How to Use Homebuyers Tax Credit Wisely

The tax return for those who have recently bought a home can be a huge financial relief. It is important, however, to use this tax return wisely because it is not free money; you have to pay it back.

Difficulty: Easy

Instructions

1. The smartest way to use your homebuyers tax credit is to use it to pay off (or down) any outstanding debts that you have. The reason for this is that the tax return is interest free, while the debt you owe is likely quite the opposite. So, by paying your interest heavy debt down with an interest free lump of money, you will actually be saving money in the long run (by not having to pay those interest fees).

2. Use the homeowner's tax return to start a small business. While you do have to pay the money back, it is in small, interest free increments over a long span of time. So, if you have been considering starting a small business, this tax return is an excellent opportunity for start up money. A recession is an ideal time to start a business because everything is cheaper, and with everything changing so much, you have a good shot at becoming established.

3. Use the tax return to invest in something else; like buying stocks. Again, the recession, as stressful as it is, can be a time of great opportunity. The only thing is that it takes a little money to make a little money...which is where the tax credit comes in in this instance. Investing in stocks while they are cheap is a smart way to go, and another way that maximizes the benefit of the homeowner's tax credit.

4. Another way to use this tax return is to take the money and put it into a high interest savings account (yes, they are few and far between but do still exist!). Even though you have to pay this money back, it is interest free. If you put it into a high interest savings account, it will actually make you money by accruing interest. This method is smart, and easy.

5. Whatever you do with this tax credit, don't blow it on something that does not appreciate; a big flat screen tv, a brand new car, etc. Again, this is not free money, you do have to pay this back; don't spend it on something carelessly so that it just adds up to another lump sum of debt.

Resources

• How to Find a High Interest Savings Account
• How to Make Smart Investments