What's the Average Tax Refund and How Are People Using Theirs

What’s the Average Tax Refund, and How Are People Using Theirs?

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Written by Edmund Moy

Apr 6, 2022

A tax refund is a reimbursement of taxes that you’ve overpaid to the federal or another government. The U.S. Treasury Department estimates that nearly 75% of federal taxpayers wind up with tax refunds because they overpay their taxes. As of April 15, 2022, the average federal tax refund for the 2022 tax-filing season was $3,103, up from $2,873 a year earlier.

Many Americans are carefully watching their tax refunds this year because of the impact of pandemic stimulus payments, tax credits, inflation, and retirement-related changes in tax laws.

Early in my career, I used to get tax refunds. I had gotten into the habit of tithing 10% of my gross income to my church, giving away a similar amount to charitable causes, and contributing to my retirement with pretax dollars, all of which had the effect of reducing my taxable income below the amount my employer withheld. At first, it seemed like a gift from the federal government—but then I realized that I had been paying too much in taxes and was getting some of my money back when I could have been using it more smartly during the course of the year. That opportunity cost was the incentive for me to be extra smart about how I used my refund.

How will you use your tax refund? What could you do to better prepare for next year’s refund? Here are some facts and numbers that may help you make these decisions.

Average Tax Refunds Over Time

As of April 15, 2022, the average federal tax refund was 8% higher than those received in April 2021. Here’s a look at average federal tax refunds since the 2016 tax year:

Tax year Average refund
2020 (returns filed in 2021) $2,827
2019 (returns filed in 2020) $2,476
2018 (returns filed in 2019) $2,869
2017 (returns filed in 2018) $2,899
2016 (returns filed in 2017) $2,763


What affects the amount of your federal tax refund? Factors include:

  • Amount of taxes withheld by your employer. This amount is determined by the information you supply on the W-4 form you submit to your employer.
  • Amount of tax deductions you claim.
  • Tax credits, which can change from year to year.
  • Amount of taxes deferred through contributions to qualified retirement accounts, health savings plans, and educational savings plans.

Looking Back: How Americans Have Spent Their Tax Refunds

Over time, spending priorities have fluctuated for those who receive federal tax refunds. Here’s a look back at how Americans have said they would spend their tax refunds.

In 2009, the last year of the Great Recession, 48% of Americans planned to put their refunds toward debt reduction, and 38.9% indicated that they would earmark their refunds for savings. One year later, in 2010, these numbers shifted, with fewer Americans saying they would apply their refunds toward debt reduction (43.9%) and more Americans saying their refund would be used for savings purposes (40.3%).

Financial priorities in 2010 may have changed slightly because of tax credits and other economic stimulus measures tied to the recession, which may have helped Americans reduce their debt in other ways.

In 2016, paying off debt remained a top priority. Rounding out the top three responses, Americans reported using their tax refunds to splurge on purchases and take vacations. These spending patterns may have been encouraged by wage growth and post-recession economic growth.

In 2022, most Americans plan to save their refunds (45%) and reduce debt (37%), according to a GOBankingRates survey. Those plans may, in large part, reflect the historic rise of inflation in 2022. By contrast, a survey commissioned by the University of Chicago found that 46% of Americans planned to save their tax refunds in 2021, and 35% planned to put the money toward everyday bills or expenses.

Today: How Americans Spend Their Tax Refunds Now

As the GOBankingRates survey shows, the highest priorities for tax refunds distributed in 2022 are savings and paying off debt. Additional surveys also show these as popular options, but in varying degrees:

  • A LendingTree survey shows that 46% plan to save the money, and 37% plan to pay off debt.
  • A survey by Capital One shows that only 31% plan to save at least part of their tax refund, with 19% planning to use their refund to pay down debt.

Although the survey findings vary, top priorities consistently lean toward saving and security.

Looking Ahead: How Will You Spend Your 2021 Tax Refund?

What if you didn’t spend your refund on luxury goods? What if you did something powerful with it and maximized its potential? You might consider doing something other than stashing your tax refund in a savings account, where it’s likely to earn only a meager amount of interest. Among these options are:

  • Reducing debt.
  • Adding to or starting an emergency fund.
  • Opening, adding to, or diversifying your retirement accounts. For instance, you might look into buying physical precious metals or setting up a precious metals IRA.
  • Exploring alternative assets that are considered hedges against inflation. These can include precious metals and real estate.
  • Boosting your financial literacy. This applies whether you receive a refund or not. For instance, you might enroll in an online financial literacy course or make an appointment with a financial advisor.

Any or all of these options may help you secure a more comfortable future. However, depending on your unique financial situation, one of the smartest future-forward moves you can make with your tax refund is to allocate it to your retirement.

In 2022, you can contribute up to $20,500 to a 401(k) and $6,000 in total to traditional and Roth IRAs. If you’re over 50, you can contribute an extra $6,500 to your 401(k) and an additional $1,000 to an IRA.

I have never regretted using a tax refund to invest in my future, but I have regretted spending it on things I have long since forgotten. Yet when I look at my retirement accounts today, I’m reminded of how smart many of those decisions were 40 years later.

No matter how large or small your tax refund is this year, you can take steps to protect it and help it grow through the power of precious metals. Call U.S. Money Reserve today to learn more about your options.


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