Should you spend or save your tax refund?

Mar 27, 2024, 3:00 PM | Updated: Apr 12, 2024, 4:05 pm

1040 form shown, tax refund season is here...

FILE - The Internal Revenue Service 1040 tax form for 2022 is seen on April 17, 2023. (AP Photo/Jon Elswick, File)

(AP Photo/Jon Elswick, File)

SALT LAKE CITY — As the deadline to file your taxes inches closer, you may be wondering what to do with your tax refund.

A recent survey from Bankrate found that 28% of respondents expecting a tax refund planned to use it to boost their savings.

Savings or debt repayments?

Senior Industry Analyst for Bankrate Ted Rossman told Dave and Dujanovic that many people are using their refunds practically this year.

Bankrate’s survey also found that 19% of respondents expecting tax refunds would use them toward their debts.

Related: Unclaimed tax refunds from 2020 are about to expire. Is one of them yours?

Rossman said the results surprised him because fewer people were using their refunds towards their debts than in years past.

“We’ve been doing similar research since 2015. This year actually marked the lowest figure we’ve ever found for debt payoff,” Rossman said.

That low figure also comes at a time of high credit card balances.

“It’s kind of surprising because credit card balances are at record highs. They’re up almost 50% in the past three years. Credit card rates are at record highs, the average is 20.75%,” Rossman said.

Related: Would you tap into retirement savings to buy a home?

Though he expected debt repayment to take priority over savings, Rossman said he understands why people chose one over the other.

“I think for a lot of people though, savings is the other side of that same coin because if you don’t have savings then the next unexpected expense pushes you into credit card debt or maybe deeper into credit card debt.”

Rossman added that unexpected expenses like medical bills are a major cause of credit card debt.

What to spend your tax refund on

If you’re unsure about what to do with your refund, Rossman said you can get the best of both worlds.

Putting some of your refund toward debt and another portion toward savings may be the best approach.

It doesn’t have to be all work and no play though, according to Rossman.

He suggested setting aside a smaller part of your refund to use as “fun money.” The majority of it, however, should go toward practical things like savings or debt repayment.

“We want to use most of it responsibly. But if you want to treat yourself a little bit that could be healthy too,” Rossman said.

We want to hear from you.

Have a story idea or tip? Send it to the KSL NewsRadio team here.

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Should you spend or save your tax refund?