Tax Refund Loans: How To Get an Advance in 2024
It’s income tax time, when W-2s are in the mailbox and the smell of refund checks is in the air. If you need your refund check sooner rather than later or don’t want to wait for the IRS to process your return, you may be able to get a tax refund advance loan. If you qualify, understanding how these loans work can help you decide if it’s the right option for you.
Read More: What To Do if You Owe Back Taxes to the IRS
What Is a Tax Refund Advance Loan?
A tax refund advance loan is a short-term loan issued by banks, which have the benefit of being members FDIC, and non-bank lenders. These loans are secured by the borrower’s anticipated tax refund. For that reason, the loan amount doesn’t exceed the refund amount.
How Tax Refund Advance Loans Work: Quick Take
When a lender offers a tax refund advance loan, it agrees to give you a loan worth all or part of your tax refund. Since the loan is secured by the tax refund, the lender expects you to file your taxes using its tax preparation software or services to ensure the form is completed correctly. Here are some key takeaways:
This lets the lender verify the amount of your refund and ensure that the IRS accepts your return.
As soon as the IRS accepts your return, the lender gives you the advance. This may be through direct deposit in a specific type of checking or savings account, a prepaid card or a down payment on a car or piece of furniture.
When the IRS issues your refund, the lender accepts the refund as payment for the loan and gives you the balance due to you, minus fees and interest.
Eligibility requirements vary depending on the lender, and most taxpayers who expect to receive a tax refund can qualify for a refund advance loan regardless of their credit score.
Where To Get a Tax Refund Advance Loan
The most common place to get a tax refund advance loan is through a tax preparation service or company. Keep in mind that fees apply and annual percentage rates, or APRs, expected refunds and product features will vary by company when you get this loan.
Tax Preparation Company | Loan Amount | Fees and Interest |
|---|---|---|
Up to 50% of your anticipated refund | None | |
$250-$3,500 | None | |
$500-$6,250 | Disclosed during consultation | |
– No Fee Refund Advance: up to $3,500 | – None for No Fee Refund Advance |
Intuit TurboTax
Intuit TurboTax offers a Refund Advance of up to 50% of your anticipated refund. You must use TurboTax to e-file your return, and you’ll also have to open a Credit Karma Money checking account — that’s where your funds are deposited once the IRS accepts your return.
The funds could be available to you within a minute via the Credit Karma Money virtual debit card. TurboTax doesn’t charge a fee for this service.
H&R Block
Like TurboTax, H&R Block closes its Refund Advance program before tax season ends. The loans are available in specific amounts ranging from $250 to $3,500.
Pathward is the lender for H&R Block Refund Advance loans. You apply with Pathward after you’ve e-filed your return. If your application is approved, you can receive the funds the same day on an H&R Block Emerald Prepaid Mastercard.
Liberty Tax
Liberty Tax Easy Advance loans are offered by Republic Bank & Trust in amounts ranging from $500 to $6,250. You must have your taxes prepared in person to qualify. The funds, less a finance charge, are ready within 24 hours after the IRS accepts the return.
Jackson Hewitt
Jackson Hewitt offers two programs at participating locations: Early Refund Advance and No Fee Refund Advance, which was available through Feb. 11. While the No Fee Refund Advance also has no interest charge, this year’s Early Refund Advance borrowers have a pricey 34.22% annual percentage rate.
Other Options for Refund Advance Loans
Car dealerships, furniture stores and other retailers sometimes offer customers refund-anticipation loans against their refunds as an enticement to make a purchase without having to wait weeks for their IRS checks or direct deposits. You’ll have to have your taxes prepared by the retailer to qualify.
Some of these offers might be good deals, but the Wisconsin Department of Agriculture, Trade and Consumer Protection warns that refund-anticipation loans can be risky. You’re on the hook for the full loan amount even if your tax refund falls short — and interest rates can run as high as 700%.
Consult with your tax preparer or financial advisor if you are unsure if this move makes sense. You can also bring up questions about of the most common tax deductions or your tax bracket, and if they might affect your refund.
Pros and Cons of Tax Refund Advance Loans
Refund advance loans are convenient, but they’re not right for everyone.
Pros
Some refund advance loans are interest-free.
Tax preparation fees are deducted from the refund.
These loans typically do not require a hard credit pull that can affect your credit score.
You can receive a loan against your tax refund in minutes, depending on the program terms set by the lender.
Cons
Some lenders charge fees and interest.
You have to file your tax return early.
You must use the lender’s tax preparation software or service.
You have to pay for the tax preparation even if you don’t get a refund.
Final Take To GO: Are Tax Refund Loans Worth It?
If you need your tax refund immediately and can’t wait a few weeks for the IRS to process your return, a tax refund loan may be worth it. If your preferred tax preparation company offers this type of program, check it out. You’d spend the money with them anyway, so it might be worth getting a loan against your refund so you have access to the money before your refund arrives. You might want to ask them questions about capital gains tax or FICA tax rates, if that applies to your situation.
But before you agree to the loan, make sure you know how much it will cost you. Look for a program with a 0% APR loan and a minimal tax preparation fee.
When It’s Not Worth It
If you anticipate a small tax refund or have to pay a substantial fee for the services, an advance may not be worth the cost. For example, the company may charge you $500 to file your tax return and will deduct the fee from your $1,500 refund. This leaves you with $1,000 even if the company doesn’t charge you interest. You’re giving up one-third of your refund for the convenience of having your money sooner rather than later.
The IRS issues most refunds in less than 21 days. If you’re willing to wait, you’ll have more money in your pocket.
Similarly, if you have a type of tax software you like to use or want to work with a specific tax preparer, you may want to skip the refund advance loan. You’ll have the flexibility you want and may not be missing out on anything.
Bottom line? Make sure you really need the cash before pursuing a tax refund advance, and check rates and terms carefully before you accept the loan.
Caitlyn Moorhead and Daria Uhlig contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: Tax Refund Loans: How To Get an Advance in 2024
