How Homeowners Can Make the Most of Their Tax Refund This Year

The average taxpayer is expected to get a bigger refund this tax season under President Donald Trump’s One Big, Beautiful Bill Act, which allows certain homeowners to claim bigger deductions for the first time in their 2025 filings. 

The Tax Foundation, a nonpartisan think tank out of Washington, DC, estimates that the average taxpayer could receive a refund that’s anywhere from $300 to $1,000 more than in previous years.

This financial relief comes at a time when household expenses, from groceries to utility bills, continue to strain homeowners' budgets. Financial experts agree that there are a few best practices when it comes to using this extra cash flow. 

Insurance premiums

Nationwide, the cost of home insurance rose about 8% faster than overall inflation between 2018 and 2022, according to a report published by the Treasury Department in January last year.

Additionally, the Consumer Federation of America published a report last spring that found U.S. homeowners saw their insurance premiums increase by an average of 24% over the past three years, which amounts to a $21 billion total price hike for Americans.

Just as home insurance is getting more expensive, insurers are also pulling back from some regions more prone to natural disasters. 

With that in mind, it’s a good idea to use this refund money to invest in the safety of your home. Review your policy to find when your next premium is due, as insurance is typically paid quarterly, semiannually, and sometimes even annually.

While you’re looking at your plan, take a look at your coverage. Because insurance premiums become part of the mortgage payments through escrow, many homeowners forget about these costs and don't realize they can comparison shop.

"As insurance premiums go up and the escrow portion of the mortgage payments go up, they just assume it's normal. It's not a given," Shmuel Shayowitz with Approved Funding Corp. in River Edge, NJ, tells Realtor.com®. 

"Homeowners have the right, and should check their insurance policies annually and even shop it around to make sure it suits their current needs and that the premium is competitively priced."

Remodels

The average tax refund is projected to increase to approximately $4,000 this year, which is a decent amount of money to invest in your home. 

While it’s not enough for a large project like a kitchen or bathroom remodel, certain vital projects can be accomplished with this injection of cash. 

In 2026, Angi projects that a bedroom remodel could cost between $1,500 and $5,000 on average. A garage renovation could start at around $1,500; however, this could balloon to well into $50,000 if you’re not careful. 

Think smaller to make your money go further. Maybe you don’t need a whole new bathroom. For instance, adding a new shower could cost you as little as $1,100 when hiring a plumber for smaller jobs. And if you want to hire a painter to refresh one of the rooms in your house, the average price is about the same: $1,100.

Emergency savings

One of the best uses of your refund is to bolster your emergency savings. 

More than 2 in 5 Americans (43%) admitted they couldn't pay for a $1,000 emergency expense with their savings in a recent survey done by U.S. News. One-third said they don't have enough savings to cover even one month of living expenses.

Given the state of the economy, it's a good idea to be extra careful with your spending, especially when you're a homeowner.

“If you don’t have at least eight months of living expenses saved up, this is such a great use of any 2026 tax refund,” financial guru Suze Orman advises on her blog. 

“It is always smart to have this cash cushion to deal with life’s curveballs, but I think it may be especially smart this year, as we are beginning to see signs of unemployment inching up.”