A big tax refund can feel like an early Christmas gift.
This year’s refund averages $3,521, according to the Internal Revenue Service. Some 35 percent of consumers will use that cash to boost their savings, and around one in four will pay everyday expenses and bills with it, a February survey from economic data and news platform PYMNTS found.
“I think there’s a strong psychological element behind the popularity of tax refunds,” said certified public accountant Bradley Anderson, a financial operations manager at tax prep software firm Sigma Tax Pro. “They can feel like a financial win, a lump sum you can put towards savings or major expenses.”
As exciting as a refund can be, some experts say taxpayers should focus on paying exactly what they owe - and not a penny more.
Overpayment origins
Tax refunds are pretty simple - if you ask the government to withhold more taxes from your paycheck than what’s needed, you get money back after you file, in most cases.
Withholding started in 1943 via tax laws signed by President Franklin D. Roosevelt, Anderson said.
“While refunds existed before this shift, withholding made overpayments more common and helped cement the modern expectation of an annual tax refund,” he said.
Since then, refunds have enjoyed celebrity status - which they may not deserve.
“A bigger refund doesn’t mean you’ve paid less tax overall,” Anderson said in an email to The Independent. “In most cases, it simply means you’ve been overpaying throughout the year.
“What taxpayers should really focus on is accuracy and optimization, making sure they’re claiming the right credits and deductions while keeping more of their money in their pocket as the year goes on.”
Bigger isn’t always better
Experts believe a main drawback of a tax refund is liquidity - the idea that you can’t access the money you overpaid until you get your refund.
“You are basically giving the IRS an interest-free loan,” No Upfront Tax Relief CEO Brian wrote in an email to The Independent. “That money could have been used during the year.”
If taxpayers focused on bigger paychecks - not bigger refunds - they could use the extra cash to pay down costly debt, Anderson said.
“Large tax refunds can actually be a missed opportunity, especially if you’re carrying high-interest debt like credit cards,” he said. “An extra $200 per month in your paycheck can go towards paying back that debt, potentially saving you thousands over time in interest.”
Around half of Americans are struggling to meet basic expenses, according to a March 2026 report from nonprofit research organization Urban Institute. Just a few hundred dollars a month could make a big difference for those households.
“Over-withholding can make it harder to cover everyday costs,” Anderson said. “For Americans living paycheck to paycheck, this can lead to additional expenses like late fees on bills that could have been paid on time with a higher monthly income.”
The extra money a taxpayer receives monthly from a small-refund strategy can bulk up savings for emergency or unexpected expenses, said certified public accountant Sherman Standberry, CEO of tax consulting firm My CPA Coach.
If the emergency fund is full, investing is the next step, Standberry wrote in an email to The Independent. The sooner money is invested, the more time it has to grow.
In short, your current and future financial health improves when you maximize your paycheck and minimize your tax refund.
“From a tax professional’s perspective, the goal is always to get as close to zero as possible, as this means you’ve kept more of your money throughout the year rather than giving the government what is effectively an interest-free loan,” Anderson said.
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