Most Americans will get a tax refund this season, but experts say this is a poor financial decision It’s the time of year when Uncle Sam pays you back. A majority of Americans (51 percent) have already received or expect to receive a tax refund this season, according to a recent Bankrate.com report, which also found that people prefer large refunds (38 percent) over small refunds (19 percent) or no refund at all (27 percent).
Tax and financial advisers, however, directly advise against getting any amount of money back. When income tax is withheld from paychecks, taxpayers are essentially giving the government a small, interest-free loan.
“Most people think getting money back is a good thing, a windfall, but you’re simply getting your own money back,” says Douglas Boneparth, a certified financial planner and vice president at Life and Wealth Planning in New York City, said in a statement.
The average 2015 refund is currently about $3,000, which amounts to $250 a month that you could have used for savings or spending.
Millennials are more likely than any other age group to receive a tax refund (66 percent), compared to 35 percent of people age 50 or older. This is unsurprising since the likelihood of receiving money back decreases with age. As for Americans plans for their refunds, most are conservatively planning to pay off debt or save it.
“People are still very, very nervous about the future,” Tim Gagnon, a tax attorney and accounting faculty member at Northeastern University in Boston, said of the report. “They had to take on more debt and see a refund as an opportunity to get some of it down so they won’t be so leveraged.”
The most popular plans for tax refunds are:
Pay off debt — 34 percent
Save or invest — 33 percent
Spend on necessities (food, utilities) — 26 percent
Splurge (vacation, shopping spree) — 3 percent
None of the above — 3 percent
— Carley Lintz
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