Author: Chelsea Culp

When you receive your tax refund, how do you usually spend it? If you’re one of the many people that views income tax as “extra money,” you might want to change your approach.

Much of your tax refund is actually hard-earned money that you worked for throughout the year, so you should spend it wisely. If you think you’ll make better use of your money by receiving more each paycheck, instead of one lump sum through your refund, consider readjusting your tax withholding by submitting a new IRS Form W-4 at work.

You should also find out if you qualify for refundable tax credits. Refundable tax credits can reduce the amount of taxes you owe or increase your refund. The Earned Income Tax Credit is a refundable tax credit that you may qualify for if you earned up to $53,930 last year. You might also qualify for The Child and Dependent Care Credit, The Child Tax Credit, The Retirement Savings Contributions Credit or the American Opportunity Tax Credit. These tax credits could really make a difference in your refund if you’re eligible.

Here are three ways you can use your refund to get back on track financially instead of spending it like extra cash.

1. You can use your refund to pay down credit card debt.

Paying down your credit card debt is one of the best ways to spend your income tax because once you get rid of your past debt, you can focus on your financial future. If you have a lingering balance that you’ve carried over for several months, getting rid of this consumer debt should be your top priority.

Your credit card balance increases not only by what you purchase, but also by added compounded interest, so the longer you wait, the more you’ll pay. Use that “extra money” to pay off what you owe. You’ll feel much better when you get the burden of debt off your chest.

2. You can use your refund to build a rainy day fund.

If you lost your job today, would you be able to sustain yourself for the next three to six months? If you answered “no” to that question, you should start building an emergency savings fund. Your money is always better off in your account than someone else’s, that’s why you should pay yourself first and set money aside for your emergency savings fund every payday.

Whether you catch a flat tire, crack your cell phone or need to travel for a family situation, you’re going to wish you had money set aside to solve your problem. Use your “extra money” to jumpstart your emergency savings.

Here’s an added bonus: if you save at least $50 of your refund by splitting it into two accounts using IRS Form 8888, you can enter SaveYourRefund for a chance to win up to $10,000. Learn more about the SaveYourRefund promotion and see how you can save to win.

3. You can use your refund to invest in your future.

It’s never too early to start planning for retirement or saving for your child’s education. Use your “extra money” to get a head start on your financial future.

Consider automatically saving a percentage of your paycheck into an Individual Retirement Account (IRA) or a 401(k). Be sure to maximize your retirement savings by enrolling in employer match if that option is available to you.

If you have a child that you hope will attend college one day, you can begin saving for their education now. Consider starting a 529 savings plan to save for your child’s education.

When you receive your tax refund, make the best of it. Don’t spend it on temporary things like clothes and shoes. Invest in yourself today so you can reach your financial goals tomorrow.

Written by Darlene Aderoju

Oftentimes, individuals with disabilities may not be familiar with savings options that are available to them or they may be afraid to save money due to the fear of jeopardizing public benefits. There are a wide variety of saving strategies that individuals with disabilities can potentially access to achieve their savings goal and build their financial well-being.

At National Disability Institute, we focus on five key strategies that can assist an individual to build a life of work, savings and asset development. The five key strategies include:

The five key strategies create opportunities for individuals to learn more about saving strategies.

Benefits Planning and Work Supports

There are a variety of savings options that individuals can access if they are receiving a needs-based benefit such as Supplemental Security Income (SSI) through the Social Security Administration (SSA). The Social Security Administration offers work incentives that support an individual to go back to work and maintain employment while receiving a public benefit. An example of a work incentive that promotes savings is the Plan to Achieve Self-Support, often referred to as PASS. Plan to Achieve Self-Support is a plan for an individual’s future. PASS lets an individual use income or other things they own to help them reach their work goals. For example, an individual could set aside money to go to school to get specialized training for a job or to start a business. To learn more about PASS or other work incentives, review Social Security Administration’s Red Book at https://www.ssa.gov/redbook/documents/TheRedBook2016.pdf.

Employment

Employment is important for an individual to build their financial well-being. We need wages to save money. There are a variety of employment services that an individual with a disability can access to obtain, maintain or enhance their employment status. A great starting point is to visit an American Job Center (AJC). American Job Centers are designed to provide a full range of assistance to job seekers under one roof. American Job Centers offer:

• • training referrals
  • career counseling
  • job listings, and
  • similar employment-related services

AJCs are also called Workforce Centers or One Stop Centers. To locate an AJC, visit: www.servicelocator.org/.

Free Tax Preparation

Tax time is an ideal time to encourage individuals to save money when they receive their tax return. Oftentimes, individuals with disabilities may not file a tax return because of low wages or for fear that, if they do file and get a tax refund, that they will lose their public benefits. Refunds received from the Earned Income Tax Credit (EITC or EIC), the Child Tax Credit (CTC) or other refundable credits are not considered income. It also is not counted as a resource for at least 12 months from when an individual receives it for benefits or assistance under any Federal program or under any State or local program financed in whole or in part with Federal funds. To learn more about disability and tax services visit: https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/disability-and-earned-income-tax-credit.

Financial Education

Financial education is an important strategy for individuals to build their financial well-being. Oftentimes, financial education may not be delivered to individuals with disabilities, though it provides the knowledge and skills they need to build their financial well-being. There are a variety of financial education curriculum and tools available to help an individual learn about savings. FDIC’s Money Smart provides an accessible curriculum that is frequently used by disability organizations. lLearn more about financial education tools and resources here., visit https://www.nationaldisabilityinstitute.org/downloads/.

Asset Development

Asset Development is the final key strategy to assist an individual to build their financial well-being. The previous strategies help move an individual to this point. ABLE accounts are a savings option for individuals with disabilities who may qualify for these accounts. These accounts allow an individual to save up to $15,000 per year without these funds impacting an individual’s needs-based benefit, such as Supplemental Security Income. Money saved in an ABLE account can be used to pay for qualified disability expenses (QDEs). To learn more about ABLE accounts, visit: https://www.ablenrc.org/.

National Disability Institute is the first national organization committed exclusively to championing economic empowerment, asset development and financial stability for all persons across the full spectrum of disabilities. We affect change through public education, training, technical assistance and policy development to help the nearly one in three Americans with disabilities living in poverty take steps toward building brighter financial futures. To learn more, visit www.nationaldisabilityinstitute.org. If you have specific questions on savings options for persons with disabilities, please send an email to ask@ndi-inc.org.

AUTHOR: By Michael R. Roush, Director, Real Economic Impact Network, National Disability Institute