Here’s how Americans plan on spending their tax refunds: report

A new report from Morgan Stanley Research shows that the majority of people plan to use their tax refund to add to their savings, followed closely by paying off debt. The report, which analyzed survey results by the National Retail Federation, shows that half of those surveyed hope to boost their savings with their refund, compared to 41% the year prior.

Paying down debt was another top pick, with nearly 35% of respondents — the same as in 2018. Those surveyed also plan on spending the money on “splurge” purchases, vacations, or everyday expenses.

Though the results were fairly similar across income groups, more respondents with incomes higher than $50,000 planned to funnel their refunds to savings, compared to lower-income groups. Younger people surveyed were also more likely to use refunds for a major purchase — like a television or a car — or a splurge.

The study also found that more people were filing their taxes later in the year, compared to 2018. Normally, high-income taxpayers file last. This year, just over 3% fewer refunds were filed compared to last year.

In its annual tax return survey, the National Retail Federation found that of the nearly 8,000 adults surveyed, 65% expected to get a refund, the same as last year. Among those expecting a refund, nearly half thought it would be the same size as last year, while 22% believed it would be lower. A third expected a larger refund.

The size of 2019’s tax returns have come under fire as many reported receiving smaller refunds, while others were hit with tax bills. It’s the first year Americans are filing their taxes after the Tax Cuts and Jobs Act went into effect at the end of 2017. The Republican-championed tax bill was criticized as being a tax cut for the wealthy and corporations, though the majority of Americans did receive a tax cut.

But for weeks after the tax season began, refund sizes shrunk — until mid-February when it started to tick upwards. The most recently released IRS data shows average refund amounts are up 0.7% from last year, though in total, refunds are down 3.5% from roughly $145.6 billion in 2018.

Refunds represent a big financial moment to a family, effectively resetting their budget, according to a new report from JPMorgan Chase Institute. If refunds are smaller than expected, or if a family is hit with a surprise tax bill, it could cause “financial stress,” according to an author of the JPMorgan Chase Institute study.

Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.

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