Getting a Tax Refund in 2026? Here's the Best Thing to Do With It.

At this point, the IRS is officially accepting returns for the 2025 tax year. And the sooner you get your taxes submitted, the sooner a refund might come your way.

You may be inclined to splurge with your tax refund, since it's basically free money, right? Wrong.

Image source: Getty Images.

Your tax refund is not a gift from the IRS at all. For this reason, you should pledge to use that money strategically.

Don't blow your tax refund

Many people think of tax refunds as free money. In reality, a tax refund is money you loaned the government for nothing in return.

When you get a tax refund, it's the IRS simply returning money that you were entitled to last year. For this reason, rather than use your tax refund to treat yourself to something fun, you should use it to improve your finances in some way. That could mean:

• Adding money to your emergency fund
• Boosting your retirement savings
• Paying off a high-interest loan or credit card balance
• Fixing small issues with your home or car so they don't escalate and cost you more down the line

Of course, if you're doing great financially, and you're caught up on your various financial goals, then there's no problem spending your tax refund on something fun. But many people are sorely behind on savings and loaded with debt.

If you're one of them, be smart with that money, and recognize that you have an opportunity to improve your finances in a meaningful way.

The Motley Fool has a disclosure policy.