Tax Refunds: How Do Nearly Half of Americans Plan To Use Their Money?
It’s beginning to look a lot like peak tax season, which means millions of Americans will be getting refunds from the IRS and figuring out what to do with the money. In what many financial experts will undoubtedly consider a positive sign, nearly half of Americans who expect a tax refund plan to put it into savings, according to a new survey from LendingTree.
The survey of 1,039 U.S. taxpayers, conducted by Qualtrics in February and released last week, found that 46% of respondents plan to put their 2022 refund money into savings accounts. That’s up from 41% in 2021 and 40% in 2020.
Even more encouraging, 62% of Gen Zers ages 18 to 25 plan to put refund money into savings — a much higher percentage than any other age demographic. In contrast, 47% of millennials plan to put their refunds in savings, followed by 42% of baby boomers and 41% of Gen Xers.
LendingTree chief credit analyst Matt Schulz sees this as a signal that taxpayers are heeding one of the major lessons of the COVID-19 pandemic: You can never have too much money saved up.
“The next rainy day that comes may not be quite as stormy as this one, but it will definitely come, and extra savings makes you better prepared when it does,” Schulz said in a press release. “It also shows that a lot of people are still doing a good job of managing their debts. The lower your debts, the easier it is to save. And the more you save, the less susceptible you are to falling into a debt cycle. That’s a good thing, and I hope people keep doing a good job.”
More than one in three respondents (37%) said they plan to pay off debt with their refunds. Those most likely to do so, at 48%, are parents with kids younger than 18. Women (41%) are more likely to pay down debt with their refunds than men (34%).
About one-third (30%) of respondents earning less than $35,000 a year will use all or part of their tax refunds to pay for necessary expenses such as rent or groceries.
Among the survey’s other key findings:
- 46% of taxpayers are relying on a refund this tax season, down from 55% in 2021 but up from 40% in 2020.
- Only 12% of respondents said they would take out a personal loan or use a credit card to pay their taxes this year, down from 22% in 2021. Even so, about one-fifth of Americans worry they won’t be able to afford their tax bill this year.
- More than half (55%) of respondents do at least one thing to reduce their tax bill, such as donating to charity, contributing to pretax retirement accounts or deducting medical expenses.
As of Feb. 25, the IRS had already received 45.4 million individual returns, LendingTree said. That’s up 0.3% from the prior year.
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