Nearly 4-in-10 Americans depend on their tax refund to stay afloat — here's why and how to break the cycle

Once considered a nice little financial bonus, a chance to pad a savings account or indulge in something nice, a tax refund in 2025 is looking more like a requirement.

The top expenses Americans say will be most affected by their tax refunds or any taxes owed are groceries and household essentials (47%), gas and transportation (28%) and bills, loans and credit card payments (27%).

Relying on a tax refund to stay financially afloat is a risky strategy, especially when the amount isn’t guaranteed — and in some cases, taxpayers may even end up owing money instead. With the cost of living so high, finding ways to stabilize finances year-round is becoming more urgent than ever.

An error of accounting

It might sound strange to depend on an unknown accounting adjustment for next month’s bills, but in today’s economy, it has become a harsh reality for some.

The cost of food and housing are elevated, squeezing household budgets and leaving less room for financial security. Inflation currently sits at 2.8%, but while it has cooled from record highs, many struggle to feel relief. A recent CBS News poll found that 77% of Americans don’t believe their incomes are keeping up with inflation.

It’s unlikely to get better anytime soon. Businesses are bracing for cost increases as a result of U.S. tariffs on foreign imports — which experts say will likely be passed down to consumers. Suddenly, tax refunds are looking mighty appealing.

Beyond the check

Relying on an annual government payout to stay afloat isn’t a financial strategy. A tax refund shouldn’t be the difference between paying rent and falling behind. So, instead of counting down the days until tax season every year, the real goal should be building a financial cushion that doesn’t hinge on a once-a-year deposit.

If you don’t know where to start, one thing you can do is to work with a financial adviser. The right one can help anyone craft a plan that balances short-term needs with long-term stability.

It’s also important to take a closer look at your debt. As of the fourth quarter of 2024, Americans' total credit card balances hit $1.21 trillion, according to the Federal Reserve Bank of New York. Minimizing high-interest payments is key. The less you owe, the more you can keep.

And finally, even if your wages remain stagnant, your income doesn’t have to. When you diversify your income streams, you can create a safety net that gives you more control over your money. For example, taking on a side hustle can help you turn your skills into extra cash flow, whether it’s consulting in your industry or freelancing in your free time.

Building financial security can help you break free from the paycheck-to-paycheck cycle. After all, tax season should be just another time of year — not a moment of desperation.