as a vacation or school tuition. Allocating a hefty annual refund to dedicated accounts could go a long way toward reaching those goals.
For others, however, there may be better uses for that money.
For example, rather than consistently withholding extra money every single month (and just getting it back the following year), you could take some of that cash and use it in other ways. You may find you need that amount for monthly spending purposes, or you could invest it. Another option is to put it in a high-yield savings account or money market account that pays a much higher rate than your bank savings account, typically anywhere from 3 to 3.5 percent.
There’s no right answer here; it simply depends on your personal financial goals. But this is one case where being intentional about your approach will help you reach those goals more quickly than if you simply go with the flow.
What should you do with your refund?
There are lots of options for using a tax refund. Again, the smartest one for you is the one that helps you reach your financial goals.
This could mean:
- Paying off a high interest debt that’s been lingering
- Boosting your investments
- Working it into your cash flow and using it to pay A, B, and C
- Funding an early retirement
- Increasing your emergency fund or cash on hand
Whatever you do, don’t make a decision on autopilot. Circumstances change quickly and new goals or priorities may have come up recently. Think about how you would like to use that money within the next one, three, or five years. Deciding how to best utilize any new dollars that come into your hands should be an ongoing, dynamic process based on your current situation — not an automatic action that’s repeated year after year.
If you owe taxes (again) this year…
If you find yourself owing a lot of money every year, that likely means that you’re not holding back enough taxes from your paycheck. Depending on the amount, you may even incur a penalty from the IRS on top of the money you already owe.
In this case, look at your withholdings on your W-4 form and direct your payroll department to withhold more money throughout the year. If you’re self-employed, reassess your estimated earnings to increase your quarterly payments.
Another option for turning the situation around: Increase your 401(k) contributions.
Every dollar you save in your 401(k) or a pre-tax retirement account reduces your reported income. So if you have the ability to save in these accounts and are doing well on cash flow, this strategy would benefit you in two ways: 1) it allows you to save more for retirement, and 2) it lowers your earnings in the eyes of the IRS.
TAX TIP FOR 2026: Don’t toss your charitable receipts! Starting in 2026, taxpayers who take the standard deduction will once again be allowed to deduct charitable contributions, even if they don’t itemize. The maximum deduction will be $1,000 for single filers and $2,000 for married couples filing jointly for qualified cash gifts to public charities.
Need help thinking through your tax approach?
When you zoom out, your tax refund isn’t just a one-time windfall — it’s part of the bigger story of how money is moving through your life. At Curio Wealth, our job is to help you connect your tax strategy to the goals that matter most, so every dollar has a purpose.
If you’re looking for a partner to help clarify your goals and financial strategy, reach out and talk with someone on our team. We’d love to work together to make sure you feel confident that where you choose to put those dollars is the right choice for you.
