The average tax refund amount is up nearly 11% from a year earlier, totaling $3,623 for the week of March 13, according to data from the Internal Revenue Service.
The total amount the government has refunded, meanwhile, is up 12% in the same time frame, reaching $182.6 billion, the IRS said. Visits to IRS.gov have also surged more than 54% from a year ago as the tax filing season marches into its final weeks, with nearly 70 million returns already received by the government ahead of the April 15 filing deadline.
Provisions in the One Big Beautiful Bill, including new and expanded deductions, were expected to juice Americans’ refunds this year. But higher gas prices amid the US-Israel war on Iran might eat into those anticipated savings: An analysis from economists at Oxford Economics last week forecast that 2026 could bring the slowest annual consumption growth since 2013, excluding the pandemic, as consumers pull back on spending.
“We had anticipated a lift in spending from a bumper tax refund season, but the rise in gasoline prices, if sustained, would more than offset that boost,” the economists Michael Pearce and Bernard Yaros wrote in the report.
Simply put, a large tax refund is a loan to the government — and it doesn’t pay you interest.
“While a refund feels like a bonus, it’s merely the return of your own overpaid money,” said David Perez, founder and CEO of Tax Maverick, via email. “This cash could have been used monthly to cover expenses or manage debt.”
Debt is one reason why a higher tax refund is so concerning. U.S. household debt increased by about 4% in 2025, according to data from the Federal Reserve Bank of New York. And serious delinquencies, payments that are at least 90 days past due, also rose.
So it’s not just about an interest-free government loan. Given the elevated inflation rate, rising unemployment, higher gas prices, and long-term financial goals, it’s money that could’ve been put to better use throughout the year.
Whether money is tight or you’re living comfortably, overpaying your taxes is a missed opportunity. Here are just a few ways your hard-earned money can do more for you throughout the year.
If you’re struggling to pay for day-to-day expenses (like higher gas prices), a smaller tax refund could mean more financial breathing room.
“Adjusting your tax withholding gives you more money in each paycheck,” said Perez. “This can provide immediate funds to cover living expenses, accelerate debt payoff, or reduce reliance on high-interest credit cards.”
You can even use the money to beef up your savings, which can cover emergencies or large purchases, so you’re not also racking up credit card debt.
High-interest debt usually refers to credit with an annual percentage rate (APR) of 8% or more. However, credit card rates tend to be much higher.
The average credit card APR was 22.30.% for the fourth quarter of 2025, according to the Federal Reserve. That means while the money you’re overpaying in taxes sits with the government, earning no interest, your credit card balance costs you more each month.
Instead, you could adjust your withholdings and use the money to chip away at your debt balances and save on interest.
Learn more: 4 ways to pay off debt faster
Invest and earn interest
Perhaps the highest opportunity cost of a large tax refund is the interest your money could have earned in the market.
The average long-term return on the stock market is 7% when accounting for inflation. While it’s not guaranteed, and any given year you can experience a gain or a loss, investment returns present a much higher potential than having your money sit with the government.
“Use the increased monthly cash flow to invest systematically into retirement accounts, brokerage accounts, or high-yield savings,” said Perez. “This strategy allows the money to start working for you immediately, maximizing potential growth over time.”
Read more: 10 best high-yield savings accounts right now
If you typically get a large refund, it usually means too much tax is being withheld from your paycheck throughout the year. Adjusting your Form W-4 can help you keep more of your paycheck in your pocket instead of waiting for a refund.
Here’s how to adjust each step on your W-4 so you can reduce your refund:
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Adjust Step 3 (dependents): Increasing the number of dependents reduces how much tax is withheld. This is one of the simplest ways to increase your take-home pay if you qualify.
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Use Step 4(b) for deductions: If you expect to claim deductions beyond the standard deduction (like mortgage interest or charitable contributions), adding them here tells your employer to withhold less tax — resulting in a bigger paycheck and a smaller refund.
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Avoid or reduce income in Step 4(a): Adding extra income (like freelance work) increases withholding. If your goal is a smaller refund, you generally don’t want to add income here unless you need to offset untaxed earnings.
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Lower or remove extra withholding in Step 4(c): This is where you can request any amount of extra withholding from your paycheck. If you had previously entered a number in this step, reducing or removing it will increase your take-home pay.
Note: If you leave Step 4 blank, your employer calculates withholding based on your filing status and the standard deduction. If that’s leading to a large refund, it may mean your withholding is still higher than necessary for your situation.
When adjusting your withholdings, be careful not to overcorrect.
“Reducing withholding too aggressively can result in a significant tax bill and potential underpayment penalties at filing time,” said Perez. “The ideal goal at tax time is to be close to a break-even point — either a small balance due or a small refund — to ensure you maximize your cash flow throughout the year.”
To find the right balance, use the IRS Withholding Estimator or work with a certified tax professional. And be sure to update your W-4 after major life events, such as getting married or divorced, buying a home, having a child, or starting a business.
