After a year of the coronavirus pandemic, millions of Americans are anxiously awaiting tax refunds from their 2020 returns.
How they plan to use that chunk of money – which, for many, is the largest windfall they’ll see all year – is very different.
Last year, the IRS sent nearly 126 million refunds, accounting for about 74% of all filers. The average check was $2,549, according to the agency.
This year, the IRS had received about 76 million individual tax returns through March 19 and has issued nearly 50 million refunds. The average refund size so far is $2,929.
Across the board, nearly half of Americans plan to save at least some of their refund check, according to a survey from NORC at the University of Chicago that polled 1,076 adults online and over the phone between Feb. 25 and March 1. The survey allowed users to select multiple options for what they planned to do with their refund.
Another 35% said they’d use some of the money for bills and expenses, and 32% said some of it would go to pay down debt.
Plans for using refunds varies by income
Overall, the survey shows that people are making solid financial decisions with their refund, and that they’re able to save some of the money even after a rough year.
But breaking down the answers by income tells a very different story. The number of respondents who said they’d save some of their refund declined with annual income, according to the survey.
“What they’re using their refund checks for is just entirely different than households making more money,” said Angela Fontes, vice president of the economics, justice and society department at NORC at the University of Chicago.
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Only 27% of those who make less than $30,000 a year said they’d save some of their tax refund, while 46% and 53% of the same group said they’d use the money to pay down debt and for everyday expenses and bills, respectively.
“These are folks potentially catching up on rent, potentially catching up on back utility bills or they’re just going to buy some additional groceries,” said Fontes.
To be sure, even those in the lower income brackets generally plan to put their refunds to good use — most respondents indicated that at least some of the money they’d get back from the IRS would better their financial situation by paying down debt or saving.
And very few respondents said they’d spend their refunds on something fun or invest it in the stock market. Only 9% of those who make more than $100,000 per year said they’d invest their refund in the market, and that portion declined to 5% for those who make less than $30,000 annually.