Virginia CPAs Offer Ten Smart Ways to Spend Your Tax Rebate

Starting at the end of April, the U.S. Treasury will begin sending economic stimulus payments — called tax rebates — to more than 130 million households. The Virginia Society of Certified Public Accountants (VSCPA) offers the following tips to help consumers make the most of this extra money.

1. Prepare for hard times

Many consumers are feeling financially strapped or worrying about the U.S. economy. Using your tax rebate to start a long-term cash reserve savings program may help insulate you and your family from future economic bumps.

2. Pay down debt

One of the best ways you can use your tax rebate is to pay down credit card debt. Not only will you reduce — or hopefully eliminate — your monthly credit card payments, but you can save money on the interest you would have paid. If you have several credit cards, pay off the one with the highest interest rate first, then work your way down.

3. Create an emergency fund

Most financial experts recommend that you set aside at least six months of income in an emergency fund. Without an emergency fund, you could end up dipping into your investments or relying on credit cards to pay for new tires for the car or dental work not covered by insurance. Keep the money in a savings or money market account that you can easily access in an emergency.

4. Fix up your home

If you're a homeowner, one of the best ways to spend your tax rebate is to invest it in maintaining or improving your home. A fresh coat of paint, an updated bathroom or some new landscaping not only increases the value of your home, but also improves your quality of life.

5. Boost your credentials

How about using your rebate to take your career to the next level? Sign up for a course and learn new skills. If you're thinking of changing jobs, attend a conference or a seminar where you can network with others in your field.

6. Fund your retirement

Consider using your rebate to open or add to a traditional or Roth Individual Retirement Account (IRA). Both offer tax advantages and can help ensure a secure retirement. The contribution limit for 2008 is $5,000 or your taxable compensation for the year, whichever is less. Taxpayers who are ages 50 and older can contribute an extra $1,000.

7. Think tuition

If college education costs are in your future, use your rebate to start or add to a 529 college savings plan. Your kids are your most important asset, so invest in them by saving now for their education.

8. Contribute to charity

Donate a portion of your rebate to your favorite charity. Not only will you be helping someone in need, but you may earn a tax deduction for next year's tax return.

9. Get a jump on payments

Consider putting some money aside to pay for annual bills, such as insurance premiums and health club memberships, that you tend to forget about until they come due.

10. Create a financial plan

A comprehensive financial plan is a great way to make your rebate pay off. Make an appointment with a CPA who can help you plan your financial future.

Find more money management information and free financial resources by visiting the VSCPA’s consumer Web site at www.FinancialFitness.org.

The Virginia Society of Certified Public Accountants (VSCPA) is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has approximately 8,300 members who work in public accounting, industry, government and education. For more information, please visit the Press Room on the VSCPA Web site at www.vscpa.com, e-mail vscpa@vscpa.com or call (800) 733-8272. To search for a CPA in your geographic region, visit www.FinancialFitness.org and click on “Find a CPA.”