Best Ways To Invest Your 2025 Tax Return Savings

There are usually three perspectives regarding tax returns: spend, save, and invest. Some homeowners are thrilled to get some cash back for special purchases. Others put that money directly into savings or use it to pay off debts like mortgages and student loans. Still others look for a way to invest that money for more returns in the future.

At South Central Services, we retrofit homes with new insulation. If you're looking for a good investment opportunity for your tax return, our recommendation is insulation. Not only will an insulation upgrade offer immediate benefits, but it also offers savings for the future.

By the end of this article, you will understand:

• How much your tax return might pay for
• Which insulation upgrades are most worthwhile
• Extra ways to maximize your savings from your upgrade

Your Tax Return May Pay For New Insulation In Your Home.

Insulation may not be the best use of your tax return. However, it's worth considering if you're experiencing any of the following issues.

• Your home is hot in the summer and cold in the winter.
• Your energy bills are usually higher than you anticipated.
• You deal with cold floors and draftiness in winter.
• You set your thermostat, but it doesn't stay at the temp you wanted.

Depending on the size of your project and your tax return, the return could pay for the entirety of your insulation upgrade. For some projects, like basement band board insulation, $2,000 may cover the whole investment. Other projects are more in-depth and require you to spend more outside the tax return.

Let's examine the top three areas where you could insulate in your home.

Update Your Attic Insulation For Maximum Energy Savings.

Your attic is the insulation upgrade that will have the most significant financial return. While your tax return alone won't cover the cost of your attic insulation, you could use your return in one of two ways.

1. Spend the return to make your investment more affordable.
2. Use the return to "splurge" on more premium insulation.

If you opt to make your investment more affordable, you'll probably be interested in blown-in insulation. Blown-in is the more budget-friendly option for attic insulation. If you've already set aside a few thousand dollars for this upgrade, your tax return can lower the overall cost of blown-in upstairs.

If you're more interested in "splurging" on your insulation, you'll be looking at spray foam insulation. The biggest splurge would be an encapsulated attic, which uses more insulation product. Encapsulated attics can be temperature-controlled like the rest of your home, which opens up your attic to use as living space.

You can install spray foam on the attic floor if you don't need a temperature-controlled attic. This works just like blown-in, except spray foam has a built-in air-seal. Spray foam is also permanent, so it won't ever need to be topped off like blown-in.

So, why does attic insulation have such an impact on energy savings?

A lack of attic insulation dramatically impacts energy efficiency in summer and winter. In summer, heat travels through the roof and attic to overheat your home. The heat you pay for in winter escapes through the attic and roof. Anytime there's uncontrolled air infiltration, the HVAC has to work harder to combat it.

By air-sealing and insulating your attic, you cut off a major area of air infiltration. Air-sealing supports the function of your HVAC, significantly reducing your energy use and cost.

Depending on the current state of your attic insulation, you might save between 30% and 70% on your energy bills through new insulation upstairs. That's a great investment!

Insulate Your Basement Band Boards To Eliminate Drafts.

The insulation upgrade that will most impact your wintertime comfort is your basement. If you have a small basement and a larger tax return, the return could cover this upgrade. Basement band boards usually cost between $1,300 and $4,000 to insulate with spray foam.

Your band boards are where your basement's concrete or stone walls meet the upstairs wood framing. It's a vulnerable place where materials transition and face a lot of air infiltration. Air infiltration can be eliminated by installing spray foam with its airtight seal in this space.

What this means for you in wintertime is fewer drafts and warmer floors. This insulation upgrade can deliver significant comfortability upgrades. When paired with new attic insulation, band board insulation also supports your home's energy efficiency. (This is due to a concept called the stack effect.)

Encapsulate Your Crawl Space For Better Air Quality.

Your crawl space is the insulation upgrade that will most impact your air quality. As a bonus, this is one of the insulation changes that can also influence your home's resale value.

If your home has a crawl space, it probably has batt insulation in its ceiling and a tarp on the floor. This combination is referred to as a ventilated crawl space. Unfortunately, this method is not effective in our climate zone. Without proper fastening and sealing, the tarp isn't acting as a vapor barrier to control moisture. And batt insulation allows air and vapor to pass through.

Essentially, you breathe crawl space air in your living space because the two areas exchange air freely. You can address the problem of dirty crawl space air by encapsulating.

Crawl space encapsulation seals the crawl space off from outside influences. Thick plastic sheathing is fastened to the floor to create a true vapor barrier, while the crawl space walls and band boards are sprayed with closed cell spray foam. Encapsulation makes the space clean, dry, and accessible. When air exchanges with your living space, it's clean.

Encapsulating is a great investment for your health, but can also benefit you if you ever need to move. Most insulation upgrades don't impact the value of a home, but encapsulation can. Since crawl spaces are generally regarded as gross and smelly, an encapsulated crawl space is considered an upgrade. In many cases, encapsulation will increase your resale value.

You Can File For A Federal Tax Credit On Next Year’s Taxes, Too.

Need another sign that investing your tax return in new insulation is the right call? Consider the 25C Energy Efficient Home Improvement Credit.

Insulation and other home improvement projects qualify for this tax credit, enabling homeowners to save money on their taxes. The 25C credit became effective in 2023 and is set to continue until 2032. You can apply for this tax credit every year, which means you could upgrade a new area of your home each year until 2032 and benefit from the credit.

Maybe you don't need new insulation right now. You might have other priorities for your home. If so, you could apply your tax return to these other upgrades and still file for the 25C Energy Efficient Home Improvement Credit!

• Home energy audits
• Central air conditioners
• Windows
• Doors
• Furnaces
• Boilers
• Heat pump water heaters

The Bottom Line About Investing Your Tax Return Savings

If you got a nice tax return this year, you have to decide how to use it. Insulation is a great investment opportunity because you can immediately improve your home's comfort while lowering your energy bills for the future. Insulation will be an excellent investment if you have high energy costs or an uncomfortable home.

You could insulate your attic, basement, or crawl space. Which area is best for you depends on the size of your return, how much else you have to invest, and your main goals. Attic insulation will be the most expensive but will deliver the most results.

Now that you know why insulation might be the best way to invest your tax return, your next step is to:

• Estimate the cost of an insulation upgrade in your home
• Learn more about the federal tax credit for insulation
• Discover if spray foam will really make your home more comfortable

Disclaimer: While we strive to publish information accurate to building science, local building codes and standards supersede our recommendations.