Are you getting back a tax refund this year? If so, what are your plans for the money? Have you considered using it on a new passive income opportunity? Investing your income tax refund into an asset that will generate additional income is a great opportunity to build your wealth. Even if you are not getting back a refund check this year, what about other lump sums of money you may have received in the past? Investing money that is not part of your normal pay is nice because you are probably not relying on that income for everyday life. Regardless the size of the refund or other lump sum payment (i.e. inheritance), choosing to invest this money is a huge step towards financial independence.
There are so many possibilities for creating new passive income streams. Some are free while others cost thousands and thousands of dollars to start. You can begin creating free income opportunities anytime. On the other hand, having the available funds to purchase cash flow producing assets is not as common. That is why using payments like income tax refunds to build your wealth offers a tremendous opportunity – regardless the size of the check!
Here are 18 passive income opportunities that you could invest a portion or all of your income tax refund into. You may notice that some of these opportunities cost a few dollars while others costs thousands of dollars.
- Build a certificate of deposit ladder.
- Add a few dividend growth stocks to your portfolio.
- Start a lawn care business and hire someone to run it.
- Use the money to purchase a franchise.
- Put it towards a down payment on a rental property.
- Buy a domain name and start a niche blog.
- Hire a ghost writer to create material for eHow and other content sites.
- Open up a high yield savings account.
- Pay for an email newsletter provider and deliver quality content to your readers.
- Write an eBook and use your tax return to pay to have it published.
- Create an online membership site and pay someone to produce quality content for your readers.
- Hire a freelance developer to create an iPhone Application.
- Invest in Tax Liens that can pay a very high yield.
- Buy a secure investment like municipal bonds.
- Purchase internet real estate that is cash flow positive.
- Use your tax refund to purchase educational materials like the One Week Marketing plan to start a passive income stream.
- Use your refund check to participate in peer lending.
- Start an online forum.
Whether you believe the list above is residual income, investment income, or passive income – the main point is they all have the possibility to earn you back money. Instead of spending your refund check on a new television or latest tech gadget, consider buying something that will pay you back. Think of all the possibilities of how you could use your passive income in the future (which should be much larger) as opposed to what you can purchase immediately.
Are you investing your tax refund into a passive income opportunity?
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I owed this year so I don’t think I am going to get much leverage for a passive income opportunity. I like the list, even though several of these require a pretty substantial refund.
Kyle’s last blog post..Town Hall For Hope, Thoughts and Summary
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pfincome Reply:
April 26th, 2009 at 7:18 am
@Kyle – Yeah, some of the ideas require a lot of capital while others only need a few dollars like starting a blog.
pfincome’s last blog post..18 Passive Income Opportunities to use your Tax Refund on
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Well, sort of. I’m getting my house painted. Since 25% of the house is a one bedroom apartment that I rent out, I guess you could say that I am investing in my “passive” income generator. (Though, I still think being a landlord is anything but passive.) The good thing is that I will be able to write 25% of the paint job off of my taxes, which will be nice for next year.
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pfincome Reply:
April 26th, 2009 at 7:20 am
@Dawn – I completely agree that being a landlord alone is not passive income. However, if you can hire a property manager or someone to take care of everything for you, then I think it can be lumped into that category.
pfincome’s last blog post..18 Passive Income Opportunities to use your Tax Refund on
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Thanks for linking to me! I would add that buying dividend stocks is a great idea especially if you do it in a tax-deferred account such as a ROTH IRA. That way uncle SAM would see very little in taxes from his tax refund
Dividend Growth Investor’s last blog post..Abbott Labs (ABT) Dividend Stock Analysis
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pfincome Reply:
April 26th, 2009 at 7:21 am
@DGI – Great point! Saving taxes on your tax refund!
pfincome’s last blog post..18 Passive Income Opportunities to use your Tax Refund on
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Dividend Growth Investor Reply:
April 26th, 2009 at 1:32 pm
PFI,
I see you are already working on responding to users ASAP. Great job!
DGI
Dividend Growth Investor’s last blog post..10 Weekend Links
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Thanks for the great list and for the link love! Always appreciated. I love the idea of creating iphone applications. This is huge and growing like a weed.
The Almost Millionaire’s last blog post..Tips for New Bloggers
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passivefamilyincome Reply:
May 10th, 2009 at 12:35 am
@TAM – Anytime. Yeah, the iPhone stuff is huge. Now I just got to go get one!
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Pay off a credit card. The interest you save isn’t income, but it’s reduces your expenses, which will increase the cash you keep.
-Nate
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passivefamilyincome Reply:
May 10th, 2009 at 12:16 am
@Nate – Great example! Part of building passive income (in my opinion) is to reduce your payments and create positive cash flow. Congrats!
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Even though the stock market has increased over the last few months there are still some great dividend paying stocks out there worth looking at. Compared to the interest rate on saving accounts at the moment, I think I know where I will be putting my refund.
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passivefamilyincome Reply:
May 10th, 2009 at 12:14 am
@David – Agreed. The market has seen a nice run but there are still some good dividend values out there. I try and move a portion of my passive income into dividend stocks when I can. What’s on your radar?
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David Reply:
May 10th, 2009 at 8:25 am
I have my eye on a few blue chips here in Europe, Vodafone, BP, Shell, France Telecom, Scotish and Southern Electricity, United Utilities to name a few. What about yourself, any suggestions?
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Great post! You really gave a lot of suggestions on how to make your income tax refund work for you.
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There are quite a number of options here to choose from. The most important part here for me is the good idea you shared about making more money from tax refund. Thanks…
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pfincome Reply:
February 22nd, 2010 at 11:20 am
@Menandro – Thanks. I think it is important to make your money work for you any chance you can get. Since most people don’t get big windfalls too often, a tax refund can be a perfect opportunity to put your dollars working to create more and more income.
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