Congratulations, you might soon be about $3,000 richer. The average American will receive nearly that amount —$2,725, to be exact — in their tax return. Of course, that’s not really a gift; it’s money that you overpaid in taxes through the year. But hey, you got it back and now the pressing question becomes: What should you do with it?
Like many Americans, you could spend it on a fancy vacation or the latest hot electronic toy. Or better yet, buck trends and stick the money in savings or pay off a high-interest credit card. But if you have plenty in savings and your credit card debt is under control, you could make an investment in your home.
Granted, it's not as exciting as a trip or a toy, but you could apply your tax refund toward your mortgage each year and by doing that pay off your mortgage earlier, potentially savings tens of thousands of dollars in interest over the course of the loan. Get specifics by talking to your Hanscom Federal Credit Union mortgage representative.
Or you could use the refund to improve the look and/or functionality of your home, which can increase the value and/or make it more appealing to a potential buyer. Central air, a comfortable patio, ceiling fans … they all add comfort to your life and value to your home.
The kitchen is one area where you can get a lot of bang for your buck, especially if it's outdated or damaged. That’s the place where families gather to eat and discuss their days, or friends can lean against kitchen counters to chat over coffee. According to a Zillow report, 58 percent of buyers who'd purchased homes in the last year said the kitchen was important or very important in their home-buying decision.
One way to improve a basically solid but dated kitchen is to paint the kitchen cabinets. The price varies, depending on the quality of paint, the cabinet design and the scope of the work. But the average ranges from $1,200 to $7,000, and the middle range matches the average tax return. And if you can do the painting yourself, you'll save even more.
Another way to brighten your kitchen? Swap out your cabinet hardware. You can spend as little as $100 to give your cabinets a new look. Of course, the more you are willing to spend, the more choices you have. Spend $10 to $25 per knob, for example, and you can find a range of options. You’ll be amazed what a new glass knob will do!
You could also spend on a minor kitchen remodel, which would include replacing cabinet boxes with Shaker-style wood panels and drawer fronts, swapping out a cooktop/oven range and slide-in refrigerator with new energy-efficient models, changing laminate countertops, installing a mid-priced sink and faucet, and adding new, resilient flooring.
The average cost of this work is about $22,400, and the average amount recouped when selling the home is $17,100. Subtract the two and you have spent less than two tax return checks.
You could also upgrade your appliances. Sixty-nine percent of recent home buyers have said they wished their home had new appliances. So if you're limping along with a washer that has seen better loads, make the investment in a new washer. Even if you have no intention of selling soon, using appliances that make daily tasks easier will make your life easier and less stressful.
Your home is almost always your biggest investment and worth taking care of. Plan carefully, and you will recoup much of the money you invested in improvements and upgrades. But don’t forget to enjoy the upgrades today while you focus on the future profit. Make good use of your home, because, as they say, there’s no place like it.
Investing in real estate can be a great way to boost income—if done wisely. On Tuesday, March 10, 2020 from 7 p.m. to 8 p.m. EDT, we'll be hosting a free webinar, Investing in Real Estate. This webinar will cover the pros and cons of different properties, resources for finding investment opportunities, and financing options. Sign up here.
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