Tax refunds jump 14% over last year

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Early tax filers are enjoying a windfall, with refunds up double digits over last year.

According to the latest IRS tax filing data, the average refund totals $2,476, a 14.2% boost over the same week last year. The total amount refunded — more than $32 billion as of Feb. 13 — is up more than 8%.

Refunds were expected to be higher this year thanks to changes in the One Big Beautiful Bill Act, which ushered in new and bigger tax breaks for millions of Americans. At the same time, the IRS did not update its withholding tables for employers, so many W-2 employees may have paid more than necessary in 2025, generating a refund at filing time.

Among the biggest changes this tax season that could affect refunds: a new deduction for seniors, deductions for overtime pay and tips, a deduction for interest paid toward car loans, and an increase in the standard deduction.

Read more: Your tax refund may be bigger this year. Here's why.

A few weeks into filing season, the IRS has received just over 32 million returns and issued nearly 13 million refunds, slightly behind last year’s pace on both fronts. Processing by the federal tax agency is also lagging compared to 2025.

The IRS issues most refunds within 21 calendar days of receiving your return — if you e-file. However, if you mail a paper tax return, the whole process can take a week (or more) longer. Once you’ve filed, you can check your refund status and see if it’s been deposited to your bank account using the IRS Where’s My Refund tool.

The IRS expects to process around 164 million individual tax returns for tax year 2025 by the April 15 filing deadline.

Learn more: Where's my refund? When to expect your tax refund from the IRS.

Best ways to use your tax refund

1. Start an emergency fund

Been meaning to put away some savings, but keep getting sabotaged by unexpected bills? A tax refund is the perfect seed money for an emergency savings fund.

Emergency savings, sometimes called rainy day funds, can help support your family during a job loss, which often involves not just the loss of income but also healthcare. Or it could front money for unexpected costs like car or home repairs.

How much should you have squirreled away in an emergency fund? Any cash is better than nothing, but experts encourage putting away savings equivalent to three to six months' worth of expenses.

Read more: What is an emergency savings fund?

2. Add to your savings

Dumping a sizable portion of your refund check into a savings account to keep it safe from impulse buys isn’t a bad idea. But it’s important to remember that not all savings accounts are created equal when it comes to interest rates.

You’ll get more bang for your buck by leaning into high-yield savings accounts, money market accounts, or a high-yield CD (certificate of deposit). While those high APYs are a big benefit, there are some drawbacks, such as restricted access to your funds and scheduled minimum deposits. Understanding how these accounts work is crucial.

And be sure to choose a bank that’s FDIC-insured. The Federal Deposit Insurance Corporation (FDIC) is a government agency that insures your bank deposits up to $250,000 per depositor in case of bank failure.

Read more: High-yield savings account vs. CD: Which is right for you?

3. Pay off high-interest debt

One of the most effective things you can do with your refund check is pay down debt. Eliminating your credit card debt, paying down medical bills, and tackling any other debts with interest in double-digit territory is a solid investment in your financial future.

If you don’t have high-interest debt, you can make extra payments on student loans, a car loan, or even a home loan that you might not otherwise be able to afford.

Read more: The best ways to pay off credit card debt

4. Put your refund check toward retirement

Thanks to the magic of compound interest, putting your refund check into a retirement account is an investment strategy that pays serious dividends. Adding $3,138 (the average refund in 2024) to a typical IRA could turn your refund check into as much as $25,000 after 25 years.

However, before you decide to use all your extra money to pad your retirement savings, double-check the contribution limits for a traditional IRA, Roth IRA, and 401(k). If you’ve already contributed the maximum, you may want to add funds to your health savings account (HSA) instead.

Worried about protecting the gains of your retirement plan as you approach 65? Experts recommend pulling 5-10 years of living expenses into more accessible high-yield savings accounts when you reach retirement age and shifting some of your asset allocation into the relative safety of high-quality bonds. Reducing risk in your retirement portfolio can shield your immediate retirement income from potential volatility in the stock market.

Read more: These are the new traditional IRA and Roth IRA limits in 2026

5. Invest in your financial goals

Take time to carefully consider your personal finance goals and put your refund to work. Some possibilities include:

• Contributing to a 529 college savings plan. New rules signed into law in 2025 mean these tax-free savings plans can also be used to pay back student loans.

• Investing in career training with the Lifetime Learning Credit

• Starting a brick-and-mortar business, online store, or side hustle

• Purchasing life insurance

• Funding home improvements, especially energy-efficient ones that provide tax breaks

Read More

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