Save For College / Emergencies
If your child is at least 10 years from college your best shot at keeping up with tuition inflation between now and then is by investing in a diversified stock portfolio in a tax-advantaged state 529 plan. Consider using your refund to start or add to such a fund, which lets you set aside after-tax money that then grows tax deferred and can be withdrawn free from federal income tax for virtually any expense related to higher education. In many cases withdrawals are also exempt from state income tax and you may be able to deduct annual contributions at the state level. Another good use of your refund, especially during this recession, is to start an emergency fund. In any climate it's smart to have up to six months of living expenses stashed away in a safe place like bank CDs or a money market account. With today's job picture the bleakest in many years, you should consider building that cushion to a year's worth of fixed costs.
See pictures of eighth-graders being recruited for college basketball.