With tax season currently in full swing, many Americans are filing their returns and receiving refunds, only to be left with the question: What should I do with this money? It can be nice to splurge a little bit on things that you want, but it might be a good idea to put your money to work for long-term benefits. Some people opt to put their tax refund into investment or retirement plans, but using your money for home improvement is also an investment. Making upgrades to your home meets a current need, while also increasing its value in the long run. Here are some tips to help you invest your tax refund in home improvement.
How to Finance
Depending on the amount of your tax refund, you may be able to choose between various home projects. According to the latest data from the IRS, the average tax refund in 2020 is currently $2,818. While it may not be enough for large overhauls of your home, it’s still plenty of money to make some considerable improvements. In reality, there may be a range of prices for every project based on the size of your home, the cost of materials, and whether or not you need to hire a contractor.
Even if you can’t cover the full cost of a home improvement project with your tax refund, it’s still helpful to cover some of the costs. If you need some additional funding, you can always get creative with how you find it. Some financial institutions allow you to get an advance on your paycheck, which may be particularly helpful if you’re stuck in limbo during the middle of a project. For larger projects that require serious funding, home repair loans are another option.
There are several projects for the interior of your home that can improve both the aesthetic appeal of your house and its value. Two important factors to keep in mind when choosing your project are 1) the average cost of the project and 2) the return on investment. The following projects meet both of these factors:
Minor Kitchen Remodel
Major kitchen remodels can drive up costs to enormous heights. However, you can still make some minor improvements and stay within your budget. The average cost of counter top installation ($2,819) is only one dollar more than the average tax refund at $2,818. For less than $100 more, you could install new flooring. And while the average cost of new cabinets is roughly $4,600, it may be possible to complete the project with far lesser costs. One way that you could save money is by replacing the cabinets yourself, if you’re up to it!
Small Bathroom Renovation
Just like with kitchen remodeling projects, renovations to your bathroom can also require large budgets. Yet, by the same measure, there are many affordable upgrades that you can make. Because of their addition to your home value, improvements to a bathroom are one of the best home improvements in terms of return on investment as well. You can upgrade a half bathroom to a full bath with the addition of a bathtub for roughly $2,800 or a shower for $3,100. For a fraction of the cost, you can replace or install a new faucet, too.
While it may be nice to make cosmetic upgrades to your home, you should focus on home maintenance first if you have structural issues. Although the prices can range widely, $653 to repair vs. $6,626 to replace, on average, making improvements to your roof may recoup nearly all of the costs and save you from damage in the long run. Another priority to fix could be a basement that floods by installing a sump pump for roughly $1,000. Until you can finish these projects, however, you should consider moving your furniture into a storage unit to prevent any damage.
The idea of curb appeal is not only aesthetically pleasing, but it’s also an important factor should you choose to sell your home. As with interior improvements, think about which projects will give you the best bang for your buck.
Building a deck is one of the more expensive home improvement projects, costing just shy of $7,000 on average. However, this is another one of those worthy do-it-yourself projects if you have the skills. This DIY wooden deck only cost $900 to construct, which was spent on the price of materials. With decks, wood is the material of choice because it’s easy to work with and provides a higher yield return on investment compared to composite materials.
Garage Door Replacement
Whether you’re replacing your garage door out of necessity or for cosmetic reasons, it’s a project that can be achieved for less than the average tax refund. A simple repair should only cost a few hundred dollars, but you can always install a new one for just over $1,000. In some cases, you could recoup over 100% of the costs, meaning that you could make money on this project if you choose to sell your home.
Installing vinyl windows not only gives your home a modern look, but can also help improve your home’s energy efficiency. For these reasons, you can save money in the long run through lower energy bills and a higher resale value. Naturally, the cost of this project is partially dependent on the number of windows installed. Although the average cost is pricey at $4,745, most vinyl windows have a 20- or 25-year warranty. To find a reputable contractor for this or any other project, you can compare services on sites dedicated to professional reviews.
Whether you have a long-standing project you haven’t been able to fund or have extra money that you’re looking to put towards a worthy endeavor, home improvement projects are a great way to spend your tax refund. Taking into consideration the size of your home, material prices, and hiring professionals, these projects may vary in cost. Luckily, there are always plenty of affordable options that will provide added value to your home.