Tax season officially began on Jan. 26, and refunds are already starting to reach consumers’ accounts this month. While the arrival of refunds is annual, the expectations surrounding them remain grounded, shaped less by intent to splurge than by routine financial planning and household budgeting.
New findings from PYMNTS Intelligence suggest that most consumers approach tax refunds with a clear sense of purpose. Rather than treating refunds as discretionary income, households across the income spectrum largely anticipate using them to reinforce day-to-day financial stability.
How They Plan to Use Refunds
Across the general population, the prevailing tone around refund use is pragmatic. Among consumers who received a refund in the most recent filing season, financial maintenance emerged as the dominant priority. Planned uses for upcoming refunds closely track past behavior, indicating that expectations are well established before funds arrive.
Savings and balance-sheet repair feature prominently. Many consumers expect to direct refunds toward savings or investment accounts, while others plan to use the funds to reduce existing debt or cover recurring expenses. Discretionary purchases, while present, play a secondary role in most households’ plans, reflecting caution rather than retrenchment.
This pattern holds across financial lifestyles, though intensity varies. Consumers not living paycheck to paycheck are more likely to channel refunds into savings or longer-term financial goals. Those under greater strain are more inclined to allocate funds to immediate obligations. Even so, the overall picture is one of deliberate allocation rather than impulsive spending.
Who Receives Those Refunds?
Receipt of tax refunds is widespread but uneven. About 56% of respondents reported receiving a tax refund in the most recent filing season, most commonly a federal refund alone or combined with a state refund. Receipt rates rise with income and financial stability, and are higher among married households with children, reflecting the role of credits and withholding structures.
Consumers with lower incomes or less stable finances are less likely to receive refunds or to file at all. While this group is not representative of the broader population, its experience underscores how refunds intersect with existing financial structures rather than reshaping them.
The data shows that refund allocation mirrors underlying financial capacity. Among those who do receive refunds, the largest share is directed toward stabilizing household finances, either through savings, debt reduction or essential expenses. Planned use of future refunds closely matches past allocation, suggesting that refunds are integrated into annual financial routines rather than treated as unexpected gains.
At a high level, tax refunds function as a timing adjustment within household cash flow. For many consumers, refunds help offset mismatches between income and expenses that accumulate over the year. This role is not confined to any single income bracket and reflects the broader reality that even financially stable households value periodic liquidity infusions.
Refunds also supplement savings in ways that are difficult to replicate through monthly budgeting alone. A lump-sum payment allows households to fund emergency reserves, reduce balances more quickly, or address deferred expenses. While the amounts vary, the behavioral pattern remains consistent: refunds are assigned to practical financial objectives rather than spontaneous consumption.
The usefulness of a tax refund depends not only on its size but on how quickly it reaches the consumer. Faster disbursement increases the likelihood that funds are applied as intended, whether to pay down balances, cover near-term expenses or move into savings. Delays can weaken that effect, particularly when refunds are already earmarked for specific obligations.
At PYMNTS Intelligence, we work with businesses to uncover insights that fuel intelligent, data-driven discussions on changing customer expectations, a more connected economy and the strategic shifts necessary to achieve outcomes. With rigorous research methodologies and unwavering commitment to objective quality, we offer trusted data to grow your business. As our partner, you’ll have access to our diverse team of PhDs, researchers, data analysts, number crunchers, subject matter veterans and editorial experts.
