The Most Popular Way Americans Spend Their Tax Refund

The tax season evokes a range of feelings. As you submit your return, a wave of relief passes over you, but soon after comes the quandary of what to do with the money you get back.

That tax refund is a big chunk of change for a lot of Americans, giving them the opportunity to save, spend, or pay bills. This article is looking at the ways in which most taxpayers decide to use their windfall for expenses. Is it an opportunity to advance financially or a shopping spree?

We’ll look at the data and find out how Americans most frequently use their tax refunds. Get ready to discover the secrets of what the majority of Americans do with their tax refund treasure as you get a cup of coffee (or treat yourself to a small treat!).

The majority of Americans plan to save their refund

A survey found that the majority of Americans intended to save their tax refund. More over 25% of participants indicated that they intended to use their refund for savings.

Debt repayment was the next most popular option

In our study, 15% of participants said they would use their refund to settle debt, and 13% said they would use it to cover expenses.

What Time Do Americans Think They Will File Their Taxes?

The majority of taxpayers do not intend to file their taxes at the last minute. According to the survey, 14% of participants intended to file sometime within the week before the deadline, and 74% of respondents anticipated filing their returns well in advance of April 15. Just 5% of people want to request an extension.

Most Taxpayers Anticipate Approximately the Same Tax Refund as They Did Last Year

The Most Popular Way Americans Spend Their Tax Refund

Based on the results of the study, 52% of participants anticipate receiving a tax return that is “about the same” as they did the previous year, while 18% anticipate receiving a larger check. Furthermore, thirty percent anticipate receiving less in 2023 than they did in 2023.

Thus far this year, the average tax refund has decreased

The IRS reports that as of the week ending on February 4, the average tax refund was $1,395. Compared to this time last year, when the average return amount was $1,963, it is a 29% decrease.

The IRS has received 15.31 million tax returns so far, which is 19% fewer than the 18.95 million returns it received at this time last year. As of 2024, 13.92 million returns have been processed.

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How to Use Your Tax Refund Most Effectively

You have a lot of alternatives if you’re asking, “What should I do with my tax refund?” First things first: your tax refund isn’t free money. It’s money that you could have received with every paycheck, but you allow the government to keep it for the entire year instead. Thus, when you get your money back, make the most of it.

These are some clever strategies to make better use of your tax refund to strengthen your financial position.

1. Pay Off Debt

Consider using the money you get to help pay off your debt and join the 15% of Americans who intend to use their refund to address debt. To lower the overall amount you pay, prioritize paying off high-interest debt first, such as credit card debt.

The Most Popular Way Americans Spend Their Tax Refund

2. Establish a Fund for Emergencies

According to a poll, 36% of Americans had savings of $100 or less. That probably indicates that they don’t have enough money to deal with emergencies. You can create an emergency fund by putting your refund in a savings account, which can help you avoid using credit cards for unforeseen costs.

Read Also: IRS Announces Extension of Free File Program to 2029

3. Make an Investment in Yourself

By moving up the professional ladder and earning more money, you might be able to end the pattern of living paycheck to paycheck.

Think about utilizing your refund to start your own business, attend conferences, join networking groups, engage a career coach, or even take online classes to advance your abilities.

Ways To Monitor Your Tax Refund

After your taxes are filed and safely in the hands of the IRS, how can you follow the progress of your refund towards you? Beginning 24 hours after filing, e-filers can use the IRS “Where’s My Refund?” feature to track their returns and any subsequent refunds.

Even if you mail your tax return to the IRS, you can still utilize the tool; however, it may take up to six weeks for the IRS to receive it and upload it to the tool.

The Bottom Line

While some may fantasize about going on a shopping binge driven by their tax refund, the majority of Americans prefer to use their windfall for sensible purposes.

The main lesson is to make wise decisions that will help you in the long run, regardless of whether you choose to invest your tax refund in your future or spend it to secure your financial future.

With this knowledge, you’ll be ready to maximize your refund the next time tax season arrives!

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