77% of Americans Plan To Use Tax Refunds for Essential Expenses: 5 Tips for Using Yours
Written by
Dawn Allcot
Edited by
Jenna Klaverweiden
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For Americans who usually receive a tax refund, that spring windfall sometimes helps cover a treat, like a family vacation, a pool or new patio furniture. But for a majority of people this year, their tax refund is going toward necessities, according to a study from Talker Research, commissioned by TaxSlayer.
The study found that 77% of Americans will spend their tax refund on necessities this year. What’s on the top of their list? More than half (52%) of those polled said the money will go toward rent or utility bills. Meanwhile, 44% will put the money toward groceries and essential goods. Thirty-seven percent are using the cash to pay down credit card debt, with 56% of that group still paying off holiday bills.
This is common — and nothing to be ashamed of — in today’s financial environment.
“If your refund is going straight to keeping the lights on and food in the fridge, that probably says more about the cost of living than your decision-making,” said Taylor Kovar, CFP, founder and CEO of 11 Financial. “That kind of pressure is real.”
However, there are ways to plan ahead to remove some of that financial sting throughout the rest of 2025. Try spending what you can of your tax refund strategically to try to get ahead.
Look at Your Spending Patterns
If you’re consistently running behind on fixed expenses, like your car loan, rent or utility bills, you should “zoom out and look at the patterns,” Kovar advised. “It’s worth seeing if there’s a monthly expense that’s quietly draining your budget.”
See if you can change due dates on bills so everything doesn’t hit your bank account at the same time too. If you have good credit, consider consolidating some of your credit card debt to a 0% interest credit card that you can aim to pay off within 12 to 18 months.
Sometimes, small tweaks like changing due dates and reducing interest payments can provide the breathing room you need.
Use Your Refund To Build a Small Cushion
If you can, deposit part of your refund into a high-yield savings account to provide a buffer for months when emergency expenses crop up or cash gets tight.
“The goal isn’t perfection,” Kovar said. “It’s just trying to make the months ahead feel a little less like a juggling act.”
Plan for the Holidays
If you’re still paying off last year’s holiday celebrations, take heart. “You’re not the only one,” Kovar said. “A lot of people spend January through April trying to clean up December.”
But it’s still early enough to avoid the situation this holiday season. “Start thinking now about what you want to spend and what kind of holiday feels good for your budget and your sanity,” Kovar advised. “A little planning goes a long way, so you’re not scrambling at the last minute.”
Many online and traditional banks offer special holiday savings accounts or savings buckets that allow you to set aside money for specific goals. If you can tuck away $100 a month at a 4% monthly interest rate from April to November, you’ll have more than $900 in the bank to take advantage of holiday deals come Black Friday.
Once you’ve paid off last year’s holiday debt, you can even use your tax refund to jump-start your holiday savings fund.
Consider a Roth IRA or a Business Investment
If your emergency savings is in decent shape, consider a Roth IRA to help build your retirement fund. With the stock market in a downswing, it might be tempting to invest in some of your favorite brands.
But keep finance expert Suze Orman’s advice in mind: “Money you have in the market should have been money you did not need for at least five years,” she wrote in a recent Facebook post.
Investments don’t always have to be related to building your portfolio, either. An investment might pay for itself through tangible improvements to your life, such as greater productivity or opportunities for passive income down the line.
Kovar recommended investing any extra tax refund money in something that matters, such as a business, a side gig, or even a much-needed vacation that can help you avoid burnout and leave you feeling more refreshed and creative when you return.
“It’s … about putting the money somewhere that helps you sleep better at night. If it’s doing something useful for your future or reducing stress, it’s probably a solid call,” he said.
Keep Records To Maximize Your Tax Refund Next Year
A hefty tax refund doesn’t always indicate smart financial choices. You’re essentially giving the IRS an interest-free loan of your hard-earned money.
If you’re getting a large refund in April but scrambling to make ends meet throughout the year, “look at adjusting your withholdings to keep more of that money in your paycheck,” Kovar said.
However, for people who aren’t disciplined savers, that tax refund can help you get ahead, splurge on something fun or bolster your savings account. Make sure to keep good records of your expenses and potential deductions, especially if you run a business or have a side gig, Kovar advised. “The smoother your records, the less of a headache tax time becomes,” he said.
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