Typically, Americans pay more taxes than they actually owe; 83% of taxpayers received a refund in 2015. This could be for a number of reasons, such as: eligibility for certain tax credits, uncertainty about how to calculate exact withholdings, or just a deliberate way to set aside money for later. Whatever the reason may be, is it a smarter long-term financial decision to spend your refund, save your refund, or to avoid a refund altogether by withholding exactly?
In this new paper from Aron Szapiro, we find that:
- Only 37 percent of workers saved their refunds, while the rest spent their refunds on mix of durable or nondurable goods.
- The larger the refund, the more of it workers spent.
- About one quarter of workers allocated a large share of their tax refunds to paying down credit card debt.
Download your copy to learn more about Aron’s findings and the pros and cons of over-withholding.
And check out our infographic to see exactly how 2015 refunds were spent.
HelloWallet works with employers to provide independent, personalized financial guidance to employees through web and mobile-based software applications. Using behavioral and consumer research and analytics, HelloWallet helps employees make the most of their salary and benefits. HelloWallet is headquartered in Washington DC and is a wholly owned subsidiary of Morningstar, Inc.