The sobering way most Americans plan to use their tax refunds this year

MarketWatch

by Andrew Keshner

February 21, 2026

AI-Generated Deep Dive Summary

The average American tax refund is expected to increase this year, but don’t expect a wave of spending sprees. According to new data from the National Retail Federation, most taxpayers plan to use their refunds for practical purposes rather than indulging in non-essential purchases. Savings, debt repayment, and covering everyday expenses are at the top of the list for how Americans intend to allocate their tax refunds. This shift reflects a more cautious financial mindset, with individuals prioritizing long-term stability over immediate gratification. The NRF survey, which has tracked consumer behavior for nearly two decades, reveals that only 8% of respondents plan to spend their refunds on non-essential items like dining out or travel. Instead, the majority (42%) are saving the money, while 35% intend to use it to pay down debt. Everyday expenses, such as bills and groceries, account for another 13% of refund usage. This trend underscores a growing preference for financial prudence among American consumers. The data also highlights broader economic factors influencing refund behavior. With many lower- and middle-income earners receiving larger refunds due to changes in tax policies, the money is being used to address immediate needs rather than fueling discretionary spending. Additionally, rising costs of living have likely contributed to this shift, as individuals prioritize managing expenses over splurging on non-essentials. This focus on practical uses for tax refunds matters because it reflects broader financial priorities and challenges faced by American households. By saving or paying off debt, consumers are taking steps toward greater financial stability. For those tracking personal finance trends, this data provides insight into how economic conditions influence consumer behavior and the growing emphasis on responsible financial decision-making. In an era of economic uncertainty, the way Americans use their tax refunds serves as a barometer for broader financial attitudes. While larger refunds may provide some relief from financial pressures, the majority are choosing to invest in long-term stability rather than short-term indulgence. This shift toward practicality not only reflects individual priorities but also offers a glimpse into how consumers are navigating an evolving economic landscape.

Verticals

financemarkets

Originally published on MarketWatch on 2/21/2026