Where Did You Spend Your Tax Refund?

Will You Spend Your Tax Refund Like One-Third of Americans?

Since we are quickly approaching April 17, there are more studies on what Americans will do with their refund.  This is the second year Capital One hired Braun Research to conduct a Taxes and Savings Survey. The survey was conducted via landline or cell phone from February 18 to February 23, 2012.  The top usage of the refund is to spend it; and for this group, the most popular way to spend it is for everyday expenses.

Survey Highlights

How they will spend their refund:

33 percent plan to spend all or part of their refund.

27 percent plan to save at least part of it.

17 percent plan to pay down debt.

5 percent plan to invest their refund.

69% of the responders do not calculate their tax refund or tax payment into their annual budget.

58 percent of responders said the current economic climate will not impact their refund plans.

Of those planning to spend all or part of their returns, here were their priorities:

28 percent plan to spend it on everyday expenses.

9 percent plan to spend it on major purchases, such as autos and appliances.

8 percent plan to spend it on vacation.

6 percent plan to spend it on new clothing and accessories.

5 percent plan to spend it on electronics, such as iPads, TVs, and smartphones.

11 percent of the responders said they would probably wait until the last minute to file their tax return and take advantage of the late filing deadline.  A majority (61 percent) of this group were male.

Of those responders who will owe taxes this year:

32 percent will need to dip into their personal savings to cover the cost.

25 percent set aside savings specifically for taxes.

19 percent will do an installment agreement or payment plan with the IRS.

Capital One’s tips

“Most people are not factoring their annual return into their overall financial plan and long-term objectives,” said Mickey Konson, Managing Vice President for Retail Banking at Capital One Bank. “A tax refund is often seen as free money, which makes it very tempting to spend it right away, but it’s important to remember that the refund you’re getting back is your own money. Tax season is a good opportunity for people to plan ahead, with an eye toward their future goals and financial health.”

Credit Expert Witness, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Financial, Internal Revenue Service

This post was written by John Ulzheimer