It’s almost time for people to begin receiving their tax refunds. If you get one, what will you do with it?

The answer will depend somewhat on the size of your refund. Last year, the average was $3,167, according to the Internal Revenue Service’s Filing Season Statistics report.

Whatever the size of your refund, you’ll want to maximize its benefit. Here are some suggestions:

• Contribute to your IRA. If you receive $3,167, it could go a long way toward funding your IRA for the year, but any amount would help. You have until April 15 to contribute for the 2025 tax year, but if you’ve already “maxed out” contributions, you could use your refund for 2026, when the annual contribution limit for an IRA is $7,500, or $8,600 if you’re 50 or older. Beginning early toward fully funding your IRA can help reduce the pressure of coming up with large amounts later.

• Build an emergency fund. Your tax refund could help you start or expand an emergency fund. It’s a good idea to keep three to six months’ worth of living expenses in such a fund, with the money kept in a liquid, low-risk account, separate from the funds you use for your daily expenses. You might need to draw on this fund for unexpected expenses, such as a major home or car repair or a large medical bill. Without an emergency fund in place, you might be tempted to dip into your IRA or other retirement accounts to pay for these types of costs, and that could be expensive, resulting in taxes, penalties and lost opportunities for growth.

• Contribute to a 529 plan. If you have children or grandchildren and want to support their education, you might consider investing in a 529 education savings plan. Earnings and withdrawals are federally tax free, provided the money is used for qualified education expenses. Your 529 plan may provide state tax benefits, too. (It’s possible, though, that 529 withdrawals could affect financial aid packages, depending on who owns the account.) A 529 plan can be used to help pay for college, accredited trade school programs, some K-12 expenses and even some student loans.

• Pay down debts. You may wish you could reduce your debt load. Your tax refund could offer you that chance. But which debts should you tackle first? You could follow the “snowball” method by paying off the smallest of your loans or debts as quickly as possible. Or you could choose the “avalanche” route by making minimum payments on all debts and using extra funds – such as your tax refund – to pay off those with the highest interest rates. Either method could help you save money in the long term.

• Prepare for other tax obligations. Your refund can also be set aside in a separate savings account to pay estimated quarterly taxes or personal property or real estate taxes.

It’s not often that you receive a financial windfall such as a tax refund – so think carefully about how you can maximize its benefits.

— This article was written by Edward Jones for use by your local Edward Jones Financial Advisor. Edward Jones, Member SIPC