How people plan to use their 2020 tax refunds depends heavily on income
After a year of the coronavirus pandemic, millions of Americans are eagerly awaiting tax refunds from their 2020 filings.
How they intend to use this piece of money – which for many is the greatest godsend they will see all year round – varies greatly.
Last year, the IRS sent nearly 126 million refunds, which is roughly 74% of all applicants. The average check was $ 2,549, according to the agency.
That year, as of March 19, the IRS had received approximately 76 million individual tax returns and issued nearly 50 million refunds. The average refund size so far is $ 2,929.
According to a survey by NORC at the University of Chicago that polled 1,076 adults online and by phone between February 25 and March 1, nearly half of Americans plan to save at least a portion of their refund check, so users can have several options for that choose what to do with your refund.
Another 35% said they would use some of the money on bills and expenses, and 32% said some of that would be used to pay off debts.
The plans for using refunds vary based on income
Overall, the survey shows that people are making solid financial decisions with their reimbursement and can save some of the money even after a difficult year.
But breaking the answers down by income tells a completely different story. The number of respondents who said they saved part of their reimbursement fell with annual income, according to the survey.
“What they use their reimbursement checks for is completely different from what they use for higher-income households,” said Angela Fontes, vice president of the Department of Economics, Justice and Society at NORC at the University of Chicago.
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Only 27% of those earning less than $ 30,000 a year said they saved some of their tax refunds, while 46% and 53% of the same group said they used the money to pay off debts and for everyday expenses and bills, respectively .
“These are people who might catch up on rent, might catch utility bills, or just buy some extra groceries,” said Fontes.
Of course, those in the lower income brackets generally plan to use their refunds wisely – most respondents said that at least some of the money they would get back from the IRS would improve their financial situation by paying off debts or saving.
And very few respondents said they would spend their refunds on something that was fun or invested in the stock market. Only 9% of those making more than $ 100,000 a year said they were investing their reimbursements in the market, and that percentage fell to 5% for those making less than $ 30,000 a year.