Making the Most of Your Tax Return | Affinity Capital

July 6, 2021

Tax season is officially over, and many of us are looking forward to our tax returns hitting our bank accounts. While some may choose to spend their return on a special treat, others may want to use the extra funds to boost their investments. If you are trying to decide where to spend (or save) it, here are some ideas for how to make the most of your tax return. 

Pay Down Your Debt 

Paying down your debts is one of the best ways to use extra funds when you have them. Debt can put a damper on your financial health by affecting your credit score—as well as your ability to save and invest—so keeping debt to a minimum is a smart financial decision. 

Pay your highest-interest debt, like a credit card or auto loan, first. In general, it is a good practice to keep your debt lower than 30% of your total available credit—if you are carrying balances higher than this, you should consider paying them down or even refinancing to make them easier to manage. Using your tax return to pay off a portion of your debt can give you a good head start when it comes to managing your finances.

Build Up an Emergency Fund 

Once your debt is taken care of, the next step to financial health is to make sure you have an adequate emergency fund. In general, it is a good idea to have easily accessible money set aside for unexpected expenses like medical emergencies, home repairs or a sudden job loss. If you have an emergency fund already, take note of how many months of expenses it would cover— try to aim for three to six months’ worth. 

For those who do not have an emergency fund, this is a great time to start. Set a goal for how much you want to save and start with your tax refund. Even if you begin with a small amount in savings, you can continue to contribute to your emergency fund as you are able, until you’re comfortable with the amount you may need. 

Treat Yourself 

If your debt is under control, you may choose to spend your tax return instead. It may be a great time to consider purchasing something you normally would not spend money on—whether it’s a wardrobe update or a house renovation. Especially after such a long and stressful year, we all deserve a little something for ourselves. Depending on the amount of your return, it may be possible for you to use it to treat yourself to something small and save or invest the rest.  

Boost Your Investments 

Another way to make the most of your tax return is to invest your money. If you have existing investments, you may want to give them a boost by adding capital to your accounts. This may mean making an extra contribution to your IRA or buying a few more shares of stocks. 

If you have never invested before, using your tax return can provide a way to get started without taking any additional funds out of your regular monthly budget. If you are considering saving your tax return over spending it, it can be beneficial to invest the funds because they have the potential to grow over time.

If you’re unsure of where to begin, please contact us for a complimentary financial analysis to determine the best types of investments for your specific needs. 

The Order of Returns

April 29, 2026
The first four months of 2026 have been a useful reminder that markets do not move in straight lines. After entering the year at record highs, U.S. equities pulled back sharply on geopolitical tensions tied to the Iran conflict, with the S&P 500 coming close to a ten percent decline before recovering much of that ground. Volatility has returned again on rising energy prices and a softer tone from the technology sector that has carried so much of this cycle’s leadership. Oil sits near one hundred dollars per barrel, the ten-year Treasury yield hovers near four and a half percent, and traditional diversification between stocks and bonds has been less reliable than many investors have come to expect. None of this changes our long-term view. It does sharpen a conversation we believe every household within ten years of retirement, on either side of that line, should be having right now. THE QUESTION THAT MATTERS MOST After more than thirty years of advising families through every kind of market, I have come to believe that one question matters more than almost any other in retirement planning. It is not what your average return will be. It is not even how much you have saved. The question is this: in what order will those returns arrive, and what will the portfolio be doing when they do? Two households can finish their working years with identical balances and identical long-term average returns. One can run out of money. One can remain wealthy for life. The only difference between them is the order in which good and bad years happened to fall. WHY ORDER MATTERS MORE THAN AVERAGE When a portfolio is accumulating, a market drop is something close to a gift. Contributions buy more shares at lower prices. When a portfolio is distributing, the same drop is a wound. Every dollar withdrawn during a downturn cannot participate in the recovery, and the base from which all future growth compounds is permanently smaller. Retirees who began withdrawals in 1973, in 2000, or in 2008 lived through outcomes quite different from those who retired even two or three years earlier or later. Same averages over the long arc. Very different lives for the family. THE RETIREMENT RED ZONE Retirement planning does not begin the year you stop working. It begins five to ten years before. We sometimes call that window the retirement red zone, and it is the period in which the wrong portfolio, held too long, can do real and lasting damage. A portfolio that served someone beautifully through their fifties is rarely the right portfolio for the first decade of withdrawals. Waiting until the retirement date itself to reposition is not a plan. It is a hope. HOW WE REPOSITION PORTFOLIOS Repositioning is a multi-year process, not a single trade. We model honest cash-flow needs in dollars. We construct one to three years of withdrawals in stable, liquid reserves so no client is ever forced to sell equities into a falling market. We build an intermediate layer of high-quality bonds to refill those reserves over time. We sequence withdrawals across taxable, traditional, and Roth accounts to manage lifetime tax cost, often using the years before Social Security and required minimum distributions for thoughtful Roth conversions. We rightsized concentrated and legacy positions over multiple tax years. And we stress test the plan against a meaningful market drop in year one before any client crosses the retirement line. A CLOSING THOUGHT Sequence risk is not really a math problem. It is a human one. The discipline to reposition during good markets, when it can feel almost unnecessary, is what separates retirees who sleep well from those who reach for the wrong decision at the worst possible moment. By the time a dramatic market drop arrives, the work either has been done or it has not. Whether you are a long-time client of Affinity Capital or considering a relationship with our firm, we would welcome a conversation about how your portfolio is positioned for the years ahead.

What a Noisy World Means for Your Portfolio

March 26, 2026
If it feels like the news cycle has been louder than usual lately, that's because it has been. Geopolitical tensions across multiple regions, shifting U.S. trade relationships, and a rapidly changing domestic political landscape are all contributing to elevated market volatility. We want to take a moment to share our perspectives on what this means for your portfolio and for the broader inflation picture. What's Happening Globally We are in an extraordinary moment. The U.S. is reshaping its economic and geopolitical relationships in ways that are accelerating global fragmentation and creating real uncertainty for businesses and investors alike. Energy markets have been particularly sensitive to these developments, with commodity prices responding sharply to supply disruptions and shipping route concerns. Most forecasters believe current disruptions are short-lived and expect prices to moderate as conditions stabilize, but the range of outcomes remains wide. Closer to home, affordability has become the defining political issue heading into the midterm cycle. The administration is rolling out consumer-focused measures around housing costs, prescription drugs, and credit, which could benefit some sectors while creating headwinds for others. What This Means for Inflation The inflation picture is nuanced right now. If current disruptions prove temporary, the impact on consumer prices should remain limited. However, if tensions persist and energy prices stay elevated, we expect to see some upward pressure on inflation over time. It is worth keeping in mind that energy prices, while attention-grabbing, are historically less influential on long-term inflation than factors like wage growth and domestic demand. The broader U.S. picture reflects a tension between tariff-driven price pressure on one side and softening economic momentum on the other. The Fed is navigating this carefully, balancing inflation concerns against labor market signals. For now, rates appear likely to hold steady near term, with modest cuts possible later in the year if conditions warrant. How We're Thinking About Your Portfolio Volatility is uncomfortable, but it is not the enemy of long-term wealth building. History has demonstrated consistently that market disruptions driven by geopolitical events tend to be temporary in nature. Long-term investors are best served by staying anchored to their goals and risk parameters rather than reacting to the news of the day. This environment does reinforce several principles we apply in managing your portfolio: maintaining thoughtful diversification, ensuring fixed income allocations reflect your actual income needs, and being intentional about where inflation and energy exposure sits within your overall strategy. We are monitoring developments closely and will continue to adjust positioning as the picture becomes clearer. As always, if anything here raises questions specific to your situation, please reach out. That conversation is exactly what we are here for.

What the New Tax Legislations Mean for Your Tax Plan in 2026

March 12, 2026
If you’ve been paying attention to the tax landscape this year, you already know the ground has shifted. New tax legislations signed into law last July made sweeping changes to the federal tax code—and for high-net-worth individuals and families, the implications are significant. Let’s cut through the noise and share what we think matters most. First, the seven-bracket individual rate structure from the 2017 Tax Cuts and Jobs Act is now permanent. That means the top marginal rate stays at 37 percent. For years, many of us were planning around the possibility that rates would snap back to 39.6 percent in 2026. That’s off the table. If you’d been accelerating income into prior years to avoid a potential rate increase, it’s time to reassess that strategy. Second, the standard deduction was made permanent at its elevated level. For most of our clients, this doesn’t change the calculus—you’re likely itemizing anyway—but it’s worth noting if you have family members in simpler tax situations. Third, and this is the big one for estate planning: the federal lifetime gift and estate tax exemption is now permanently set at $15 million per individual, indexed for inflation. No more sunset. For married couples, that’s $30 million you can transfer free of federal estate tax—and that number will only grow with inflation adjustments. If you’ve been hesitating on gifting strategies because of uncertainty around the exemption, that uncertainty is gone. There are also new wrinkles in the charitable deduction rules. Starting this year, itemized charitable deductions are only available for amounts exceeding 0.5 percent of your adjusted gross income, and the deduction is capped at 35 percent for taxpayers in the top bracket. That’s a meaningful change from the prior 60 percent AGI limit for cash gifts. If philanthropy is part of your wealth plan—and for many of our clients, it is—we need to rethink how and when you give. The SALT deduction cap has also been adjusted, rising to roughly $40,000 with phase-outs starting around $500,000 in modified AGI. For those of us in Texas, the lack of a state income tax softens this blow, but if you hold property in high-tax states, it’s still relevant. Here’s our takeaway after thirty years of doing this: certainty in the tax code is rare. When you get it, act on it. The permanent nature of these provisions gives us a genuine planning window. Let’s not waste it. If you haven’t reviewed your tax plan since last summer, let’s schedule a conversation.