Tax Refund Tips: 3 Smart Ways to Use Your Refund

As of April 3, 2026, the IRS issued almost 70 million income tax refunds for the 2026 filing season, with an average refund amount of $3,462, about 11% higher than last year.¹

For recipients, such a sudden influx of cash raises an important question: What’s the best way to use the money? In a recent survey, 43% of consumers expecting a refund said they planned to either save or invest it, 20% planned to pay down debt, and 17% planned to use refund dollars to pay everyday expenses. The remainder planned to spend the money on a splurge, fund a home improvement project, or make a major purchase such as a home or car.²

What you do with your tax refund is up to you, but here are three options that could help it go twice as far.

1. Double your savings

Perhaps you would like to use your tax refund to contribute more to a retirement savings account, start an education fund for your children or grandchildren, or save for a rainy day or a major purchase. You can get a rough estimate of how long it might take to double what you initially save by using a mathematical concept known as the Rule of 72. Simply divide 72 by the annual rate you hope that your money will earn. For example, if you invest a $4,000 tax refund and it earns a 6% average annual rate of return, your investment might double in approximately 12 years (72 divided by 6 equals 12).

If you are saving for retirement in a workplace account such as a 401(k) or 403(b) plan, your employer might match your contributions. Employer matches vary, but a full match, where your employer matches what you put in dollar for dollar, effectively doubles the value of those contributions. Alternatively, your employer may offer a partial match (for example, $0.50 for each dollar you contribute). Both full and partial matches are often limited to a percentage of salary (for example, $0.50 for each dollar you contribute, up to the first 6% of your pay). Ideally, you’ll want to contribute enough to get the maximum match your employer offers.

2. Double down on your debt

You might also want to use your tax refund to tackle nondeductible debt such as credit card debt or a personal or vehicle loan with a high interest rate. Putting your refund toward your debt could enable you to pay it off early and save on interest charges. How much you will save depends on your balance, the interest rate, and other factors such as your loan term.

Here’s a hypothetical example. Let’s say you have a personal loan with an $8,000 balance, a 10% fixed interest rate, and a 24-month repayment term. Your fixed monthly payment is $370. If you were to put a $4,000 refund toward paying down your principal balance, you would be able to pay off your loan in 12 months and save about $648 in interest charges over the remaining loan term. Check the terms of any loan you want to prepay, though, to make sure that no prepayment penalty applies.

What about putting your refund to work by applying it toward your mortgage balance? A home mortgage may be the largest debt you have, and making extra mortgage payments can reduce your principal balance, save on interest charges, and shorten the term of the loan, allowing you to accumulate equity faster. However, using a refund to cut down mortgage debt ahead of schedule could also have counterproductive consequences that you will want to consider, including losing the ability to claim the home mortgage interest deduction when filing your income taxes. In addition, the reduction in your overall liquidity may limit your ability to make new purchases or investments.

3. Double the amount of a charitable gift

If you decide to use your refund to make a charitable gift, you can help your favorite charity or nonprofit reap double rewards by finding out whether your gift qualifies for a match. Employers may sponsor programs that match donations to charitable organizations, often on a dollar-for-dollar basis. Major companies, foundations, and schools may also run gift campaigns or challenges that offer to match individual donations. Terms and conditions apply, so contact the charitable organization or your employer’s human resources department to find out more about available matching gift opportunities.

Finally, check your withholding

Receiving a refund that is larger than expected is a sign that your withholding deserves a second look. While a big refund is great, it means that you’re missing out on the chance to put that money to work for you throughout the year. Because tax laws, and your tax picture, can change from year to year, it’s a good idea to check your withholding every year. The IRS has a recently updated Tax Withholding Estimator on irs.gov that can help you figure out the approximate amount of federal income tax to have withheld in 2026.

These hypothetical examples of mathematical compounding are used for illustrative purposes only and do not represent the performance of any specific investment. Fees, expenses, and taxes are not considered and would reduce the performance shown if they were included. Actual results will vary.

1) IRS, April 10, 2026
2) Experian, March 2026