“Tax season” — two words that can strike panic into the hearts of Americans and send chills down the spines of accountants. But as much as we may resent having to pay tax or become frustrated over how complex the process can be, there are good aspects of taxes.
First, there are all the services that taxes pay for. Beyond that, though, many Americans receive a tax refund. Hooray, free money! Right? Not exactly.
What Is a Tax Refund?
The government returns money to taxpayers if they’ve overpaid their taxes throughout the year. This most commonly happens because an employer has withheld an overly large amount for taxes or because an individual qualifies for tax credits. If the total amount withheld exceeds the actual tax liability reported on a return, then the taxpayer receives a refund.
The Internal Revenue Service (IRS) issued over 100 million tax refunds in both 2024 and 2025, meaning nearly two-thirds of people who filed their taxes received a refund. Whether you receive a refund and the amount you’ll receive depends on your circumstances, but since most taxpayers receive a refund, it’s worth considering what you’ll do with that money.
What Should You Do With Your Tax Refund?
Here are some ideas for what you can do with your tax refund:
Pay Off Your Debt
Unfortunately, we’re not starting with anything fun, but rather something important. If you have high-interest debt, such as a credit card balance, you want to pay that off as quickly as possible. Longer-term debts, such as mortgages and student loans, are more manageable and usually have lower interest, so you can afford to carry those for years. But high-interest debt can grow fast, and if you miss a payment, it can really hurt your credit score. So, if you have this kind of debt, it’s wisest to use your refund to pay it off if you can.
Save It
There are always things to save for: a home, children’s education, retirement, an emergency fund. Whatever your goals, putting your tax refund into one or more savings accounts can pay off big in the future.
Buy Something Nice
If you don’t have any debts to pay and your savings accounts are looking healthy, then having some fun with your refund is perfectly reasonable. Consider saving half and using the other half for your restaurant budget for the year, or for a vacation.
Discuss Your Strategy
Want personalized advice for your tax refund and your savings strategy? Contact a Vectra Bank professional, and we’d be happy to help.
