As gas prices soar, Americans who have filed their taxes are getting some relief.
The average federal tax refund reached nearly $3,800, an increase of 8.8% from the same week last year, according to data from the Internal Revenue Service. The government has processed more than 36 million refunds so far this season, totaling more than $136 billion.
Refunds were projected to be larger this year thanks to provisions of the One Big Beautiful Bill, which makes new tax breaks available to millions of Americans. Major changes include new deductions on overtime pay and tips, a greatly expanded deduction for state and local taxes, and a larger standard deduction: $31,500 for a married couple.
The vast majority of Americans claim the standard deduction rather than itemizing deductions. But it’s worth reconsidering whether you’d benefit more from detailing, especially if you’re a homeowner.
Those who bought in recent years typically have higher mortgage rates—they’ve averaged about 6.69% over the past two years, according to data from Freddie Mac. And you pay more interest in the early years of a mortgage. All of that can make the mortgage interest deduction extremely valuable. If you live in a high-tax state, combine that with the huge SALT deduction, and those benefits together could easily add up to more than the standard deduction.
With filing season just a few weeks away, the IRS received just over 32 million returns and issued nearly 13 million refunds, slightly behind last year’s pace on both fronts. Processing by the federal tax agency is also delayed compared to 2025.
The IRS issues most refunds within 21 calendar days of receiving your return, if you file electronically. However, if you mail a paper tax return, the entire process may take an extra week (or more). Once you’ve submitted your request, you can check the status of your refund and see if it has been deposited into your bank account using the IRS Where’s My Refund tool?
The IRS expects to process about 164 million individual tax returns for tax year 2025 before the April 15 filing deadline.
Have you been meaning to save some, but keep getting sabotaged by unexpected bills? A tax refund is the perfect seed money for an emergency savings fund.
Emergency savings, sometimes called emergency funds, can help support your family during job loss, which often involves not only loss of income but also loss of health care. Or you could advance money for unexpected costs, like car or home repairs.
How much should you have saved in an emergency fund? Any cash is better than none, but experts recommend setting aside savings equal to three to six months’ expenses.
Read more: What is an emergency savings fund?
Depositing a sizable portion of your refund check into a savings account to keep it safe from impulse purchases isn’t a bad idea. But it’s important to remember that not all savings accounts are the same when it comes to interest rates.
You’ll get more bang for your buck if you opt for high-yield savings accounts, money market accounts, or a high-yield CD (certificate of deposit). While those high APYs are a huge benefit, there are some drawbacks, such as restricted access to your funds and scheduled minimum deposits. Understanding how these accounts work is crucial.
And be sure to choose a bank that is FDIC insured. The Federal Deposit Insurance Corporation (FDIC) is a government agency that insures your bank deposits up to $250,000 per depositor in the event of the bank’s bankruptcy.
Read more: High Yield Savings Account vs. CDs: Which Is Right for You?
One of the most effective ways to use your refund check is to pay off debt. Eliminating your credit card debt, paying medical bills, and tackling any other double-digit interest debt is a solid investment in your financial future.
If you don’t have high-interest debt, you can make extra payments on student loans, a car loan, or even a home loan that you otherwise couldn’t afford.
Read more: The best ways to pay off credit card debt
Thanks to the magic of compound interest, depositing your refund check into a retirement account is an investment strategy that pays serious dividends. Adding $3,138 (the average refund in 2024) to a typical IRA could turn your refund check into up to $25,000 after 25 years.
However, before you decide to use all your extra money to boost your retirement savings, double check the contribution limits for a traditional IRA, a Roth IRA, and a 401(k). If you’ve already contributed the maximum, you may want to add funds to your health savings account (HSA).
Are you worried about protecting your retirement plan benefits as you approach age 65? Experts recommend transferring 5 to 10 years of living expenses into more affordable high-yield savings accounts when you reach retirement age and shifting some of your asset allocation to the relative safety of high-quality bonds. Reducing risk in your retirement portfolio can protect your immediate retirement income from potential volatility in the stock market.
Read more: These are the new limits for traditional IRAs and Roth IRAs in 2026
Take the time to carefully consider your personal financial goals and put your repayment to work. Some possibilities include: