Survey: How Americans Spend Their Tax Refunds
- Most Americans use tax refunds to save, pay down debt, or cover everyday expenses, according to a study by the National Retail Federation.
- Other common ways that people spend tax refunds are home improvements, major purchases, and vacations.
- A tax return could help you make progress toward your financial goals.
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The average tax refund is nearly $3,000, according to IRS data from the 2025 filing season. You could do a lot with that kind of money, like pay down your credit cards, increase your emergency fund, or buy something you’ve had your eye on. If you’re not sure how to use your refund, it may help to know what everyone else is doing with theirs.
So how do people spend their tax refunds? The answer to that question varies depending on who you ask, but studies show that most Americans use their tax refunds in a few particular ways.
How Do People Spend Their Tax Refunds?
The most popular ways that people spend their tax refunds are savings, paying down debt, and everyday expenses. Here are the leading ways consumers planned to spend their tax refunds in 2025, according to a survey by the National Retail Federation.
| Use of Tax Refund | Percentage of People |
|---|---|
| Savings | 49% |
| Pay down debt | 33% |
| Everyday expenses | 28% |
| Home improvement | 10% |
| Major purchase | 10% |
| Splurge purchase | 10% |
| Vacation | 10% |
| Other | 3% |
Respondents could select more than one response, since many people use their tax refunds for multiple purposes.
A Freedom Debt Relief survey got similar results, just with the top two responses switched around. 42% of women and 40% of men said they would use their tax refunds to pay off debt. 27% of women and 24% of men said they would put the money in a savings account.
Debt and savings can both be great ways to use a tax refund. Ultimately, the right choice depends on your financial situation. If you have debt, a tax refund could help you put a dent in it, or maybe even pay it off.
Can Your Tax Refund Fix Your Finances?
A tax refund normally doesn’t fix a person’s finances, at least not entirely. But you could use the money to make progress toward financial goals. For serious, long-term changes, you’ll probably also need some new habits.
For example, you could use a tax refund to make one large payment toward credit card debt. If you owe $8,000 on your credit cards and you use a $3,000 tax refund to pay down the balances, that’s a big step in the right direction.
But you’ll still need a plan to pay off the remaining $5,000. You could commit to paying a set amount per month. Or get a debt consolidation loan so you have a fixed payment amount and schedule. Either way, your tax refund wipes out a sizable chunk of your debt, but not all of it.
In some cases, a tax refund could resolve financial issues. Maybe you can even pay off your credit card debt in full with your tax refund. If so, that’s great! As soon as you click to submit the payment, turn your attention to creating a plan to avoid this type of debt in the future. If the debt was from an event outside your control, the plan could be to build a bigger emergency fund. If the debt was from overspending, your plan could include building new habits in how you use your credit cards.
How to Use Your Tax Refund
One of the best ways to use a tax refund is to put it toward your biggest money goal or your most pressing financial problem. If you have high-interest debt or accounts that are in collections, start there. A tax refund could help you take control of your debt by getting on track with your payments, or you could use the money to negotiate a debt settlement.
If you don’t have pressing issues with debt, you could do the same thing as nearly half of Americans—put your tax refund into savings. This is a particularly good idea if you don’t have a full emergency fund yet. The standard rule is to have enough emergency savings to cover your bills—with no money coming in—for at least three to six months. Saving that much money takes some time, but a tax refund could speed up the process.
You could also split your tax refund, using part of it for financial goals and part of it to treat yourself. But if you’ve been struggling financially, or if you want to make lots of progress on your goals, consider putting your entire tax refund toward debt, savings, or paying bills.
Get Help Planning Your Financial Future
Deciding to take control of your finances and get rid of debt is a great first step toward a more stable financial future, whether your tax refund is involved or not. If you’d like guidance in dealing with debt, talk to a Certified Debt Consultant with Freedom Debt Relief.
A debt relief program is an opportunity to negotiate and settle your debt. Your tax refund could make it easier to reach a settlement agreement with your creditors, since you have some cash to put toward a deal. But even if you don’t have a tax refund, you could still use debt relief to put your debt behind you for good.
Debt relief stats and trends
We looked at a sample of data from Freedom Debt Relief of people seeking a debt relief program during June 2025. The data uncovers various trends and statistics about people seeking debt help.
Credit utilization and debt relief
How are people using their credit before seeking help? Credit utilization measures how much of a credit line is being used. For example, if you have a credit line of $10,000 and your balance is $3,000, that is a credit utilization of 30%. High credit utilization often signals financial stress. We have looked at people who are seeking debt relief and their credit utilization. (Low credit utilization is 30% or less, medium is between 31% and 50%, high is between 51% and 75%, very high is between 76% to 100%, and over-utilized over 100%). In June 2025, people seeking debt relief had an average of 75% credit utilization.
Here are some interesting numbers:
| Credit utilization bucket | Percent of debt relief seekers |
|---|---|
| Over utilized | 30% |
| Very high | 32% |
| High | 19% |
| Medium | 10% |
| Low | 9% |
The statistics refer to people who had a credit card balance greater than $0.
You don't have to have high credit utilization to look for a debt relief solution. There are a number of solutions for people, whether they have maxed out their credit cards or still have a significant part available.
Student loan debt – average debt by selected states.
According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) the average student debt for those with a balance was $46,980. The percentage of families with student debt was 22%. (Note: It used 2022 data).
Student loan debt among those seeking debt relief is prevalent. In June 2025, 27% of the debt relief seekers had student debt. The average student debt balance (for those with student debt) was $48,703.
Here is a quick look at the top five states by average student debt balance.
| State | Percent with student loans | Average Balance for those with student loans | Average monthly payment |
|---|---|---|---|
| District of Columbia | 34 | $71,987 | $203 |
| Georgia | 29 | $59,907 | $183 |
| Mississippi | 28 | $55,347 | $145 |
| Alaska | 22 | $54,555 | $104 |
| Maryland | 31 | $54,495 | $142 |
The statistics are based on all debt relief seekers with a student loan balance over $0.
Student debt is an important part of many households' financial picture. When you examine your finances, consider your total debt and your monthly payments.
Regain Financial Freedom
Seeking debt relief can be the first step toward financial freedom. Are you struggling with debt? Explore options for debt relief to regain control of your finances. It doesn't matter how old you are or what your FICO score or credit utilization is. Take the first step towards a brighter financial future today.
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Author Information
Written by
Lyle Daly
Lyle is a financial writer for Freedom Debt Relief. He also covers investing research and analysis for The Motley Fool and has contributed to Evergreen Wealth and Monarch Money.
Reviewed by
Kimberly Rotter
Kimberly Rotter is a financial counselor and consumer credit expert who helps people with average or low incomes discover how to create wealth and opportunities. She’s a veteran writer and editor who has spent more than 30 years creating thousands of hours of educational content in every possible format.
What’s the best way to use a tax refund?
The best way to use a tax fund is generally to put it toward your most important financial goal or your biggest financial challenge. High-interest debt and past-due accounts are a good place to start. If you don’t have any expensive debt, then you could use your tax refund to increase your savings or build your retirement fund.
Which filing status gives the biggest tax refund?
“Married filing jointly” has the lowest tax rates, and typically results in the biggest tax refund. But the optimal tax bracket depends on the person and income. If you’re not sure which tax bracket you’re in, talk to a tax professional.
What percentage of people get tax refunds?
About two-thirds of people get tax refunds, according to IRS data from the 2025 tax filing season. The average refund amount is about $3,000 per person.