Here’s the No. 1 Thing Americans Do With Their Tax Refund
It’s safe to say that most Americans don’t look forward to tax season. But the refund that a majority of taxpayers receives can make the tedious process of tax filing worth the effort. Of course, that raises the question of what to do with your tax refund.
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Not sure yet? With the filing deadline being April 15, you still have some time to figure it out. But if you need inspiration, here’s how the majority of Americans plan to use their tax refund in 2024.
Most Americans Will Be Saving Their Refund
According to a 2024 survey conducted by GOBankingRates, most Americans plan to use their tax refund in a practical manner: saving it. Over 25% of respondents said that they plan to put their refund toward savings.
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Paying Off Debt Was the Next Most-Popular Choice
According to our survey, 15% of respondents said they plan to use their refund to pay off debt, while 13% said they will use it to pay bills.
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Few Americans Will Be Spending Their Refunds on Unnecessary Expenses
According to the GOBankingRates survey, only 2% of Americans said they planned to spend their refund on a vacation. About 4% said they would spend it on a major purchase to “treat themselves,” 4% said they would invest it and less than 1% said they would donate it.
When Do Americans Expect To File Their Taxes?
Most taxpayers don’t plan on waiting until the last minute to file a tax return. The survey found that 74% of respondents expected to file a return well before April 15 and another 14% planned to file sometime in the week of the deadline. Only 5% are looking to ask for an extension.
Most Tax Filers Expect Their Tax Refund To Be About the Same as Last Year
According to the survey data, 52% of respondents expect their tax refund for this year to be “about the same” as last year and 18% are expecting more in their refund checks. In addition, 30% expect to receive less than the amount they got in 2023.
The Average Tax Refund Is Down So Far This Year
According to the IRS, the average tax refund as of the week ending Feb. 4 was $1,395. That’s down 29% from this same time last year when the average refund amount was $1,963.
So far the IRS has received 15.31 million tax returns, down 19% from the number of returns it had received by this time last year — 18.95 million. It has processed 13.92 million returns so far in 2024.
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The Best Ways To Use Your Tax Refund
If you are wondering, “What should I do with my tax refund?” — you have plenty of options. But first, don’t think of your tax refund as free money. It’s money that you could have gotten in each paycheck, but instead, you let the government hold onto it for you throughout the year. So make the most of your money when you get it back.
Here are some smart ways you can use your tax refund to improve your financial situation.
1. Pay Off Debt
Join the 15% of Americans who plan to use their refund to tackle debt and consider using the cash you get to help pay off what you owe. Focus on first paying off high-interest debt — such as credit card debt — to reduce the total amount that you pay.
2. Create an Emergency Fund
A separate GOBankingRates survey found that over a third of Americans (36%) have $100 or less in savings. That likely means they don’t have enough cash to cover emergencies. Stashing your refund in a savings account can be an effective way to build an emergency fund so you don’t have to rely on credit to cover unexpected expenses. This could be an especially smart move this year, given the volatility of the job market.
3. Invest In Yourself
You might be able to break the cycle of living paycheck to paycheck by climbing the career ladder and making more money. Consider using your refund to hire a career coach, take courses online to improve your skills, attend conferences, join networking groups or even launch your own business.
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How To Track Your Tax Refund
So, the taxes are filed, they’re snug in the IRS’ hands; how do you then track your refund as it heads your way? E-filers will be able to track their returns and subsequent refunds using the IRS’ “Where’s My Refund?” tool beginning 24 hours after filing.
You can use the tool even if you mail a physical tax return to the IRS, but you’ll have to wait up to six weeks for the IRS to receive and upload the return into the tool.
How Can I Estimate My Tax Refund?
Maybe you’re planning on making a big purchase. Maybe you’re a bit behind on a few payments. Or maybe you just want to know how much that tax refund might be. You can use one of several great online estimators to get a ballpark figure.
TurboTax has a tax return calculator, an easy-to-use tool that is always up to date on the latest and greatest in tax law. H&R Block also has a calculator — just answer a few simple questions about your income and expenses and you’ll be able to see an estimate of either your refund or what you might owe.
Why You Actually Shouldn’t Want a Big Tax Refund
Although it can feel like a windfall, there are a few reasons why a big tax refund is actually not a good thing. It means that you let the government hang on to your money interest-free throughout the year.
You could be better off getting more in each paycheck to pay down debt or invest so your money can grow. Taxpayers who regularly get a large refund might need to reassess their W-4 to adjust their tax withholding and hang on to more of each paycheck.
Cameron Huddleston and Gabrielle Olya contributed to the reporting for this article.
Methodology: GOBankingRates surveyed 1,005 Americans ages 18 and older from across the country between Jan. 23 and Jan. 26, 2024, asking 14 different questions: (1) How do you plan on filing your taxes for this year?; (2) When do you expect to file your taxes this year?; (3) How much do you expect to receive in a tax refund?; (4) What do you plan to do with your refund?; (5) Do you feel confident you are receiving all the deductions you are qualified for?; (6) Do you believe your tax dollars are being spent effectively?; (7) Do you believe you are paying too much, too little or a fair share in taxes?; (8) Have you ever been audited before?; (9) Who will/would use your tax dollars the best?; (10) How much is the standard deduction for a single filer (and married filers) in 2024?; (11) What concerns you the most about Tax Day?; (12) Do you expect your tax refund this year to be more or less than last year?; (13) What do you understand the least about your taxes?; and (14) What would you rather be doing than your taxes? (Select all that apply). GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
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This article originally appeared on GOBankingRates.com: Here’s the No. 1 Thing Americans Do With Their Tax Refund
