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The average American gets several thousand dollars back from the IRS after filing their tax returns. And some people may get even more money this year if they have unclaimed stimulus funds they can get after submitting their tax forms.
Choosing what to do with a tax refund is important, as this lump sum payment can be used to improve your long-term financial situation. For some people, the most attractive choice is investing this money in cryptocurrency because they want to take advantage of buying opportunities in this growing asset class.
If you're thinking about using your tax refund to buy cryptocurrency, you may be able to skip a step and deposit your refund directly into the coin of your choice. That's because Coinbase has partnered with TurboTax to make this possible.
Coinbase is making it easy to invest your tax refund in cryptocurrency
Coinbase announced on Thursday that tax filers who use TurboTax to submit their returns to the IRS will have the option to have their tax refund directly and automatically deposited right into their Coinbase account.
The money from the IRS will be deposited in U.S. dollars. However, when it hits the taxpayer's Coinbase account, it can be converted immediately into the cryptocurrency of their choosing.
Best of all, there will be no trading fees associated with this transaction, and no other additional costs associated with getting a refund in crypto. Taxpayers who choose this approach will get the full amount of their refund, and they won't pay a trading fee to Coinbase -- although the standard spread applies for crypto purchases and sales.
Coinbase accepts up to $25,000 in deposits per day, so even tax filers who receive a large refund will be able to use this option if they choose to.
How to invest your tax refund in cryptocurrency
If you choose to take advantage of this offer, you'll need to complete a few basic steps, including starting to file your tax forms from the Coinbase section of the TurboTax site. You can also get up to $20 off TurboTax if you are a Coinbase user.
Once you've completed your tax forms and your refund amount has been calculated, you'll set up Coinbase as your direct deposit account that you want your refund to go into. After choosing Coinbase as your direct deposit option, you'll need to activate the account and choose which crypto you want to invest your refund in.
While this process can make it convenient and simple to buy cryptocurrency with your tax refund, you do want to make sure it's the right financial move for you. You should ensure you have a fully funded emergency fund before buying cryptocurrency, and you must take into account that virtual currencies can be a volatile investment and they can carry a higher risk.
If you're financially prepared for crypto investing and have researched which coins you want to buy with your refund, then taking advantage of Coinbase and TurboTax's offer could be a great option to simplify the investing process.
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