The Impact of Tax Refunds on Average U.S. Families

A federal tax refund is the largest lump sum of money received in a year by the average American household.

  • An estimated $230 billion1 in federal tax refunds will be issued this year to the nation’s taxpayers.
  • Approximately $140 billion1 will be in consumers’ pockets by Feb. 15.
  • In 2012, the average federal tax refund averaged $2,7002, equaling more than a month’s worth of income for two-thirds of taxpayers or more than three months of groceries for the average family of four.

Refunds are especially vital for the estimated 40 percent3 of U.S. households living paycheck-to-paycheck.

  • Of those living paycheck-to-paycheck, only 4 percent3 are confident in their ability to plan for their financial future.
  • More than one third of households admit to rarely being able to save money (not including a 401K) if any3.

Refunds are the primary reason taxpayers file returns by mid-February.

  • Those taxpayers that filer prior to Feb. 15 mirror the profile of a paycheck-to-paycheck household (see Table 1).
  • Approximately 84 percent of taxpayers filing in Jan. through Feb. 15 receive a refund, compared to only half of those who file in April4.

Table 1
Table #2_tax centerTurboTax Tracking Survey of U.S. Households – 2011

Consumers typically make the largest dent in their credit card debt in the first quarter of the calendar year, fueled by the increase in income due to tax refunds. 

  • In 2012, Americans planned to spend an average of $8595, adding to the average consumer credit card debt of $8,7216.
  • The average tax refund could cut almost a third of the average credit card debt.

Early tax filers use tax refunds to pay down debt, cover the costs of every-day living.

  • 42 percent of early tax filers plan to use their refund to pay down debt and cover the costs of rent, food and utilities. (See Table 2)

Table 2
Table 1_reserach reportTurboTax Customer Survey – 2012

1 American Tax & Financial Center estimate based on IRS data for 2011, 2012

2. Average federal refund amount – IRS tax year 2011

3 Intuit market research study – 2009

4. TurboTax Tracking Survey of U.S. Households – 2011

5. American Research Inc. Survey – 2012

6 Mint.com – January 2013