What Did You Do with Your Last Tax Refund?

How Were Tax Refunds Spent?

Every spring, more than 4 in 5 tax filers, or over 100 million families, receive a tax refund from the IRS. These refunds averaged $2,800, totaling $306 billion in 2015. But how is this money spent? What do we do with our refunds?

We looked at HelloWallet user data to investigate spending in the months before and after our users received their 2014 tax refunds. We HelloWallet users enjoyed getting our refunds, and we usually spent them pretty quickly!

For a more in-depth analysis, download the paper

Saved Spent?

37% of us saved our whole refund

Saving our tax refunds is pretty responsible, but it would be even better to receive our income throughout the year. After all, if we kept more of our paychecks throughout the year instead of getting a refund, we'd have extra money in case of emergencies and we could earn a little more through interest or investments.

63% of us spent at least a portion of our refunds

We spent our refunds on all kinds of things from vacations to dining to clothing. Additionally, many of us used our refunds to catch up on bills or credit card debt.


25% of us paid down credit card debt with our refunds

While paying off debt is good, most of us would be better off getting this money in our regular paychecks so we could have avoided borrowing to begin with or paid off debts sooner.

38% of us used our refunds as a savings device to make large purchases

As with other kinds of spending, we might be better off receiving our money throughout the year and automatically allocating it to a savings account. That way, if we needed the money for something—such as an emergency—we would have it and wouldn't need to borrow while waited for our tax refunds. On the other hand, paying extra taxes is a good way to force us to save, since we had to wait until spring to get our extra payments back.

73% of us increased spending the month after receiving refunds (if we spend our refunds)

Tax refunds make us feel rich, encouraging us to increase our standard of living for a brief period of time. But, refunds really just represent overpayments; we would be better served collecting more of our money throughout the year.

After looking at HelloWallet user data, we believe that many people are not well-served by lending money to Uncle Sam all year and collecting it back as a large lump sum.

As you have seen, people often do not use their tax refunds rationally, spending them relatively quickly, and often on nondurable goods. Some people did use these refunds as a forced savings device for large purchases—the best way to spend a tax refund—but other users built up credit card debt throughout the year and then paid this debt down with their refunds, when they may have been better served by adjusting their withholdings and receiving that money as part of their paychecks.

Update your tax withholdings & keep your money as you earn it

Want to learn more?

For a more in-depth analysis, download the paper