I received a surprise on Feb 29 - my tax refund showed up in my bank account!  I actually got part of my tax refund about 2 weeks prior.  Two parts to a tax refund - what is this guy talking about?  Well let me explain.  Since I run a small business part time, I receive some 1099 income that is not taxed.  I am supposed to pay estimated taxes on this money, although I didn’t in 2007.  I did set aside money to cover my expected taxes though.  Once I did my taxes early in February, after all my W2 income and 1099 income, my refund came out to be a cool $3737.  That’s not a bad refund at all. 

It’s better than it looks

However, the story isn’t done.  Remember that cash that I had set aside to pay for my business taxes?  Since I figured my 1099 income into my tax return, that cash suddenly became freed up.  I had a total of $5505.15 set aside for this purpose.  Combined with the $3737 that I got as a direct deposit, my refund effectively becomes a whopping $9242.15.  Now that is a tax refund.

2008 will be stunning

The really amazing thing about this tax refund is the potential.  I purchased my first house towards the end of the year, and didn’t pay enough in interest / property taxes to itemize deductions.  The refund I received was using the standard deduction.  Next year things will be different, and I will be able to itemize. 

Aren’t tax refunds bad?

In theory, yes tax refunds are bad.  After all, it’s nothing more than an interest-free loan to the federal government.  On the other hand, it feels really, really good to get back over nine thousand of my hard earned dollars in one lump sum.  From a psychological aspect, tax refunds are great.  They can make a big dent in certain bills, or provide padding for a savings account.

What did I use my refund for?

The bulk of my tax refund went straight into my money market account, to pad my emergency fund.  $2800 went to fund my Zecco account, so I can begin purchasing individual stocks commission-free.  And finally, $972.31 went to pay off my Best Buy credit card.  The balance was at 0%, but it was time to be rid of it.  And you’ll be proud - I used a grand total of $0 on wasteful items.  There are many things I’d like to purchase for my home, but I bought none of them.  How was your tax refund - did you use it for purchases or saving / investing?

Popularity: 18% [?]