The average 2026 tax refund is a whopping $3,739 thanks to the One Big Beautiful Bill, but people aren't making the most of it. Here's how you can

Instead of splurging, many Americans are taking a more cautious approach with their refund cash.

New survey data from the National Retail Federation shows 52% of Americans plan to save their tax refund this year, the second-highest share since the organization began tracking the trend in 2007. Only 42% of refund recipients actually saved their refund last year, suggesting a notable shift in behaviour may be coming, and that many people want to be prepared for a potentially rocky future. Meanwhile, 32% plan to use the money to pay down debt, 30% expect to cover everyday expenses, and just 12% intend to make a large purchase (2).

A tax refund is the largest single lump-sum payment many households receive all year. Getting it is a chance to make a financial change for the better. But simply parking the money in a savings account that does not deliver returns may not be the most effective approach.

Expect a bigger refund this year

Several factors are pushing refunds higher in 2026.

The One Big Beautiful Bill Act of 2025 introduced new deductions and credits that reduced many taxpayers’ liabilities (3). The result is that refunds are expected to be $300 to $1,000 higher than last year, according to the Tax Foundation (4).

Still, financial planners caution that a tax refund isn’t truly “extra” income.

“It’s money you already earned that’s being returned to you,” writes Andreas Jones, founder of Kinda Frugal. Essentially, you gave the government an interest-free loan during the year (5).

The highest-return move

For many households, the smartest place to spend your refund is paying down debt, particularly credit card balances.

Average credit-card interest rates are hovering around 21%, according to the Federal Reserve (6).

If you have a credit card balance at a high interest rate, “We want to do whatever we can to take that out as fast as possible,” Noah Lewis, a financial advising analyst with Scholar Advising, said to CBS News.

Even a high-yield savings account paying around 4% interest cannot compete with the guaranteed return that comes with eliminating debt at a rate five times that.

Experts often recommend the avalanche method, which prioritizes paying down the balance with the highest interest rate first, or the snowball method, which prioritizes the smallest balances to build momentum.

Related: 7 ways to grow your tax refund

If you’re saving, choose the right account

Given the NRF survey showing a majority plan to save their refund, where that money goes matters.

The national average interest rate for savings accounts is still 0.39%, meaning funds sitting in a traditional bank account earn very little, and in fact lose value thanks to inflation.

Financial planners say consumers should consider high-yield savings accounts or certificates of deposit (CDs), which currently offer rates close to 4% or higher in some cases (7).

You agree to leave your money for a set period of time, allowing you to keep it relatively liquid, and earn better returns than other conservative investments.

Invest once your basics are covered

Once debt is under control and some savings are established, investing your refund can be a powerful way to grow it over time.

You could also use your tax refund to help boost retirement accounts such as Roth or traditional IRAs, which offer tax-advantaged investment growth.

Other options include investments that provide fairly reliable returns over time, such as index funds. You could also choose to fund a 529 college savings plan for a child, or contribute to a health savings account (HSA), which offers tax benefits for future medical expenses.