Tax Season: $26.65 Billion in Refunds Issued – How Will You Spend Yours?

Tax season has officially begun, with the IRS accepting and processing 2022 tax year returns since January 23. So far, 13.34 million refunds totaling $26.65 billion have been issued, with an average refund of $1,997. For those who have yet to file, there is no need to panic as the deadline isn’t until April 18. Regardless, if you’re receiving a refund, it’s a nice inflow of cash.

A GOBankingRates survey found that some people plan to treat themselves (6%) or travel (4%), while most plan to save (26%).

Faron Daugs, CEO at Harrison Wallace Financial Group, observed that people are making smart financial choices with their tax refunds. Many opt to increase savings, pay bills, or pay off debt, which he views as excellent for securing a strong financial future – a priority in the face of recent inflation.

“The Financial Glow Up” author Wanda Bowman advises taxpayers to pay off credit card debt with their refund instead of saving. Bowman explains that credit cards have high interest rates of around 21%, while savings accounts have low yields of 1.5% to 3%. For those without credit card debt, she recommends creating a three-month emergency fund or investing in real estate, an index fund, or a retirement plan. Bowman’s goal is for everyone to achieve financial independence and live confidently without financial struggles.

There’s no right or wrong way to spend your tax refund. The best choice depends on your financial situation and goals. If you’re not in debt and have savings, you can spend your refund. But if it’s significant, reassess your withholdings to avoid an interest-free loan to the government. Ideally, aim for zero on tax day to maximize cash flow without a large liability.