It can be both stressful and exciting to get an income tax refund. This is because you will need to decide what to do with this sudden — and possibly unexpected — windfall. You might be envisioning a shopping spree, a splurge-worthy trip, or something fun with that refund money from Uncle Sam burning a hole in your pocket. Did you know that last year, the IRS processed about 155 million individual tax returns and also issued over $320 billion in tax refunds?

Splurging on a luxury vacation or iPhone 11 is certainly tempting, but what if you did something more financially meaningful and prudent with your refund? An excellent place to start is with your home. Here are two ways to spend your refund in a responsible manner.

What To Do With Your Tax Refund?

1. Update Your Home

By using the tax refund to make home improvements and repairs, you can increase your property value — and hence your equity. This will make sure that your house remains up-to-date and in excellent condition. It is worth noting that smaller projects that enhance the cosmetic appearance of your home will likely make a considerable difference, especially if you are planning to list your home soon. You can begin with some deferred maintenance tasks and then tackle home updates and improvements.

Install New Flooring

While new floors can sound intimidating at first, there are some excellent options out there. These options are very inexpensive and also look top-notch, which is great. If you would like to spend even less money, you could always DIY it, as well.

Refresh Interior Paint

Note that new paint in your main rooms, such as the bedroom, brightens the whole house. If you are planning to sell your home, calming neutrals are best. In addition, doing it yourself can save on labor costs.

Landscaping

It is no secret that a beautiful, maintained lawn and neatly manicured flowerbeds will add curb appeal to your home. A few small and simple projects, such as adequately fertilizing the grass and keeping it cut, laying fresh mulch, and planting flower seeds will not break the bank, but it will make your home look like a million bucks.

(READ: 7 Simple and Inexpensive Ways to Update Your Home)

2. Purchase a New Home

You can also use your tax refund as a down payment to buy the home of your dreams. If one of your financial goals this year is to stop renting and purchase a home, you will have to save up for a down payment on the mortgage and closing costs. This is where a handsome tax refund will give you a great start on the road towards your own home.

In addition, you can get the many tax benefits of homeownership. If you have already arranged the funds and you are ready to buy a home, you still have to budget for closing costs. These costs are usually between two percent and five percent of the purchase price. Hence, if you are purchasing a $100,000 home and your closing costs are three percent of the price, then a tax refund of $3,000 will cover your closing costs.