I’m feeling super proud of myself for getting my taxes done early this year. We also got a nice refund this year. But is that a good thing?
There are two schools of thought on this subject that we’ll explore.
The first is that tax refunds are bad because it means you overpaid your taxes. The bigger the refund to more you overpaid. Basically, you gave Uncle Sam an interest free loan that he repays through your refund. This school of thought is based on the idea that you can make better use of the money whether that includes saving it or investing it. It makes sense and reminds me of something my dad used to tell me, “No one cares more about your money than you do.” I consider myself fairly good with money (thanks to my parents) and so I know from a rational standpoint I should work to minimize my refund and keep more my money in each paycheck. I already save for my property taxes so I’ve proven to myself that I can do it.
Which brings us to the second school of thought which is less about actual rational thought and more about a gut reaction. If I’m completely honest this is where I find myself. One year in my early career I had to write that check to Uncle Sam that put me into this school of thought. Even now I can remember the gut punch of owing taxes and I swore it would never happen again. It’s all about the feeling. A tax refund feels like a unexpected windfall which is the exact opposite of the feeling you get writing the check to send off with your return.
It’s too late for last year but maybe I’ll revisit this issue with my own taxes and take the emotion out of it and make a strictly rational decision.
In the meantime, I’ve got plans to enjoy the money from my refund.
Post author: Jamieson Mackay, CCUFC
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