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Consumers using tax refunds to pay down debt and save

Retailers shouldn’t expect much of a big sales bump this year from consumers’ tax refunds.

More Americans than ever plan to hold on to their tax refunds this year rather than spending the money they get from the IRS, according to the annual tax refund survey by the National Retail Federation and Prosper Insights & Analytics.

Of the 65% of taxpayers expecting a refund, 49% say they will put it into savings. That’s up from 48% last year and the highest level in the 12-year history of the survey.

Meanwhile, 35% will pay down debt, in line with last year and the lowest level since 2016 — all far below the peak of 48% seen during the recession in 2009.

Only 22% will spend this year’s refunds on everyday expenses, the second-lowest level in survey history after last year’s 21%. Beyond that, 12% will use the money for a vacation; 10% will “splurge” on dining out, trips to a spa or apparel; 9% will invest in home improvements; and 8% will make major purchases ranging from a television or furniture to a car.

“Younger consumers are being more mindful about their hard-earned money, especially those 18-24 who have already filed their taxes this year, higher than any other age group,” Prosper executive VP of strategy Phil Rist said. “Although this group is focused on allocating a portion of their refunds to savings, they are also more likely to use them for everyday expenses compared with any other age group.”
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