How Are People Spending Their Tax Return This Year vs. Last Year?

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Tax return season can be stressful for those who owe taxes and joyful for those who receive refunds. According to the NRF, around 58% of Americans believe they’re getting a refund on taxes paid in 2024.

Traditionally, tax refunds have been treated by many as windfalls meant to fund splurges such as vacation upgrades. However, data indicates that may be changing.

Surveys Show Consumers Are More Conservative with Their Tax Returns

According to a survey conducted by the NRF, the bulk of those receiving a refund say they plan to conserve their resources by using their refund to pay down debt or grow their savings. That’s up from the previous year.

• Around a third of those surveyed said they were using 2024 tax refunds to pay down debt compared to 21% the previous year.
• Close to half said they were putting refund money toward savings compared to 28% the year before.
• Around 30% said they need to use the money to fund everyday purchases—that’s also up from the previous year, when only 22% flagged tax refunds for day-to-day spending.

While more respondents are planning to save money, there were also slight increases in the number of people who said they planned to spend their return on “splurge” purchases like home improvements and vacations.

Are Tax Refunds Higher for 2024 Than They Were for 2023?

As of early February 2025, the IRS reported that tax refunds for the year 2024 were averaging $2,069, which is 34% more than the average for 2023 tax returns. Reasons for potentially higher refunds for the 2024 tax year include larger standard deductions and adjustments to tax brackets and the Earned Income Tax Credit to account for inflation.

What Should You Do With Your Tax Refund?

Deciding what to do with your tax refund is a personal process, but it does make sense to carefully consider your financial goals and needs when spending refund money. Whether you’re getting a higher refund than you expected or just a few hundred dollars, there are many ways to use that money.

Use It to Work on Credit

Dedicating some of your return to cleaning up your credit can go a long way. A lower score can cost you thousands on high interest rates, or prevent you from being approved for loans, certain jobs, or apartment rentals.

Here are some ways you could potentially invest in your credit:

1. Pay off any amounts in collections and negotiate a “pay-for-delete” agreement with a collection agency.

Even after you pay a balance in collections, it will may still stay on your credit reports until it ages off. A pay-for-delete agreement is a deal where a collection agency agrees to remove a debt from your credit report in exchange for payment. Collection agencies do not have to agree to this, but some might. Here’s a letter template to get you started.

2. Improve your credit utilization ratio by paying down debt

Your credit utilization ratio is the amount of available credit you have compared to the amount of credit that you’ve used. Your credit utilization ratio can affect as much as 30% of your overall credit score. Paying down debt and improving your utilization ratio may also have a direct affect on your score.

3. Open a secured credit card

If you’re worried about being approved for a credit card, a secured credit card may be a good option. A secured credit card requires a refundable cash deposit (usually equal to your credit limit) and functions like a regular credit card. They’re intended to help people with bad credit build good credit in a secure way. By using it responsibly—keeping balances low and making on-time payments—you build a positive payment history and improve your credit score.

If you need help cleaning up your credit, you might consider hiring a trusted credit repair agency like Lexington Law Firm.

Put It Toward Savings

A $1,000 tax refund makes a very nice beginning for your emergency fund. Any amount you receive and can set aside provides some level of peace of mind, which might be more valuable than any products you could buy. Depending on the size of your tax refund, you might consider savings options like high-yield savings accounts or certificates of deposit that help you earn money on your savings over time.

Whether you want to save up to buy a house or are putting money away for your children’s college education, a hefty tax refund can be a nice addition to that fund. You could also consider using your tax return to add funds to an IRA or other retirement fund if you likely won’t meet contribution limits through other methods this year.

Take a Hard Look at Your Finances and Credit

When your personal finances are in order and you’re consistently working within your means, you can make the best use of large money drops like tax refunds. If you need help analyzing your credit report and repairing bad credit that may be holding you back, connect with Lexington Law today.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.