Jesse Jones

How taxpayers plan to spend tax returns this year

The IRS will be issuing bigger refunds this tax season. $3,200 is the amount of the average return, up 2% from last year.

The reason? The IRS raised tax bracket thresholds and also boosted standard deductions to keep up with inflation.

A recent Bankrate study revealed what American’s plan to do with their beefed-up returns.

“Most people tend to use their tax refunds quite practically, and that’s important because this is the largest windfall of the year for a lot of households,” says Bankrate Analyst Ted Rossman.

According to the survey most will put their returns into savings. The second most popular use will be to pay off debt.

There is a contrast in how older generations vs. younger will utilize their refunds.  Older generations are less likely to invest their return - while gen z is most likely to invest.

“I think this speaks to the rise of social investing platforms like Robinhood that have gotten people interested in investing early and often. The reason this is important is because of compound interest.” says Rossman.

And where do millennials fall? Bankrate says more in line with older generations.

“Millennials are coming into middle age. They have mortgages, they have kids. They’re, they’re not really blowing it on vacation. They’re, they’re typically using it for something practical.”

Tax season is a good time to look at your finances overall. And remember, when it comes to returns - bigger isn’t always better.

“A refund feels great, but it’s not always the smartest approach because you’ve basically given the government an interest free loan this past year. You might want to adjust your withholdings so that next year you get this money in bits and pieces, and not all at once.

If you expecting a big refund, you can check the status of your refund on the IRS website, under where’s my refund?