Spend or Save – What People are Doing with Their Tax Refunds

Looks like the retail boom might be a bust this year

There’s a retail boom that happens every year following tax season, but analysts suspect it’ll be much smaller this year as fewer Americans are planning to spend their tax returns. Two thirds of Americans are expected to receive refunds this tax season, but only one in five of them plans to spend it, which is the lowest level ever recorded by the National Retail Federation.

In fact, analysts suspect that just 8.7% of those who will receive tax refunds will spend it on major purchases like television sets or furniture, while 7.6% are expected to spend their refunds on treats like dining out.

Saving vs. Paying Down Debt

About 48% of those surveyed said they plan to deposit their tax refunds into a savings account, which is down slightly from the 49% who claimed they would do so in 2016. More than a third of those surveyed said they would use the money to pay down debt. “Financial security continues to be top-of-mind for all Americans, and consumers are hanging onto their refunds tighter than ever,” NRF CEO Matthew Shay said.

Other Spending

In addition to saving and paying down debt, almost eleven percent of those surveyed said they would spend their tax refund on a vacation. Almost twenty-one percent said they’d use their refund on everyday expenses.

“I think it is a sign about how people feel about the economy and where we are going. There is still a lot of uncertainty out there,” says Bryan Pukoff, CPA and principal at Rehmann, one of the largest financial services accounting and consulting firms in the Midwest. “That is different than what we have seen in the past. People generally take a portion of their refund and spend it on something for themselves – a vacation or a new car. The percentages actually surprise me,” Pukoff said.

While the IRS issues more than nine out of ten refunds within three weeks, some refunds take longer. Taxpayers who file electronically and select direct deposit often receive their refunds the fastest. So far, about 44% of taxpayers have received a refund. The average amount being $2,058, according to the IRS.

What do you plan on spending your tax refund on this year? Do you think it’s wiser to put your funds in a savings account or use them to pay down existing debt?

 

This post is not intended to be a solicitation for a loan. Pomo One Marketing, Inc. provides these blogs for entertainment and informational purposes only. Remember to consider all your financial options before making any decisions related to credit.

 

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