This Is the No. 1 Thing Americans Do With Their Tax Refund

An income tax refund can be big financial windfall, averaging $2,800 for the 109 million refunds the IRS paid out in 2015. This amount is equal to about two-thirds of a month’s pay for an American family earning the median household income, or about 1.4 paychecks if they are paid biweekly. This “extra” money can be a significant boon to taxpayers’ finances — if they use tax refunds wisely.

But how do Americans actually plan to use the $305 billion in refunds that the IRS pays out each year? To find out, GOBankingRates conducted a survey asking taxpayers about their tax refund plans.

See the 2017 Survey Results: Here’s the No. 1 Thing Americans Do With Their Tax Refund

Survey Findings: How Americans Plan to Use Their Tax Refunds

GOBankingRates’ Google Consumer Survey posed the question, “What do you plan on doing with your tax refund?” and provided seven possible answers. The following answers displayed randomly (with “none of the above” listed last), and respondents were limited to one response each:

  • I do not receive a tax refund
  • Make a major purchase (car, home, etc.)
  • Pay off debt (loans, credit cards, etc.)
  • Put in savings
  • Put toward a vacation
  • Splurge on a purchase (TV, shoes, etc.)
  • None of the above

The most common response selected was “none of the above,” which was chosen by 34.8 percent of responses. This means that over a third of respondents either do not have a clear plan for their IRS tax refunds, are unsure they will get a refund this year, or have plans for the refunds that are not reflected in the offered responses.

The rest of the analyses that follow focus only on the responses from the other 65.2 percent who chose one of the responses other than “none of the above.”

Tax Refunds

Of the respondents who chose a response other than “none of the above,” the largest portion, 30 percent, said they don’t expect to receive an income tax refund. This is just slightly above IRS reporting for 2015, which indicates that about 27.4 percent of taxpayers don’t receive a refund. Those who don’t receive an IRS tax refund don’t get money back because they either selected the proper withholding on their W-4s — and instead of a refund got bigger paychecks throughout 2015 — or they might owe taxes on income earned last year.

Read More: What to Do If Your Tax Refund Is Missing

Paying Off Debt Is No. 1 Plan for Taxpayers’ Refunds

Of those who do expect to receive a refund, the most common answer respondents picked is paying off debt like a loan or credit card, with 27 percent choosing this response. Over 80 percent of Americans have debt of some kind, from a mortgage to credit card balances, according to a 2015 Pew report. Two in five have credit card debt (39 percent), and one in five has student loans (21 percent) with average balances around $20,000.

The average credit card balance of a U.S. household is $7,500 according to a survey from, so a typical $2,800 tax refund would lower that household’s credit card debt by 37 percent and could save them a lot of interest. The same refund could pay off 14 percent of the average student loan balance.

3 in 4 Americans Expecting a Tax Refund Plan to Save or Pay Off Debt

People are nearly as likely to plan to save their tax refunds, at 25 percent. Two-thirds of Americans have less than $1,000 in savings, a 2015 GOBankingRates survey found, so adding a refund to this type of account could triple their savings and get an emergency fund off to a healthy start.

Between those who are saving or paying off debt with tax refunds, over half (52 percent) of respondents overall plan to use their tax refunds to improve their financial situation. Of those who actually expect to get a IRS tax refund and have a plan to spend it, a high 75 percent say they will use it to either save or pay off debt.

1 in 5 Americans Plans to Spend Income Tax Refund Money

The remaining three groups together make up the 18 percent of respondents who plan to spend their tax refunds. Half of this group, 9 percent of the overall responses, said they plan to use their tax refunds for a vacation. Another 5 percent said they would put their tax refunds toward a major purchase like a home or car, and another 4 percent plan to use their refunds to splurge on a purchase, such as on a TV or apparel.

How Each Age Group Plans to Use Their Tax Refunds

income tax refund

Older Respondents Are Twice as Likely to Not Expect a Refund

Whether or not taxpayers can expect a tax refund in 2016 could depend on their age. The older a respondent, the more likely he is to indicate he won’t be getting a refund this year, according to this survey’s results. About one in five millennials (ages 18 to 34) doesn’t expect to receive a tax refund, whereas twice as many seniors age 65 and over — 46.1 percent — don’t expect to get one this year. The portion of respondents who don’t expect a refund also rose with each age group from 35 to 65.

Older Taxpayers Save Tax Refunds, Younger Respondents Splurge

Because there’s such a wide difference in whether different age groups expect a tax refund, GOBankingRates isolated the respondents’ answers in each age group to see exactly how those who do expect a refund plan to use the money. This information is displayed in the following table:

Age GroupPlan to Spend 2016 Tax Refund
DebtSavingsVacationMajor PurchaseSplurge

When it comes to paying down debt, Generation X (ages 35 to 54) is the most likely to use their refunds for this purpose, with two in five of those in this age group who are expecting a return selecting this answer. Other age groups gave similar responses with plans to pay down debt, though seniors are significantly less likely to use a tax refund for this purpose.

Older millennials (ages 25 to 34) are the most likely to save a tax refund, selecting this answer 27.2 percent of the time overall. But looking just at the respondents who said they expect a tax refund, seniors are actually the most likely to say that they plan to save a refund. Of those 65 and over who expect a return, just under half (49 percent) say they will save their tax refunds this year. Overall, millennials and Gen Xers are more likely to focus on paying down debt, whereas baby boomers (ages 55 to 64) and seniors (age 65 and up) are more likely to focus on saving.

Related: How to Protect Your Tax Refund From Being Stolen

Age also correlates to spending a tax refund for those expecting to receive one. Whether it’s on a vacation, major purchase or splurge, younger respondents are more likely to say they will use their refunds to buy something.

Across age groups, the most popular way to spend a tax refund — rather than save or pay off debt with it — is on a vacation. Respondents ages 54 and under plan to use their tax refunds for vacationing about 13 percent of the time. This 54-and-under age group is also about twice as likely as taxpayers who are 55 and older to spend their tax refunds on a major purchase.

Millennials are the most likely to say they plan to splurge with their tax refunds. Among millennials expecting to get a refund, 8.8 percent of those 18 to 24 and 6.9 percent of those 25 to 34 plan to use their refunds to splurge. This response rate makes millennials twice as likely as boomers and seniors to say they plan to splurge, of whom just 3.1 percent and 3.5 percent plan to splurge, respectively.

Women Plan Pay Down Debt but Men Plan to Splurge

Women and men are about equally likely to not expect a tax refund in 2016, with about three in 10 of each sex choosing this response. They are also equally likely to say they plan to save their refund, with about a quarter of each selecting “put in savings.” The sexes also plan to make a major purchase in similar, though small, numbers, with just under 5 percent of men and women giving this response.

IRS tax refund

There are some significant differences between the sexes for certain answers, however. Women who expect a tax refund are most likely to say they plan to use it to pay down debt, at 29.9 percent. Women selected this answer about 20 percent more often than men did. Whereas women are more likely to pay down debt than save their refunds, men are about equally likely to save a refund or use it to tackle debt.

Another area of significant difference is among respondents who plan to use a refund to pay for a vacation or a splurge purchase, with men more likely to choose both responses. Men are nearly 25 percent more likely than women to plan on using a refund for a vacation, at 10.2 percent versus 8.2 percent, respectively. And men are 85 percent more likely to use a refund to splurge, with 4.8 selecting this answer compared with 2.6 percent of women.

Keep Reading: Every Tax Penalty You Should Know About If You Forgot to File

Methodology: GOBankingRates conducted this poll through a Google Consumer Survey from Dec. 30, 2015, to Jan. 1, 2016, and collected 5,000 responses. The poll posed the question, “What do you plan on doing with your tax refund?” and allowed respondents to select one of the following responses, which were displayed randomly: “I do not receive a tax refund,” “Major purchase (car, home, etc.),” “Pay off debt (loans, credit cards, etc.),” “Put the money in savings,” “Put toward a vacation,” or “Splurge on a purchase (TV, shoes, etc.).” The answer option “none of the above” was displayed last. This survey is representative of the online U.S. population with a margin of error of 1.8 percent. Analyses based on gender and age were only conducted on answers from respondents for which the relevant demographic data was available.