Put your tax rebate to work for you

The Internal Revenue Service will start issuing economic-stimulus payments next week and continue through at least July 11. When you get yours depends on when you filed your tax return, whether you arranged for direct deposit, and the last two digits of your Social Security number.

Depending on your income, you could get up to $600 per individual and $1,200 per married couple, plus $300 for each qualifying child. The intent, as you probably know, is to boost consumer spending, and the economy as well.

If you're planning to spend your payment, our colleagues at the Home & Garden blog have compiled a list of top-performing home-related products that you might consider buying.

But you may have better uses for the money, such as using it to pay down debt. For example, if you're carrying a balance on your credit cards, you can put your check toward paying it off. Similarly, if you're facing even a modest reset of an adjustable-rate mortgage this month (for example, a 20 percent increase on a $1,500 monthly payment), the tax rebate can help cushion that blow.

If you don’t need to use your stimulus check to pay off debt—and you don’t plan to go on an economy-boosting shopping spree—there are plenty of ways to put the money to work for you. If you are saving for retirement, you can put it in an Individual Retirement Account or Roth IRA. If you are setting aside money to help pay college tuition for a child or grandchild, you can put your rebate into a 529 college savings plan.

Other options that don’t require large minimum deposits are bank CDs, many no-load index funds, and U.S. Savings Bonds or Treasury Inflation-Protected Securities (TIPS) via Treasury Direct. 

Using your economic stimulus check to jump-start your own savings could end up being the best $600 or $1,200 you ever spent.—Chris Horymski

Comments

[Austin Chu]

Good post. I work for a company that manages and tracks gift cards and we blogged about the issue a few days ago on savvywallet.com. There's a lot of talk of what to do with the IRS stimulus. There are several things to be wary of. One, there are some phishing scams going on, so be careful about giving away private information because the IRS won't ask for it. Secondly, be careful of the retailers giving you 10% bonuses in gift cards when you exchange your stimulus. Consider this: Last year, we spent $100B in gift cards, and $8B was lost or unredeemed. I'm sure that $8B could help this economy, heck even us. My advice? Take Chris's advice. As for me, I'm going to get $600. I'm putting half of it in my Roth IRA, and I'm blowing the rest of it when I go down to Argentina this summer and spending it on one run of heli-skiing off the Andes.

[k shepherd]

saving to pay it back at tax time2008