NRF finds most Americans will save their refund this year or put it toward paying down debt.
More Americans than ever plan to hold on to their tax refunds this year rather than spending the money they get from the IRS, according to the annual tax refund survey by the National Retail Federation and Prosper Insights & Analytics.
“Tax return season is a time when consumers plan and prioritize financially, whether it is paying down debt or saving for a rainy day,” NRF President and CEO Matthew Shay said. “With the passage of tax reform and the expectation of more disposable income, we expect to see consumers prioritizing how and when they spend their hard earned dollars, especially during the back-to-school and holiday seasons.”
Of the 65% of taxpayers expecting a refund, 49% say they will put it into savings. That’s up from 48% last year and the highest level in the 12-year history of the survey. Meanwhile, 35% will pay down debt, in line with last year and the lowest level since 2016—all far below the peak of 48% seen during the recession in 2009.
Only 22% will spend this year’s refunds on everyday expenses, the second-lowest level in survey history after last year’s 21%. Beyond that, 12% will use the money for a vacation; 10% will “splurge” on dining out, trips to a spa or apparel; 9% will invest in home improvements; and 8% will make major purchases ranging from a television or furniture to a car.
“Younger consumers are being more mindful about their hard-earned money, especially those 18-24 who have already filed their taxes this year, higher than any other age group,” Prosper Executive Vice President of Strategy Phil Rist said. “Although this group is focused on allocating a portion of their refunds to savings, they are also more likely to use them for everyday expenses compared with any other age group.”
According to the survey, 67% of Americans file their taxes online, with 39% using computer software, 20% hiring an accountant, 17% going to a tax preparation service, 14% preparing their taxes manually and 9% seeking help from a spouse, friend or relative. Among those using a tax preparation service, consumers are spending $5.7 billion on tax services — an average $132.93 per person, up slightly from last year’s $131.66.
Of those surveyed, 59% have already filed their taxes or expect do to so by the end of February while 27% will file in March and 14% in April.
The survey, which asked 7,657 consumers about their tax return plans, was conducted Feb. 5-13 and has a margin of error of plus or minus 1.1 percentage points.