Pondering how to spend your tax refund? These projects do more than pay for themselves.
Tempting as it may be, a new TV or much-deserved vacation might not be the smartest use of your tax refund. (Although they might be the most fun.) If you’re toying with ideas on how to spend your tax refund, you might want to make use of your tax windfall by making a few home upgrades instead. We’re not talking about merely painting a few walls and calling it a day. Instead, it’s about being strategic in choosing projects that will add more value to your home or allow you to take advantage of tax credits next year. Think about it: Once you factor in these benefits, it’s as if you’re getting paid to fix up your home.
We consulted home improvement experts with one goal in mind: figuring out how to maximize your tax refund by spending it on DIY home projects to boost your home’s value. Here’s what they recommend, depending on your refund amount.
How to spend your $500 tax refund
Upgrade the garden. Cleaning up the yard and caring for existing landscaping is one of those low-cost investments that can pay off big time. “Gardens are normally the first thing visitors will see when viewing your property, so investing in a clean and well-maintained garden will add 5% to 10% to the market value [of] your home,” says Chris Kervin of Skip Hire Services. With rented or borrowed tools, your project will cost in the neighborhood of $200. Bump up your budget a bit by finding a local company to pick up any excess lawn debris.
Swap out fixtures and accessories. These days, you can find energy-efficient faucets, light bulbs, showerheads, and fixtures. It’s not just a smart decision to install them for savings on energy and water bills; these additions can also pay off next year at tax time. Than Merrill, former host of A&E’s Flip This House and CEO of FortuneBuilders, says they would be considered a “capital improvement,” which qualifies homeowners for a deduction as high as 10% of the costs up to $500 (the nonbusiness energy property credit). If you have a little more money in your tax refund budget, also consider energy-efficient alternatives for your washer and dryer, HVAC, and toilets.
How to spend your $1,000 tax refund
Update your garage door. Although most of us don’t give garage updates a second thought, Lauren Makk, interior designer and home expert for ABC’s FABLife likens the impact the garage door makes to that of your main entrance. “If the front door is the ‘handshake,’ and the first thing that guests notice, then the garage is the ‘fist bump’! It can instantly upgrade your home and curb appeal and swag!” she says. But you don’t have to spring for all-new doors: You can paint it a new shade to better complement your existing exterior (skip the contrasting colors or bright white) or paint on faux windows for a more Arts and Crafts–style look.
Customize your closets. While this home upgrade doesn’t necessarily qualify for a tax break, it’ll certainly pay off when you’re ready to sell. (And give you plenty of enjoyment in between.) If you live in an area with older homes, your home for sale in Charleston, SC might be a lot more appealing with a custom closet in place. But labor costs for installing custom closets can sometimes cost more than the materials. If you’re ready to roll up your sleeves and aren’t afraid of following directions, you might want to invest in a modular closet system. Online design tools can help you maximize space.
How to spend your $2,000 tax refund
Install fiberglass insulation. “The only thing worse than throwing your money out the window is watching it escape through the nonexistent insulation in your attic,” Makk says. “But with a small investment of adequate insulation, you can guarantee that your money, and your heat, stay trapped under your roof … literally!” Doing so could qualify you for a tax credit of 10% of the product cost as well as add an estimated value of $2,338 to your home.
Treat yourself to wood flooring. Ah, yes, wood floors, the most common request of every potential buyer on every real estate–focused home show ever. Expect to pay anywhere from $7 to $12 per square foot for quality hardwood flooring. Of course, the final costs will be determined by the type of flooring you choose (and potentially whether you opt for professional installation). “However, experts agree that it is a ‘wow factor’ that can, conservatively, bring back 1.5 to two times its costs when you sell, so it’s well worth the investment,” Merrill says.
How to spend your $3,000 tax refund
Upgrade your front door. A new entryway or a statement front door can almost completely change the look of your home’s exterior. Phil Eby of Eby Exteriors also considers this a great investment for those looking to boost home value. “That first impression someone has when they pull up to a home is significant in determining value,” he says. “It’s not unreasonable at all to imagine that an investment of $2,000 to $4,000 could be returned instantly.” Your door could also be eligible for tax credits if it’s an Energy Star–certified model.
Refresh your bathroom. “You don’t have to do a complete floor-to-ceiling remodel to enjoy a new look and reap benefits if you’re planning to sell,” says J.B. Sassano of Mr. Handyman. A new shower door, updating the floor with new tiles, regrouting, adding a vanity, or installing new fixtures are all cost-effective ways to add more value to the bathroom. On average, even a minor bathroom remodel recoups approximately 70% of costs.
How to spend your $4,000 tax refund
Repaint your exterior. A fresh coat of new color practically makes your home feel brand-new. If you’d rather not go the DIY route — this is a pretty labor-intensive update, depending on the size of your house — expect labor to be around $1,200 for a 2,100-square-foot, two-story home and quality paint to run you up to $70 a gallon. But no matter the total costs, it’s a project that really pays off. “It has the highest ROI of any home improvement project, with a national average of 90%,” Merrill says.