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Survey: How Americans Spend Their Tax Refunds

Survey: How Americans Spend Their Tax Refunds
BY John Russo
Mar 4, 2019
 - Updated 
Sep 22, 2024
Key Takeaways:
  • A Freedom Debt Relief survey found that most Americans spent their tax refunds to pay down debts.
  • 30% spent their refunds on other items.
  • And 22% put some or all of their refund into savings.

Every year, studies are conducted on how Americans spend their tax refunds. But this year, a new tax law went into effect that you might think would change those results…if people actually knew about it. However, since most Americans are confused or ill-informed about tax reform, those spending plans might have to change. So, how do taxpayers plan to spend their refunds, and how might the recent reforms affect those expectations?

How will Americans spend their tax refunds?

From paying off debt to saving money or going on a vacation, the answer to that question varies depending on who you ask. For example, a recent Freedom Debt Relief survey showed that 42% of women and 40% of men of all generations stated they would use their refunds to pay off debt. An additional 27% of women and 24% of men said they would sock the money away into a savings account.

42% of women and 40% of men of all generations stated they would use their refunds to pay off debt.

Can your tax refund fix your finances?

No matter how they plan to use their money, many Americans see tax refunds as a much-needed cash infusion that will help them manage their finances. But unfortunately, while a majority of the survey’s respondents stated that they would use their refund to pay off debt, 42% of people said that they have about the same amount of credit card debt this year as they did last year. Similarly, a combined 54% stated that they would find it difficult (32%) or very difficult (22%) to pay for an unexpected $500 expense. And yet, only 26% plan to put their tax refund toward savings.

While your tax refund usually can’t fix your financial woes, it can make a dent if it’s part of a detailed, thoughtful plan grounded in the realities of your particular situation.

Are Americans informed about tax reform?

Speaking of reality, it’s important to know how recent changes to tax law could affect your refund. Unfortunately, while these reforms made headlines over the past year, many Americans may remain uninformed about how the new tax rules could affect them. In fact, 37% of people felt they were not at all informed about the 2018 Tax Reform. An additional 43% stated they were only slightly informed.

And, despite the U.S. Government Accountability Office’s (GAO) warning that taxpayers should reassess their 2018 withholdings, only 15% of Americans said they had changed their withholdings. So, now a majority of people of all generations still think that their tax refunds will be about the same as last year. And some will be disappointed.

Tax reforms that could affect your refund

So, what are some of the changes that could alter how Americans spend their tax refund this year? To sum it up, the new law lowers tax rates in most brackets, doubles the standard deduction, and overhauls many old tax rules. If you haven’t had a chance to file your taxes yet, here is an overview of some of the biggest changes happening this tax season:

  • The standard deduction, also known as the amount of income that is not subject to income tax, has increased this year. For single filers, it is now $12,000. For joint filers, it is $24,000. For the head of the household, it is $18,000.

  • Many itemized deductions have been suspended this year, including investment expenses, alimony deductions, personal casualty and theft losses, and mortgage interest deductions.

  • Personal exemptions, or the amount you can deduct for yourself and your dependents, have been eliminated.

  • Tax rates have changed as much as 4% in each tax bracket.

In sum, it’s great to have a spending plan for your tax refund, especially one that involves paying off debt. However, it’s also important for that plan to be one based in reality — the realities of your financial situation, and of the tax laws affecting the amount of your refund.

Get help planning your financial future

Making the decision to take control of your finances and get out of debt is a great first step toward a more stable financial future, whether your tax refund is involved or not. And luckily, learning how to deal with debt, money, and planning for that future doesn’t need to be hard. To that end, we’ve developed a simple to follow guide to help you find the tools you need to move to a better financial future. Get started by downloading our free guide right now.

Debt relief by the numbers

We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during August 2024. This data reveals the diversity of individuals seeking help and provides insights into some of their key characteristics.

Age distribution of debt relief seekers

Debt affects people of all ages, but some age groups are more likely to seek help than others. In August 2024, the average age of people seeking debt relief was 50. The data showed that 17% were over 65, and 15% were between 26-35. Financial hardships can affect anyone, no matter their age, and you can never be too young or too old to seek help.

Home-secured debt – average debt by selected states

According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) (using 2022 data) the average home-secured debt for those with a balance was $212,498. The percentage of families with mortgage debt was 42%.

In August 2024, 27% of the debt relief seekers had a mortgage. The average mortgage debt was $236,240, and the average monthly payment was $1,890.

Here is a quick look at the top five states by average mortgage balance.

State% with a mortgage balanceAverage mortgage balanceAverage monthly payment
California21$391,801$2,725
Washington DC18$336,914$2,290
Utah35$324,405$2,184
Nevada26$307,368$2,063
Massachusetts29$303,507$2,366

The statistics are based on all debt relief seekers with a mortgage loan balance over $0.

Housing is an important part of a household's expenses. Remember to consider all your debts when looking for a way to get debt relief.

Regain Financial Freedom

Seeking debt relief can be the first step toward financial freedom. Are you struggling with debt? Explore options for debt relief to regain control of your finances. It doesn't matter how old you are or what your FICO score or credit utilization is. Take the first step towards a brighter financial future today.

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