Americans Have Mixed Feelings About Their Tax Returns
Few people enjoy filing taxes. Even if you expect a refund, actually going through the process of filling out tax forms is fairly unpleasant, and changes in the tax laws for this filing season left many people uncertain as to what to expect.
Among the 74% of U.S. Adults who had filed their taxes by mid-March, the results were a mixed bag. About two-in-five (42%) were happy with the outcome, while 25% were neither happy nor upset, and 33% said they were not happy with the outcome, according to a new survey from the National Endowment for Financial Education (NEFE).
"The results don't seem to align with what we've been hearing anecdotally about people's feelings of filing taxes under the new tax law. Despite a perceived unhappiness, the good news is the largest proportion of people say they're satisfied with their tax filing outcome," said NEFE CEO Billy Hensley.
People have mixed feelings after filing, Image source: Getty Images.
What actually happened?
The new tax laws led to uncertainty before the filing season began. Many Americans were unsure if they would get refunds or end up owing money. Only 7% of filers said they paid more than they had in the past, according to the results of the 2,000 person survey. Other findings were:
73% said they received a federal refund.
21% said they owed taxes.
5% broke even.
When it comes to getting a refund, the numbers were mixed. A quarter of those surveyed (26%) said they "received about the same federal tax refund as in other years." About the same amount (24%) said their refund was lower and 15% said their refund was higher than last year.
How do Americans spend their refunds?
A tax refund is an opportunity for a bit of a financial reset, and many Americans treat it that way. Nearly half (47%) plan to put their refunds into savings, while 38% plan to use theirs to pay off or pay down debt. Fifteen percent will use their refunds for travel, and the same percentage will use the money they get back for home improvements. That's slightly higher than the 12% who plan to put their refunds toward car repairs.
"Getting a large payout such as a tax refund is a great opportunity to make progress on financial goals such as paying down debts and starting an emergency savings fund," Hensley said.
What should you do?
If you get a tax refund, you should use it responsibly. Pay off high-interest debt (credit cards and personal loans) before doing anything else. After that, you may want to tackle other debt like student loans, or even mortgage principle. You also want to make sure you have an adequate emergency fund.
Generally, that's six months of living expenses, but in some cases more might be needed. If you have health problems or anticipate being out of work for long periods of time, it's smart to save as much as you can.
If you've checked off all of those boxes, you can invest your refund toward longer-term goals, like retirement. You might also consider spending some of it for fun -- maybe a vacation or a big-ticket purchase -- but you should only use your refund that way if your finances are in good overall shape.
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