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What You Plan to Do With That Refund

Now that you’ve met the April 18 tax filing deadline comes the good news – three-quarters of filers are expected to get refunds this year, and the average amount will be more than $3,000. That’s almost twice the $1,698 average it was in 1999, writes Wall Street Journal Tax Report columnist Laura Saunders.

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Why the increase? A number of factors. People who lost jobs or investment income in recent years overpaid inadvertently. Consumers also didn’t adjust their withholdings after the addition of some tax benefits such as the American Opportunity education credit, the home-buyer credits or the expanded child credit.

Saunders writes that while conventional wisdom has discouraged large tax refunds because it amounts to an interest-free loan to the government, many consumers like the forced savings, especially when the money would earn little in the bank with interest rates so low. More importantly, that $3,000 check might not get frittered away if it comes all at once rather than “dribbled” in paychecks.

So how do most of us plan to spend the cash? Quite responsibly, according to a number of reports.

Almost half of consumers surveyed in March by Deloitte said they would use their refund to pay bills and credit cards. About 40% plan to save that money. Only 13% said they would spend it on a vacation or trip, and 8% plan to use to remodel a home.

Readers, do you expect to receive a refund? If so, do you plan to spend or save it?


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Comments (5 of 7)

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    • If you talk to your accountant,. he can expalin it fully.Basically, you can deduct medical dental expenses, insurance premiums, medical related travel, as part of yout itemized deduxtions. If you don’t itemize, you’re out of luck.

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    • Refund? I wish. I paid thousands, but with no hesitation. It was a good investment year.

About The Tax Blog

  • The Tax Blog brings together a team of award-winning tax journalists from the Dow Jones network and around the web to examine the tax issues, changes and legislation that affect families, investors and small business owners. Our contributors include Tax Report columnist Laura Saunders (WSJ), Tax Guy columnist Bill Bischoff and senior reporter Jilian Mincer (SmartMoney.com), retirement-focused reporter Anne Tergesen (WSJ), wealth management writer Arden Dale (Dow Jones Newswires), TaxWatch columnist Eva Rosenberg and personal finance reporter Andrea Coombes (MarketWatch), and reporter Alyssa Abkowitz (SmartMoney). They’ll provide the latest news and insight, mine the tax code for tips and loopholes, and answer your questions about tricky tax situations. Contact the The Tax Blog with ideas, suggestions or tax questions at thetaxblog@dowjones.com.