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Tax Day is swiftly approaching, and for most filers that means a refund is also likely on the way.
This year, many taxpayers are planning to save any refunds they receive in an effort to boost their personal wealth.
Some 46% of people plan to save their refunds, according to a LendingTree survey of more than 1,000 taxpayers conducted online Feb. 7 through Feb. 10. That’s higher than the previous two years: 41% in 2021 and 40% in 2020, according to LendingTree.
More than 81 million Americans have filed their 2021 tax returns before the April 18 deadline, and the IRS has sent out a total of more than $188 billion in refunds through March 25, the agency reported. Thus far, the average individual refund is $3,263, which is about 12% higher than last year.
For many people, a tax refund is the largest single check they get all year and can be a crucial part of their budget.
Aside from saving, Americans are also looking to use their refunds to pay down debt and boost family budgets, the survey showed.
“It is good to see that people have used [a refund] or intend to use it primarily to save and pay off debt, especially because things are just getting more expensive by the day and debt is only going to get more expensive as the [Federal Reserve] continues to raise rates,” said Matt Schulz, chief credit analyst at LendingTree.
Refunds applied
The data also showed that younger workers, women and those with lower incomes were more likely to use their refunds to save, pay down debt or for necessary expenses.
“One of the great lessons of the pandemic is just how important savings are,” said Schulz. “A lot of people really learned that lesson — you don’t know when that rainy day is coming, and you don’t know how strong the storm is going to be.”
More than 60% of Generation Z respondents, ages 18 to 25, said they will put their refund cash into savings, compared to 47% of millennials and 41% of boomers. Those in Gen Z were also more likely to invest their refunds, the survey found.
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Women were more likely than men to use a refund to pay down existing debt. Some 41% of women said they’d put a refund toward debt management, compared to 34% of men.
That may be due to necessity, said Schulz, because women tend to experience more financial headwinds than men — they often earn less, are more likely to be a single parent and may take time off to care for children or other family members.
Others are using their refunds just to get by. One-third of those who made less than $35,000 last year said they would use their refund to pay for necessities such as rent and groceries.
“As inflation continues to grow and interest rates continue to rise, I would suspect that number is only going to grow,” said Schulz. “It’s a tough situation for those folks.”
To be sure, some of those surveyed said they were looking to use their refund at least partially to splurge on something they’ve been wanting to buy or to book a vacation.
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