Are Tax Refunds Used Wisely?

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.

 

 


 

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