5 smart ways to spend your tax refund

If you’ve been anxiously checking your mailbox or your bank balance in anticipation of a big refund check from the Internal Revenue Service (IRS), you’re in good company. In 2026, some 46% of Americans say they’re relying on getting a refund.¹ And undoubtedly, many already have big plans for what to do with the money — plans that involve travel, shopping sprees, or home improvement projects.

In 2025, the IRS processed 165 million individual tax returns. Of those who filed taxes, 63% received a refund, and refunds averaged $3,167.² Though it’s understandable to want to treat yourself, what if this year you think beyond the immediate thrill and put your refund to work in ways that pay off long term? Sure, paying down debt or adding to your savings may not seem as exciting as booking a trip right now, but think of these savvy money moves as a treat your future self will enjoy.

If you’re one of the lucky ones getting a refund this year, consider these five strategies to put your tax refund to work.

1. Save for retirement

If you’re enrolled in a retirement account through your employer, consider increasing your contributions or looking into an IRA through a bank or financial company. Most retirement experts recommend contributing 10% to 15% of your income toward your 401(k).³ The highest amount you can contribute in 2026 is $24,500 with a catch-up contribution of $8,000.⁴ Using your return to reach these levels can pay off in the long term. Time has a powerful multiplier effect when it comes to retirement savings, so starting early and adding gradual increments over time may make a big difference in the years to come.

2. Fill up your emergency fund

An emergency fund can be helpful for covering unexpected expenses without going into debt, but just 47% of Americans have enough cash on hand to cover an unforeseen expense of $1,000, and 29% say they owe more on their credit cards than they have in an emergency fund.⁵ Creating a buffer using your tax refund can help pay for a surprise car repair or medical bill without veering off your financial course.

3. Pay down your debt

Speaking of credit card debt — the average credit card balance in the US is $6,523.⁶ Carrying a big balance means you’re losing money to pay interest every month. Use your refund to make progress paying off your credit card or student loan so you can get closer to being debt-free.

4. Save for college

If you’re a parent, consider putting the money into a 529 fund to start saving for your child’s education. If you save enough now, you may be able to avoid going into debt to pay for college later.

5. Consult a financial advisor

Many financial institutions offer a complimentary consultation with advisors who know a range of financial products and how they can help protect you. A financial advisor can help you understand your options, so you can spend your refund wisely, knowing how it will impact your financial future.

Getting a refund on your taxes isn’t the same as finding money — it’s money you overpaid, essentially giving an interest-free loan to the government. Consider asking your payroll department at work to reduce the tax withholding on your paycheck so you can keep more of that money in your wallet. If you’re self-employed, see if you can reduce your quarterly tax payments. And plan to spend this year’s refund on your future financial confidence, instead of something you don’t need.