IRS Refunds Are Up 14.2% So Far: What Filers Should Do With the Extra Cash

Core Insights - The average federal tax refund for 2025 is $2,476, reflecting a 14.2% increase compared to the previous year [1] Group 1: Financial Management - Tax refunds should be prioritized for addressing short-term debt payments, such as credit cards and mortgages, or to enhance emergency funds [2] - Part of the tax refund can be allocated to fund near-term goals like travel or education, helping to prevent impulsive spending [3] - Tax refunds are considered "windfall" payments, and contributing them to retirement plans like IRAs or 401(k)s can enhance long-term wealth [4] Group 2: Personal Development - Investing tax refunds in education or credential programs can lead to significantly higher lifelong earnings, as supported by U.S. Bureau of Labor Statistics data [5] Group 3: Tax Planning - To avoid overpaying taxes and receiving a refund in 2026, individuals should use the IRS Tax Withholding Estimator to balance their withholding [6] - A higher tax refund indicates overpayment, which means the government had access to the taxpayer's money throughout the year, highlighting the importance of tax planning [7] - Early tax refunds tend to be higher due to simpler returns being processed first, while more complex returns may lower the average refund as the tax deadline approaches [7]