Discover How Americans Are Planning to Use Their 2025 Tax Refunds

Essential Insights on 2024 Tax Refunds

• Despite early reports of lower average refunds, experts anticipate 2024 tax refunds could be among the most substantial in recent years.
• Inflation-driven tax code adjustments and slower wage growth have contributed to larger potential refunds for many households.
• While used-car dealerships traditionally see a surge during tax season, more individuals are prioritizing essential expenses such as rent, groceries, and debt repayment.

New research reveals that Americans are considering various ways to allocate their 2024 tax refunds. While some plan to invest in used vehicles and footwear, a growing number are focusing on vital needs like housing and food.

Preliminary IRS data showed a 32.4% decrease in average refund amounts early in the season, dropping from $3,207 to $2,169 compared to last year. However, Oxford Economics suggests the total refunds distributed could still rank among the highest in recent times.

Contrary to earlier reports highlighting spending on non-essential items, many taxpayers are expected to channel their refunds toward necessary purchases this year.

According to Oxford Economics, used-car dealerships typically experience the highest sales increase when refunds are issued, followed by footwear and hobby retailers.

A recent survey by TaxSlayer and Talker Research indicates that most Americans intend to allocate their refunds towards essential expenses such as rent, groceries, and credit card debt. Only 8% plan to spend on luxury items like new clothing, entertainment, or electronics.

What Factors Could Lead to Higher Tax Refunds in 2024?

Although early IRS data indicated lower average refunds, this did not account for significant credits like the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC), which are typically distributed mid-February.

As more tax returns are processed, refund amounts are expected to rise, potentially surpassing previous years. Inflation in 2024 has prompted more generous tax code adjustments, increasing refund potential.

Bernard Yaros, lead U.S. economist at Oxford Economics, notes that increased standard deductions and tax credits such as EITC and ACTC will benefit many taxpayers this year.

Additionally, slower wage growth in the past year may have caused more households to overwithhold taxes, resulting in larger refunds upon filing.

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