5 Things To Stop Doing With Your Tax Refund in 2024
Written by
Cynthia Measom
Edited by
Gary Dudak
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If you didn’t receive a tax refund last year, you’re in the minority. During the 2023 tax season, which dealt with 2022 tax returns, 64% of returns filed by April 21, 2023, resulted in a refund. But don’t feel bad if you didn’t get one — it’s not necessarily a good thing.
“Receiving a tax refund means that you overpaid in taxes and provided the government an interest-free loan,” said Jason Dall’Acqua, CFP(r) and owner of Crest Wealth Advisors in Annapolis, Maryland. “You should review your tax withholding and make adjustments to have your return come as close to neutral as possible.”
However, if you usually receive a refund, you should put it to good use. Let’s take a look at some tax refund facts, along with five things to stop doing with your tax refund in 2024.
2024 Tax Refund Amount People Expect To Receive
GOBankingRates surveyed 1,005 Americans aged 18 and older across the nation to find out how much they expect to receive in a tax refund this year. Only 35% of respondents stated they do not expect to receive a tax refund. Just 9% said they expect to receive $3,000 or more. An expected tax refund of $0.01-$500 was the most popular answer from 18% of respondents, followed by a refund of $501-$1,000 from 15% of respondents.
Here’s the rest of the breakdown:
- $1,001-1,500: 10%
- $1,501-$2,000: 5%
- $2,001-$2,500: 5%
- $2,501-$3,000: 4%
What Americans Plan To Do With Their Tax Refund
When survey respondents were asked what they planned to do with their refund, 35% said they did not expect to receive a refund. Of those who do expect to receive a refund, 25% said they plan to put it in savings, while 15% said they plan to pay off debt and 13% said they plan to pay bills.
Here’s the rest of the breakdown:
- Invest it: 4%
- Treat themselves: 4%
- Use it for travel: 2%
- Donate it: 0.7%
Things To Avoid Spending Your Tax Refund On
If you’re expecting a tax refund this tax filing season, here are five recommended things to avoid doing with your refund check.
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Impulse Buys
One of the quickest ways to blow your tax refund is to impulsively spend it on random items. Expensive takeout, a new pair of shoes, the latest electronic gadget — it will all combine to eat up your refund. Plus, if you normally stick to a budget, shopping without a plan can lead to a bad habit.
Luxurious Weekend Getaway or Other Travel
Yes, most people could use a weekend getaway. But if you have more important priorities for extra funds, such as paying off debt, you shouldn’t spend your tax refund on a five-star hotel room, a gourmet dinner with a view and signature drinks by the pool.
Gambling
If you think you’re going to hit the jackpot by buying hundreds of dollars worth of tickets in your state’s next big lottery draw, think again. According to mathematical experts, even though you may increase your odds of winning the jackpot somewhat by buying 100 tickets, there’s still a very high probability you won’t.
That means you’ll be watching your tax refund go down the drain — and the same goes for those who think they will come out on top via sports betting.
Down Payment on a Car
You may have been eyeing a new car and think your tax refund is the perfect amount for a down payment. While that may be true, you should think a little further ahead to the actual payments you’ll have to make once you finance the car. If you already have a functional vehicle that’s paid off, why saddle yourself with more debt?
Sketchy Investments
Risky investments, like cryptocurrency or high-yield bonds, are a poor use of your tax refund. It’s possible you might come out ahead, but the majority do not. The risk is just not worth it.
What You Should Do With Your Tax Refund Instead
It’s obviously up to you what you do with your tax refund, but here are a few solid suggestions from our expert.
“The best way to use a tax refund will depend on your specific financial situation,” said Dall’Acqua. “Good options include paying down high-interest debt, increasing your emergency savings, adding to your retirement accounts — a double benefit of saving for retirement and potentially lowering your current year taxes — setting the money aside for short-term goals/expenses or adding to a 529 college plan if you have kids and want to help with future college expenses.”
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