How the Majority of Americans Plan to Use Their Tax Refund in 2024

With the filing deadline of April 15 looming close, Americans are pondering over the age-old question: what to do with that tax refund money? The majority are choosing a path of prudence by opting to save it, as unveiled by a recent 2024 survey conducted by GOBankingRates. This survey discovered that over a quarter of respondents intend to funnel their refunds into savings, showing a commendable streak of financial foresight.

Debt Repayment and Bill Settlement: The Next Best Choices

But savings isn’t the only smart option. Statistics from the same survey reveal that 15% of Americans plan to use their tax refunds to chip away at debts, while 13% will use these funds to settle bills. In a time where financial acumen is paramount, a heavy push towards debt reduction couldn’t come at a more opportune moment.

Americans Show Restraint in Splurging Their Refunds

Interestingly, the survey highlighted the frugal inclinations of Americans, with a mere 2% planning to splurge their refunds on a vacation. Around 4% intend to make a significant personal purchase, while 4% are considering investment options. An even smaller percentile, less than 1%, plan to donate their refunds, underscoring a prevailing sense of financial responsibility.

Timely Tax Filing: A Major Consensus Among Taxpayers

Despite the inevitability of tax season, procrastination isn’t the norm. The GOBankingRates survey divulged that 74% of taxpayers aim to file their returns well in advance of the April 15 deadline, with an additional 14% targeting a submission within the deadline week itself. The minuscule 5% contingent looking to request extensions is indicative of a populace tuned into the consequences of tardiness.

Anticipated Changes in Tax Refund Amounts

Survey data suggests that a majority of respondents, approximately 52%, anticipate their tax refunds for the current year to mirror the previous year’s figures. Conversely, 18% are looking forward to a more substantial windfall, while 30% are bracing for a smaller return. Such preemptive insights offer a glimpse into individuals’ financial expectations for the upcoming tax season.

The Decline in Average Tax Refunds

As per the IRS data up to the week ending February 4, the average tax refund stands at $1,395, marking a 29% decline from the same period last year when the average refund amount was $1,963. Coinciding with this dip, there has been a 19% drop in the number of returns received year-on-year, signaling a unique juncture in tax history.

Strategic Allocation of Tax Refunds for Financial Gain

While the average tax refunds may be down this year, taxpayers can maximize the utility of their refunds by employing strategic financial planning. From debt repayment to savings enhancements, utilizing tax refunds wisely can lead to long-term financial stability and growth.

1. Prioritize Debt Repayment

Join the 15% of Americans who prioritize debt repayment, particularly focusing on high-interest debts like credit card balances. By allocating your tax refund towards debt reduction, you pave the way for increased financial freedom and stability.

Optimizing Your Tax Refund: A Financial Blueprint for Success

Building Financial Resilience

A study revealed that a significant number of Americans have minimal savings, leaving them vulnerable to financial emergencies. By allocating your tax refund into a savings account, you can fortify your financial resilience and shield yourself from unforeseen expenses without having to resort to credit.

Investing in Growth

Breaking free from the paycheck-to-paycheck cycle can be facilitated by enhancing your career prospects and boosting your income. Utilize your tax refund to engage a career coach, upskill through online courses, participate in industry events, network effectively, or even kickstart your entrepreneurial venture.

Find Out More: IRS Increases Gift and Estate Tax Exempt Limits — Discover Your Tax Exemption Window

Unraveling the Tax Refund Trail

With your taxes filed and in the hands of the IRS, tracking your refund journey becomes imperative. E-filers can monitor their returns and ensuing refunds by leveraging the IRS’ “Where’s My Refund?” tool, accessible 24 hours post-filing.

Even if you opt to mail a physical tax return, utilizing the tool remains an option; however, patience is key as it may take up to six weeks for the IRS to receive and process your return.

Leveraging Tax Refund Estimators

Contemplating a major purchase, catching up on payments, or simply curious about the potential refund amount? Various online estimators exist to offer an approximate figure.

Platforms like TurboTax and H&R Block provide calculators that furnish the latest tax law updates. Answer a few queries about your financial standing, and grasp an estimate of either your refund or outstanding dues.

Redefining the Tax Refund Paradigm

Although a substantial tax refund may feel like a financial windfall, it may not be as advantageous as perceived. Entrusting the government with your money all year long, interest-free, might not align with your financial objectives.

Opting for more substantial paychecks throughout the year can allow for debt repayment or investment opportunities, leading to potential financial growth. Taxpayers accustomed to receiving significant refunds should reconsider their W-4 status to adjust tax withholdings and retain a greater portion of their paychecks.

Contributions by Cameron Huddleston and Gabrielle Olya.

Survey Methodology: GOBankingRates collected insights from 1,005 Americans aged 18 and above nationwide between Jan. 23 and Jan. 26, 2024, encompassing multiple tax-related queries. The survey was conducted through PureSpectrum’s platform.

More Insights from GOBankingRates

This article was first published on GOBankingRates.com: Here’s the No. 1 Thing Americans Do With Their Tax Refund

The perspectives and opinions expressed in this article are solely those of the author and do not necessarily align with Nasdaq, Inc.