The deadline to file taxes isn't until April 17, but already people know what they'll do with the refunds they get and a third has decided to spend it.
Taxes might not have to be filed until April 17 this year (enjoy those two extra days if you need them!), but already people know exactly what they’ll be spending their refunds on. The IRS has said the average federal tax refund will be $2,913, and a third of Americans plan to spend all or part of that money, according to Capital One Bank’s annual Taxes and Savings Survey.
Not all of that spending will be frivolous. More than a quarter of Americans save part of the money while 17% are planning to use the money to pay down debt. Only 5% are planning to invest their refunds. But since 69% don’t factor their tax refund into their annual budgets, many will simply spend it.
“Most people are not factoring their annual return into their overall financial plan and long-term objectives,” Mickey Konson, managing vice president for retail banking at Capital One, said in a statement.
Of course, you also have to factor in that you could owe taxes, which only 25% responded that they specifically set aside savings for. About a third (32%) will dip into personal savings to cover the cost and 19% are going to do an installment agreement or payment plan with the IRS.
Most planning to spend the money (28%) will put it toward everyday expenses, but the same amount plan to spend the money less frugally. Five percent will spend the money on electronics such as a TV or an iPad (luckily the newest version is already out). For 8%, the money is going toward vacation; 6% will use it on new clothing and accessories; and 9% have large purchases like cars or appliances in mind.
“A tax refund is often seen as free money, which makes it very tempting to spend it right away, but it’s important to remember that the refund you’re getting back is your own money,” Konson said. “Tax season is a good opportunity for people to plan ahead, with an eye toward their future goals and financial health.”
As for this year’s late deadline, it’s going to come in handy; 11% expects to take advantage of it and wait until the last minute. The majority of those procrastinators will be men (61%).