Here’s the No. 1 Thing Americans Do With Their Tax Refund
Written by
J. Arky
Edited by
Ashleigh Ray
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
It’s safe to say that most Americans don’t look forward to tax season. But the refund that the taxpayer majority receives can make the tedious process of tax filing worth the effort. Of course, that raises the question of what to do with your tax refund.
Not sure yet? With the filing deadline being April 15, you still have some time to figure it out. But if you need inspiration, here’s how the majority of Americans plan to use their tax refund in 2025.
Most Americans Will Be Spending Their Refund on Essentials
According to a recent survey conducted by TaxSlayer and Talker Research, most Americans plan to use their tax refund in a practical manner: paying for essentials. Over half (52%) plan to use their refund towards bills, like rent and utilities, and 44% plan to spend it on groceries and essential goods.
Paying Off Debt Was the Next Most-Popular Choice
According to the survey, 37% plan to use their refund to pay down credit card debt. Among those who plan to use their refund towards their credit card debt, over half (56%) are specifically targeting debt they racked up due to holiday season purchases.
Other things Americans plan to do with their refund include putting it into a savings account (22%) or covering a home improvement project or repair (20%).
Few Americans Will Be Spending Their Refunds on Unnecessary Expenses
According to the survey, only 8% of Americans said they planned to spend their refund on luxuries. Among those who are planning to treat themselves with their refund check, the largest proportion plan to buy new clothes (37%). Others plan to spend it on entertainment (28%), a new phone (26%), gifts (24%) or a night out on the town (23%).
When Do Americans Expect To File Their Taxes?
Many taxpayers don’t plan on waiting until the last minute to file a tax return. The survey found that 43% of Americans plan to file early, with 54% reporting that they will file by the deadline.
Most Tax Filers Expect Their Tax Refund To Be About the Same as Last Year
According to the survey data, 51% of respondents expect their tax refund for this year to be “about the same” as last year and 22% are expecting more in their refund checks. In addition, 26% expect to receive less than the amount they got in 2024.
The Average Tax Refund Is Up So Far This Year
According to the IRS, the average tax refund as of the week ending Feb. 21 was $3,453. That’s up 7.5% from this same time last year when the average refund amount was $3,213.
So far the IRS has received 42.7 million tax returns, down 4.2% from the number of returns it had received by this time last year — 44.6 million. It has processed 42.4 million returns so far in 2025.
The Best Ways To Use Your Tax Refund
If you are wondering, “What should I do with my tax refund?” — you have plenty of options. But first, don’t think of your tax refund as free money. It’s money that you could have gotten in each paycheck, but instead, you let the government hold onto it for you throughout the year. So make the most of your money when you get it back.
Here are some smart ways you can use your tax refund to improve your financial situation.
1. Pay Off Debt
Join the 37% of Americans who plan to use their refund to tackle debt and consider using the cash you get to help pay off what you owe. Focus on first paying off high-interest debt — such as credit card debt — to reduce the total amount that you pay.
2. Create an Emergency Fund
A separate GOBankingRates survey found that over a third of Americans (39%) have $250 or less in savings. That likely means they don’t have enough cash to cover emergencies. Stashing your refund in a savings account can be an effective way to build an emergency fund so you don’t have to rely on credit to cover unexpected expenses. This could be an especially smart move this year, given the volatility of the job market.
3. Invest In Yourself
You might be able to break the cycle of living paycheck to paycheck by climbing the career ladder and making more money. Consider using your refund to hire a career coach, take courses online to improve your skills, attend conferences, join networking groups or even launch your own business.
How To Track Your Tax Refund
So, the taxes are filed, they’re snug in the IRS’ hands; how do you then track your refund as it heads your way? E-filers will be able to track their returns and subsequent refunds using the IRS’ “Where’s My Refund?” tool beginning 24 hours after filing.
You can use the tool even if you mail a physical tax return to the IRS, but you’ll have to wait up to six weeks for the IRS to receive and upload the return into the tool.
How Can I Estimate My Tax Refund?
Maybe you’re planning on making a big purchase. Maybe you’re a bit behind on a few payments. Or maybe you just want to know how much that tax refund might be. You can use one of several great online estimators to get a ballpark figure.
TurboTax has a tax return calculator, an easy-to-use tool that is always up to date on the latest and greatest in tax law. H&R Block also has a calculator — just answer a few simple questions about your income and expenses and you’ll be able to see an estimate of either your refund or what you might owe.
Why You Actually Shouldn’t Want a Big Tax Refund
Although it can feel like a windfall, there are a few reasons why a big tax refund is actually not a good thing. It means that you let the government hang on to your money interest-free throughout the year.
You could be better off getting more in each paycheck to pay down debt or invest so your money can grow. Taxpayers who regularly get a large refund might need to reassess their W-4 to adjust their tax withholding and hang on to more of each paycheck.
Cameron Huddleston and Gabrielle Olya contributed to the reporting for this article.
More From GOBankingRates
