Nearly Half of Consumers Earmark Tax Refunds for Savings
WASHINGTON, D.C. — With tax season in full swing, consumers are already planning what to do with their refunds — and it's not spend it.
According to the annual tax refund survey by the National Retail Federation (NRF) and Prosper Insights & Analytics, more U.S. consumers will hold onto to their tax refunds this year.
"Tax return season is a time when consumers plan and prioritize financially, whether it is paying down debt or saving for a rainy day," said NRF President and CEO Matthew Shay. "With the passage of tax reform and the expectation of more disposable income, we expect to see consumers prioritizing how and when they spend their hard earned dollars, especially during the back-to-school and holiday seasons."
Of the 65 percent of taxpayers expecting a refund, 49 percent said they will put it into savings. That number is up from 48 percent last year and the highest level in the 12-year history of the survey.
The survey also found that 35 percent will pay down debt, in line with last year and the lowest level since 2016 — all below the peak of 48 percent seen during the recession in 2009.
Only 22 percent will spend this year's refunds on everyday expenses, the second-lowest level in survey history after last year's 21 percent.
Other findings include: 12 percent will use the money for a vacation; 10 percent will "splurge" on dining out, trips to a spa or apparel; 9 percent will invest in home improvements; and 8 percent will make major purchases ranging from a television or furniture to a car.
"Younger consumers are being more mindful about their hard-earned money, especially those 18-24 who have already filed their taxes this year, higher than any other age group," said Prosper Executive Vice President of Strategy Phil Rist. "Although this group is focused on allocating a portion of their refunds to savings, they are also more likely to use them for everyday expenses compared with any other age group."
Of those surveyed, 59 percent have already filed their taxes or expected do to so by the end of February. Another 27 percent will file in March and 14 percent in April.
The survey, which asked 7,657 consumers about their tax return plans, was conducted Feb. 5-13 and has a margin of error of plus or minus 1.1 percentage points.
Washington, D.C.-based NRF is the world's largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and internet retailers from the United States and more than 45 countries.
Worthington, Ohio-based Prosper Insights & Analytics is a global leader in consumer intent data serving the financial services, marketing technology, and retail industries.