For many Coloradans, their tax refund this year will be a nice bonus. But how do you spend it?
The money comes from a long-time state budgeting rule, the Taxpayer Bill of Rights (TABOR), that requires the state to return excess revenue to taxpayers. The purpose of a Tabor refund is to provide citizens with a monetary reward for contributing more money than is necessary for government operations and services. In short, it’s taking some of your hard-earned tax dollars back from the government.
Pay Off Debt
Taxpayers are required by law to get a refund if their state revenue exceeds its spending limit. The TABOR (Taxpayer’s Bill of Rights) cap is based on a formula considering the state’s population growth and inflation.
Usually, these excess revenues are returned to taxpayers via mechanisms like property tax reimbursements for local governments, an income tax rate reduction, and sales tax refunds.
In recognition, lawmakers passed Senate Bill 233, which expedited the TABOR rebate as a quick-and-easy cashback check to qualified taxpayers. Those who filed their 2021 taxes by June 30 are expected to receive $750 for individual tax filers and $1,500 for joint filers this summer.
Save for Long-Term Investments
Whether saving for retirement, planning your kid’s college education, or treating yourself to an indulgent splurge, Colorado TABOR refund can help you achieve these goals.
The best way to save for long-term investments is to start early. The earlier you invest, the more time your money will have to grow through compounding.
When investing, consider your target goal and asset type. Ideally, your long-term assets will be diversified across multiple investment types to ensure you’re not exposed to too much risk or volatility.
If you’re a beginner, consider investing in a target-date fund or robo-advisor that automatically creates a diversified portfolio of stocks and bonds for you.
A diversified portfolio is essential for any financial plan but is necessary for long-term investing. In addition to diversifying your portfolio, you must regularly review and shuffle your investments for maximum returns.
Splurge
More than 2.4 million Colorado residents are set to receive a shiny new check in the mail thanks to a law passed by state lawmakers this year. This one is special, unlike the standard refunds in the mailbox.
If you’re a taxpayer with an eye for the big picture, you can figure out what to do with your windfall.
Using your coveted TABOR prize to its full potential is no small feat, and it will take a bit of finesse and finality.
Donate
Colorado taxpayers are getting a huge refund this summer, but it could go down the drain if they owe back taxes or child support.
The state must return excess revenue under the Taxpayer’s Bill of Rights, a constitutional cap on how much the state can keep in a year. The money is usually refunded through property tax reimbursements for local governments, an income tax rate reduction, or a sales tax refund.
Typically, TABOR refunds are issued when taxpayers file their taxes in the first quarter of the year. This year, however, lawmakers approved a particular payment that will be sent to citizens.
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