Why the Ideal Tax Return is Nothing

tax return money

For many young people, getting a big tax return is like Christmas in the Spring- a windfall you can use to pay off debt, invest, or throw at a big-ticket item. A lot of people treat it like found money, or a fun, beginning of the year bonus. Except it’s not. When the IRS gives you a solid chunk of change (and the average tax refund is about $2,800), what they’re really giving you is your money, back, after an entire year of using it interest free.

That’s a whole bunch of money that never needed to be withheld from your paycheck in the first place. Keep that extra couple hundred dollars in your paycheck and you can make time and interest work for you. Considering how people most commonly use their tax refunds, it’s crazy not to.


  • A full third of people receiving tax refunds in 2015 planned to put at least part of that refund into savings. This is a noble goal, though poorly executed–instead of languishing in the government coffers, your money could be building up interest in your savings or as an investment all year long. Furthermore, even people who intend to stash away their tax refunds in savings do typically end up increasing their spending, anyway, if unintentionally. If they’d accumulated that wealth throughout the year rather than all at once they’d be less tempted to indulge after receiving their return.


  • The same is even more true for individuals intending to use their refunds to pay back debts. Throughout the year, credit cards, student loans, and any other sort of debt will accumulate interest. Giving the government a couple hundred dollars a month to hang onto rather than putting it toward the principal of those debts means you’re getting slapped with those interest fees when you could have been paying it off.

If you’re planning on putting your tax return into savings or paying off debt, hey, at least you’re not going shopping–but next year, try not to give Uncle Sam an interest-free loan that comes out of your pocket.

For the Love of Your Wallet, Read This Before Doing Your Taxes


We’re less than a month away from the tax deadline—if you haven’t filed yet, we’d like to encourage you to make the most of your tax return. Many young people aren’t even aware of how many deductions are out there, let alone taking advantage of them.

What’s the First Step?

For starters, you’ll only want to turn in an itemized deduction list (Schedule A) if your deductions total more than 2% of your Adjust Gross Income. Otherwise, you’ll just be taking the standard deduction. If your AGI is $50,000, for example, your itemized deductions must be more than $1,000 to qualify you for more than the standard deduction. We encourage taxpayers to calculate their tax return both ways and see which has the greater return.

What Are Some Unexpected Deductions?

That said, there are a lot of things people aren’t aware they can count as tax-deductible. Here are some of the most commonly overlooked deduction possibilities:

  • Interest on Student Loans

In fact, your student loan interest can be deducted even if you don’t itemize. However, it’s still in your best interest to pay as much as possible and on the loans with the highest interest.

  • Car Registration Fees

In many cases your car registration fees can be counted as deductions, which is great news if you’re still bitter about how much it cost to get your license plates. Check here to see if you’re eligible, and for how much.

  • Studio Space

Do you rent a space related to your work or hobby? If you’re an artist, dancer, designer, musician, etc. leasing a studio or practice room, write it off!

  • Job Hunting

Most expenses you incur while searching for a job within your field are deductible, including any printing costs, resume design, placement agency fees, or travel for interviews.

  • Theft

If you lost personal property through fraud or theft, you can claim it on your return, and this isn’t just limited to property you use for your business. If your laptop, bicycle, or earrings were stolen, and you have the police report to prove it, you can claim it.

  • Education

This doesn’t just mean college—if you take a community course in something you add to your resume, like graphic design, photography, or typing, you can apply your Lifetime Learning Credit and deduct it. If you’re taking courses at an accredited school, your tuition, fees, and even textbooks are all deductible.

  • Research Materials

If you’re making money from your hobby—even if it’s precious little—you can consider it a business venture, meaning any “research” you do is tax deductible. If you’re a writer, buying books, seeing plays or movies, or going to museums can all be written off if the experience relates to your work. If you’re a musician, you can deduct going to shows or subscribing to music magazines. Just be prepared to justify how any expense contributes to your understanding of your business!

  • Renting Your Home

You can rent out your home for up to 14 days a year tax-free. If you’re lucky enough to have a great property located next to a temporary hot spot, like a New Orleans home during Mardi Gras, a great apartment near the Superbowl stadium, or a beach house on the 4th of July, you can rent for up to two weeks without owing the IRS a dime—and this includes Airbnb! Most people don’t itemize their expenses when filing taxes—only about 35% of Americans, in fact, and the numbers look even worse when you look at the lower end of the income spectrum. For Americans earning less than $50,000 annually, only about 17.9% itemize, as opposed to 93.3% of those earning $200,000 or more. One of the best financial decisions young or lower-income Americans can make is keeping detailed records of their expenses and asking for their due course come April 15th. For more financial advice that can help you achieve financial stability and independence, check out our Earn It Use It eBooks!

Are You Making These Top 3 Credit Card Mistakes?


Bad credit score? You’re not alone, especially if you’re under 30–according to a new study by Nerd Wallet, millennials have the lowest average credit score of any age demographic. If you want to boost your credit score, or just stop hemorrhaging funds in interest and late payments, watch out for these three common mistakes.


  • Avoiding Credit

There’s a big difference between credit card debt and healthy credit. When people talk about “building your credit,” they mean maintaining a moderate balance on which you make regular payments over a long period of time. This demonstrates that you are good at handling credit and repaying loans. Many millennials are fearful of credit cards and accruing debt, and though this is a healthy instinct they’re approaching it the wrong way. Seven out of ten millennials would prefer to use a debit card to a credit card, and 63 percent of adults ages 18-29 don’t even have a credit card. Our advice: get one, use it modestly, pay it on time, and watch your credit score climb. You’ll be glad you did when you try to get a loan someday!


  • Making Only the MInimum Payment

The minimum payment should be considered exactly that–the absolute minimum amount you can put in every month. If you’re able, you should absolutely be paying more than your minimum, not only because it will help you stay on top of your purchases but also because you won’t be paying the high interest rates on top of your original purchases. The current average national interest rate for credit cards is 14.95 percent, and most cards for which millennials with low scores qualify are much higher than that. This means that for every $100 you keep on your card, you’re accruing about another $14 each month in owed interest. Bottom line: pay off as much of your balance as you can afford, because you’ll be paying interest on any money that’s outstanding. Another tip: we recommend using Bankrate’s helpful online calculator to determine how long it will take to pay off your debt.


  • Ignoring Automatic Payments

There are two ways to ignore automated payments, and both are equally disastrous for your credit score and bank account. Firstly, you can ignore the possibility of setting up automatic payments and saving yourself a monthly headache. Remembering to pay your credit card on time every month can be an impossibly slippery task for some people, but if you arrange for an automatic payment from your debit card to your credit card, you’ll never risk those late fees. However, you can also make the mistake of setting up automatic payments and then ignoring your balances–if you run a very close monthly budget, your automatic payment might result in overdrafting your debit account, which means overdraft fees. Our advice is to automate your credit card statements, make sure you have overdraft protection from your bank (likely from another line of credit tied to your account), and keep an eye on your accounts if you’re on a tight budget!


For more advice on finances, check our Earn It Use It e-books, designed to help millennials manage their money, stay out of debt, and (most importantly) achieve financial independence through growing their savings! Reach out to us with any questions, or download our free introductory e-book!