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Best of: Ways to Spend an Income Tax Refund

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You did the math and as it turns out, you're getting an income tax refund! Now how to spend it... ©djshaw/stock.xchng

According to the IRS, the average tax refund for 2011 is $2,985. If you are one of the lucky nearly 65 million Americans to receive one, you’ve got some planning (and maybe some spending) to do. And while saving your income tax refund is a prudent, smart option, the reality is some, if not all of the money that many folks receive in April gets spent.

Here are our favorite ways to pass the buck:

Amanda:

Vacation: When we get to spend our tax refund on a family trip, I’m definitely in (and going to) a happy place. And since that’s what we’re doing this year, I’m ecstatic. This time around we are taking the kids on a surprise trip to Disney World, but in the past our April bonus has funded a jaunt to Colorado and a cruise to Canada. When I was younger my parents used to use their tax refund to pay for our family vacations and it’s a tradition I’m happy to continue.

House repairs/improvements: When we have to spend money on the house, I’m not so much with the happy as I mentioned above. Yes, investing in our home is a good idea. When it’s necessary — a clogged pipe, a filled cesspool, torn aluminum siding — I’m glad that we have the money in our account, not thrilled we have to spend it on something so useful.

First birthday party: Last year our youngest son turned one and we wanted to celebrate. Big time. So we did, inviting 75 friends and family members to a bash held at a beach club over Memorial Day weekend. Tons of food, live music, toys and games for all the kids. Was it extravagant? Yup. Will he remember it? Nope. Was it one of my best days ever? For sure. It was six hours of pure fun and I know our family will never forget it.

Suzanne:

Fun Home Improvements: While Amanda talks about the run-of-the-mill home improvements which sometimes need doing, we like to throw our extra funds into more visible and enjoyable home projects. Like buying furniture and new carpeting for our family room, which is what we did this year. Gone are the fifteen-year-old couches. Bye-bye big TV that takes up half the room. And hello cushy rugs without blue marker. If the refunds were as big as they used to be, maybe we could plan on doing the kitchen next year, but we might have to find a larger pot of gold for that endeavor.

Summer Camp: We kind of have no choice on this one, as it also doubles as day care during the summer. Considering what it costs to send my son to his day camp, it certainly qualifies as a luxury in my mind since it wouldn’t otherwise fit into our annual budget.  Besides, if I don’t get to lounge by the pool and play tennis every day, somebody should.

Are you getting a income tax refund? How will you spend it?