IRS Refunds Are Up 14.2% So Far: What Filers Should Do With the Extra Cash
IRS Refunds Are Up 14.2% So Far: What Filers Should Do With the Extra Cash
John CsiszarSat, February 28, 2026 at 2:08 PM UTC
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According to the latest data from the Internal Revenue Service, the average federal tax refund so far in 2025 is $2,476, up 14.2% over the same period last year.
Here’s a look at what filers should keep in mind regarding these larger tax refunds and what they could do with the extra cash.
Take Care of Short-Term Needs
If you’re late on any debt payments, such as credit cards, auto loans or your home mortgage, using your tax refund to address this deficit should be priority number one. If you’ve got a handle on your debt situation, use your refund to boost your emergency fund.
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Fund Near-Term Goals
Consider using part of your refund to fund short-term goals, such as planned travel, ongoing education or an upcoming large bill. If you allocate that money to something you know you’ll need ahead of time, it will help prevent impulsive spending on discretionary items.
Contribute to a Retirement Plan
Tax refunds fall under the category of “windfall” payments. This means they are not part of your everyday budget and can be considered a type of “extra” cash. If you divert this money to an IRA or 401(k) plan, if eligible, you can boost your long-term wealth without having to take any money out of your own pocket.
Invest in Yourself
Research from the U.S. Bureau of Labor Statistics consistently shows that earnings correlate strongly with level of education and credential attainment. If you can use your tax refund to enroll in a certificate, credential or degree program, you could potentially leverage that small amount into much higher lifelong earnings.
Plan Ahead Using the IRS Withholding Calculator
If you’re receiving a tax refund, it means you overpaid your taxes. To avoid this scenario in 2026, ensure your withholding is balanced using the IRS Tax Withholding Estimator.
Things To Remember -
You just gave the government a tax-free loan: While a higher tax refund might sound like a windfall, it is simply the return of overpaid taxes. As explained by the Tax Foundation, the government had free use of your money throughout the tax year instead of it remaining in your pocket or being invested. That’s something to consider for tax planning in 2026.
Early refunds tend to skew higher: Simpler returns processed first tend to generate larger average refunds. Returns with complexities, such as the earned income tax credit, or EITC, are often processed later because of statutory holds, so the average refund amount may decrease as April 15 approaches.
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This article originally appeared on GOBankingRates.com: IRS Refunds Are Up 14.2% So Far: What Filers Should Do With the Extra Cash
Source: “AOL Money”
