More than half of Americans worried about tax refunds
What do most Americans plan on using their tax refunds for?
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With tax season upon us and inflation still posing a burden on Americans, many tax filers this year have concerns.
According to a study conducted by Bankrate.com, about 40% of those planning on filing taxes are expecting refunds, and 67% of Americans who are expecting tax refunds hold at least one concern.
The most common worries include fears that refunds will be smaller than usual, that they won’t make as big an impact as expected due to inflation and rising costs, that refunds could be delayed and that they won’t stretch as far due to rising interest rates.
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"Many Americans will get smaller refunds this year because they already got half of their child tax credit funds in monthly installments during the second half of 2021," Ted Rossman, senior industry analyst at Bankrate.com, said.
1040 income tax form and W-2 wage statement with a federal Treasury refund check.
According to the IRS, the average federal tax refund last year was $2,815, and an estimated 77% of filers received a refund.
In all, about 67% of Americans expecting tax refunds say the money is important to their overall financial situation. Thirty-six percent say it is very important.
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Both millennials and Gen Xers, as well as women, parents of younger children and lower-income households are more likely to have concerns about their refunds this year compared to baby boomers.
Close to 75% of millennials — those ages 26-41 — and 72% of Gen Xers — those ages 42-57 — who expect a tax refund this year believe the money is important to their overall financial health and well-being.
The reflection of a pedestrian walking past an IRS office building in the East Harlem neighborhood of New York, June 24, 2017. (Timothy Fadek/Bloomberg via Getty Images / Getty Images)
Now, what are Americans planning to use their refunds for?
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Here are the most popular plans for using refunds this tax season.
1. Save most or all of the money – 32% of Americans
2. Pay down debt – 23%
3. Pay for day-to-day expenses – 12%
4. Make home improvements – 10%
5. Invest the money – 7%
6. Splurge on vacation – 4%
7. Retail purchases – 2%
8. Not sure yet – 6%
9. Other – 5%
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IRS building signage (iStock)
"A tax refund is the largest windfall that many Americans will receive all year," Rossman said.
"Using this money to pay off credit card debt is an excellent choice, since the average credit card charges over 16% and that’s likely to rise to 17% or more by the end of 2022," Rossman added.
"The average American owes $5,525 on their credit cards, according to Experian, so the average tax refund represents more than half of the battle."
Other than those expecting refunds, 18% of Americans expect to owe the government, 17% expect to break even and 25% aren’t exactly sure what to expect regarding their tax refund this year.
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About 44% of tax filers plan to submit their returns in February, according to Bankrate. March comes in at a close second, with 25% saying they will submit their returns then.
The remainder plan on filing in April and later months, while 12% say they plan to file this year, but don’t know when yet.