• Consumer150
  • Posts
  • Tax Refund Season in the US: Understanding Its Impact on Consumer Behavior

Tax Refund Season in the US: Understanding Its Impact on Consumer Behavior

Tax refund season is a critical period for both consumers and businesses in the United States. Each year, millions of Americans receive a financial windfall as refunds from the Internal Revenue Service (IRS), injecting billions of dollars into the economy. This influx of discretionary income influences spending patterns, savings behavior, and overall economic activity in distinct ways.

March 20, 2025 • Estimated Reading Time: 19 minutes

Introduction

Tax refund season is a critical period for both consumers and businesses in the United States. Each year, millions of Americans receive a financial windfall as refunds from the Internal Revenue Service (IRS), injecting billions of dollars into the economy. This influx of discretionary income influences spending patterns, savings behavior, and overall economic activity in distinct ways.

For many households, tax refunds represent a significant portion of their annual income, often used to pay down debt, make essential purchases, or invest in experiences they may otherwise forgo. Businesses across industries—from retail and automotive to travel and financial services—strategically prepare for this seasonal shift in consumer behavior, adjusting marketing efforts and promotional strategies to capture a share of this increased spending power.

This report explores the trends and patterns that define tax refund season, examining how different demographic groups allocate their refunds, the sectors most affected by this annual financial boost, and the broader economic implications. By understanding these dynamics, businesses can better anticipate consumer needs, and policymakers can assess how refund-related spending contributes to overall economic stability.

IRS Refunds Statistics

Over the past five years, the Internal Revenue Service (IRS) has processed and issued an average of 115.37 million refunds annually, returning approximately $341.91 billion to taxpayers each year. The year with the highest amount of money refunded was 2021, with $366.07 billion among 129.98 million of refunds (71% of processed requests).

After reaching a peak of 77% in 2021, the percentage of processed returns that ultimately resulted in refunds has experienced a notable decline, dropping to 67% in 2022, 65% in 2023, and further down to 64% in 2024. This downward trend in refund rates is particularly striking given that both the total number of returns received and the total number of returns processed by the IRS have generally maintained an upward trajectory over the years. Despite the increased efficiency in processing tax returns, a smaller proportion of processed returns is translating into actual refunds, which may suggest changes in tax policies, eligibility criteria, or taxpayer circumstances.

From 2016 to 2024, IRS refund amounts have shown fluctuations, reflecting changes in economic conditions, tax policies, and taxpayer behaviors.

The total amount refunded remained relatively stable from 2016 to 2019, fluctuating around $300 billion. However, in 2020, there was a slight dip, with total refunds dropping below prior levels. This was followed by a significant surge in 2021, coinciding with economic stimulus measures and pandemic-related tax relief, pushing total refunds to their highest levels in the period. Since then, total refunds have declined, settling at approximately $320 billion in 2024.

The average refund amount followed a similar trend. Between 2016 and 2019, it gradually increased from $2,860 to $2,910, indicating modest growth. However, in 2020, the average refund dropped to $2,546, likely due to economic disruptions. This was followed by a sharp increase in 2021, reaching $3,252, marking the highest recorded refund amount in this period. Although the average refund has slightly decreased since then, it remains above pre-2020 levels, standing at $3,138 in 2024.

This trend suggests that while total refunds have moderated after the 2021 peak, individual taxpayers are still receiving higher refunds on average compared to pre-pandemic years. The elevated refund amounts may reflect changes in tax credits, deductions, or withholding patterns that have persisted beyond the immediate pandemic effects.

Consumer Behavior in Tax Refunds Season: Understanding where money goes

More Consumers Saving or Paying Off Debt in 2024

NRF’s 2024 annual Tax Returns Survey shows that Americans are largely not splurging with their tax refunds, but instead prioritizing financial security. Nearly half of consumers expecting a refund plan to save the money (around 48%), a figure just shy of last year’s record high (~49%). A significant share – about 35.5% – intend to pay down debt, slightly up from ~34.9% in the prior year. By contrast, relatively few respondents plan to use refunds for immediate everyday expenses (hovering around one-fifth or less in recent surveys). Discretionary uses remain modest: only single-digit percentages earmark refunds for “fun” spending or big purchases. For example, roughly 8–9% plan to invest in home improvements, and similarly small shares will put the money toward major purchases (≈8%) or a vacation (~11%). These patterns underscore that in 2024 most taxpayers are choosing to bolster savings or reduce debt rather than indulge in large purchases or extras.

Comparison to Previous Years: Evolving Consumer Priorities

The 2024 results continue a years-long trend of financial caution with tax refunds. In the mid-2010s, the share planning to save refunds was already high – for example, 46% planned to save in 2014 (then a record). This proportion climbed to nearly 50% by the late 2010s and has remained around that level through 2023–2024. The inclination to pay off debt has likewise been substantial but slightly declined compared to a decade ago. About 38% used refunds to pay debt in 2014, and the figure stabilized in the mid-30s percent in recent years (roughly 35% in both 2023 and 2024). Notably, during the Great Recession a much higher share – 48% – applied refunds to debt (2009 peak), highlighting how extraordinary economic stress can shift priorities. Meanwhile, those using refunds for day-to-day expenses have become a smaller minority over time. In 2017 only 21% put refunds toward everyday bills – the lowest on record – reflecting improved confidence and other income support. This category briefly ticked up during the pandemic: NRF data for 2022 showed about 31% of Americans needed their refund for essentials, up from ~25% in the last pre-pandemic year. By 2023, however, the share using refunds for necessities had fallen back to near historic lows (around the low 20s percent) as more consumers returned to saving or debt reduction. Discretionary spending of refunds (on big-ticket items, home projects, vacations, etc.) has consistently remained low. For instance, around 9–11% have typically devoted refunds to vacations or major purchases in recent surveys, and these fractions dipped to record lows in the late 2010s (e.g. only ~8% splurged on non-essentials in 2017). Even in 2024, with larger average refunds expected, the vast majority are not rushing to make major purchases – a continuation of the frugal posture seen in prior years.

Notable Shifts and Influencing Factors

Several economic and policy factors underlie these trends in tax refund usage. Economic downturns tend to drive more defensive financial behavior: during the 2008–09 recession, Americans overwhelmingly funneled refunds into debt repayment or savings, reaching record highs for those uses. In contrast, as the economy recovered in the 2010s with stronger employment, consumers felt less pressure to spend refunds on immediate needs; the result was a steady rise in saving rates (hitting new records by 2017–2018) and a drop in those relying on refunds for basics. Tax policy changes can also impact expectations and usage. For example, after the 2017 tax reforms, NRF noted consumers anticipated more take-home pay and signaled intentions to save refunds for future expenses (like back-to-school or holiday shopping). Similarly, pandemic-era policies in 2020–2021 (stimulus checks, expanded tax credits) temporarily altered refund dynamics – some households received other funds for essentials, while others faced economic hardship, causing a short-term uptick in using refunds for necessities. By 2023–2024, with the labor market relatively strong but inflation still a concern, “financial security continues to be top-of-mind” for many Americans. Consumers are essentially “hanging on to their tax refunds tighter than ever,” as NRF President Matthew Shay observed, leveraging these windfalls to fortify savings or reduce debt rather than splurge. Larger average refund checks in 2024 (thanks to inflation-indexed tax brackets and credits) may have given some people room to both save and spend a bit, but the overall behavior remains cautious. In summary, the latest data suggest a long-term shift toward using tax refunds as a financial safety net or debt-reduction tool. This shift reflects lessons from past recessions, recent economic uncertainties, and a mindset – especially among younger adults – that prioritizing savings and prudent spending will pay off in the long run.

2024 Tax Cohort Spending by Subcategory: Trends and Insights

According to Earnest the 2024 tax refund season has led to noticeable spending differences between refund recipients and non-recipients, particularly across retail and service categories. According to Earnest’s latest analysis, spending shifts varied by subcategory, reflecting consumer priorities during the period following refund disbursements.

Key Trends in Tax Refund Spending

  1. Higher Spending in Home-Related Categories

    • Home Furnishings experienced the highest spending increase among refund recipients, rising by 10% as of April 27, 2024, compared to non-recipients.

    • Home Improvement spending also saw a moderate boost, with a 3% increase in both late March and late April, suggesting continued investment in housing-related purchases.

  2. Apparel & Retail Growth

    • General Apparel spending showed a 9% increase by March 30, though it slowed slightly to 4% in late April. This may indicate an initial rush of shopping right after refunds were received.

    • Footwear and Active & Athleisure purchases grew consistently at 4%, highlighting steady consumer interest in clothing and fitness-related items.

  3. Department Stores and Discount Retailers See Modest Gains

    • Off-Price Department Stores and Mid-Tier Department Stores had spending increases of 4% and 3%, respectively, suggesting that consumers with refunds may be looking for deals rather than splurging at high-end retailers.

    • Big Box Retailers and Warehouse Clubs posted 3-4% growth, reinforcing the idea that refund recipients may be stocking up on essentials or taking advantage of bulk purchases.

  4. Auto and Travel Spending on the Rise

    • Spending on Auto Parts & Services jumped 7% in March and April, indicating that some consumers may be using refunds for car repairs or maintenance.

    • Air Travel spending increased by 2% in March, rising to 4% by April, suggesting that consumers may be allocating part of their refunds toward upcoming vacations or trips.

  5. Dining and Entertainment See Steady Increases

    • Casual Dining and Quick Service Restaurants (QSRs) saw 3-4% spending growth, showing a moderate increase in discretionary food purchases.

    • Sports Gear spending remained stable at 4%, possibly tied to seasonal shopping patterns or planned sports-related expenses.

  6. Tech and Electronics Show a Mixed Trend

    • General Electronics was the only category to see a slight decline (-2%) in spending in late March, but by late April, spending in this category rebounded with a 6% increase, suggesting a delayed impact of tax refunds on tech purchases.

Conclusion: Smart Spending and Selective Splurging

The data suggests that tax refund recipients in 2024 are primarily focusing their spending on home improvements, necessary apparel, auto services, and select discretionary purchases like dining and travel. While categories such as home furnishings and apparel saw early boosts in March, spending in tech and travel showed delayed increases in April. The modest but widespread increases in multiple retail segments indicate that many consumers are using their refunds wisely, balancing essential needs with some discretionary indulgences.

2024 Tax Cohort Spending by Brand: Who Are the Winners?

According to Earnest analysis, the 2024 tax refund season has influenced spending across various brands, with some retailers experiencing significant gains as tax refund recipients allocated their extra cash. The biggest winners of the season were brands in the apparel, home goods, and sporting categories, suggesting that consumers prioritized fashion, home improvement, and fitness-related purchases.

Top-Performing Brands During Tax Refund Season

  1. Express (EXPR) – Biggest Winner

    • Spending among tax refund recipients at Express surged by 11% in late April, up from a 7% increase in late March.

    • This suggests a strong demand for fashion and apparel, possibly as consumers refresh their wardrobes post-tax season.

  2. Adidas – Strong Growth in Athletic Apparel

    • Spending at Adidas increased by 10% in April, up from 5% in March.

    • This highlights an uptick in demand for sportswear and footwear, likely driven by consumers using their refunds on activewear.

  3. Wayfair (W) – Home Furnishings Surge

    • Wayfair saw a 9% increase in spending among tax refund recipients, making it a top performer in the home goods category.

    • This aligns with broader trends showing home improvement and furniture purchases as a priority for many refund recipients.

  4. Macy’s (M) – Department Store Boost

    • Spending at Macy’s jumped 9% by late April, making it one of the top-performing general retailers.

    • Taxpayers appear to have used their refunds for clothing, accessories, and beauty products.

  5. Lululemon (LULU) – Luxury Activewear Demand

    • Lululemon spending saw a 6% increase in April, despite starting at 0% in March.

    • This suggests a delayed impact of tax refunds on premium athletic wear.

  6. Shein – Fast Fashion Gains Traction

    • Shein spending rose by 5% in April, having been at 0% in March.

    • This indicates that younger consumers, in particular, may be using tax refunds for trendy, budget-friendly clothing.

  7. Lowe’s (LOW) – Home Improvement Gets a Boost

    • Lowe’s spending rose by 5% in April, a notable jump from 3% in March.

    • This reflects a broader trend of refund recipients investing in DIY projects and home upgrades.

  8. Amazon (AMZN) – A Steady Performer

    • Amazon saw a 5% increase in April, up from 3% in March, signaling continued online shopping strength.

    • Taxpayers likely spread their spending across multiple categories, from electronics to apparel.

  9. Target (TGT) – General Retail Sees Moderate Growth

    • Target spending rose 5% in April, slightly up from 4% in March.

    • A mix of apparel, home goods, and groceries likely contributed to this increase.

  10. Nike (NKE) – Athletic Wear Demand Grows

  • Nike experienced a 4% increase in April, up from 2% in March.

  • Similar to Adidas, this suggests refund recipients prioritized sports gear and casual footwear.

Other Notable Winners

  • Walmart (4%), Dick’s Sporting Goods (4%), and Costco (4%) all saw steady increases.

  • AutoZone (3%) and Home Depot (3%) gained as tax refund recipients invested in car maintenance and home projects.

  • Best Buy saw a delayed 6% surge in April, indicating that tech purchases may have picked up after consumers addressed other financial priorities.

Conclusion: Tax Refunds Fuel Fashion, Home, and Athletic Spending

Overall, fashion, home improvement, and sporting brands emerged as the biggest winners of the 2024 tax refund season. Apparel retailers like Express, Macy’s, and Adidas saw strong gains, while Wayfair, Lowe’s, and Home Depot benefited from spending on home projects. Meanwhile, Nike and Lululemon capitalized on consumer interest in athletic and lifestyle wear. The data suggests that while some consumers are using refunds for practical expenses, many are also indulging in apparel, home upgrades, and fitness-related purchases.

Conclusion: Leveraging Tax Refund Season for Retail Growth

The 2024 tax refund season has demonstrated clear consumer spending trends, with a strong preference for savings and debt repayment but also selective spending in key retail categories. Consumers prioritized home furnishings, apparel, footwear, and home improvement as the top sectors for discretionary spending, while auto parts, dining, and electronics also saw moderate gains. Brands such as Express, Adidas, Wayfair, Macy’s, and Lowe’s emerged as top winners, reflecting a mix of fashion, home upgrades, and fitness-related purchases.

Retailers looking to capture tax refund spending should focus on timing their promotions, particularly in March and April, when consumers tend to allocate refunds toward shopping. However, since spending varies by category and some purchases are delayed until later in the season, maintaining extended promotional windows can further enhance sales.

Retailer Tip: Maximizing Sales with Digital and Physical Gift Cards

Gift cards—both physical and digital—are an excellent strategy to capture tax refund spending and encourage repeat purchases.

Why Gift Cards Work During Tax Refund Season?

  1. Encouraging Delayed Spending: Many consumers are cautious with refunds, preferring to save or pay down debt before spending. Gift cards allow them to “set aside” money for future purchases, ensuring retailers maintain long-term customer engagement.

  2. Boosting Higher-Value Purchases: Customers who use gift cards often spend more than the card’s value, leading to increased basket sizes.

  3. Flexibility for Consumers: Refund recipients looking to treat themselves but not ready to commit to big purchases may opt for gift cards as a way to plan future indulgences.

  4. Perfect for Seasonal Promotions: Digital gift cards are an easy way to offer cashback incentives, discounts, or bonuses for tax refund shoppers, helping retailers attract budget-conscious consumers.

Why Digital Gift Cards are the Best Strategy?

  • Immediate Accessibility: Digital gift cards eliminate friction in purchasing, allowing shoppers to redeem them instantly online or in-store.

  • Boosting E-Commerce Sales: Many consumers use their refunds for online shopping. Offering digital gift cards ensures they engage with your brand instead.

  • Drive Repeat Purchases: A well-timed email or mobile push notification offering a bonus digital gift card (e.g., “Buy a $50 gift card, get a $10 bonus”) can encourage additional spending.

  • Customization & Personalization: Digital gift cards can be integrated into loyalty programs, rewards, and targeted promotions, driving engagement beyond tax season.

Actionable Retail Strategies

  • Promote Gift Card Bundles: Offer deals like “Spend $100, Get a $20 Gift Card” to encourage larger transactions.

  • Tie Gift Cards to Key Categories: Home improvement, apparel, electronics, and sporting goods should be a focus for targeted digital gift card promotions.

  • Leverage Social Media & Email Marketing: Highlight digital gift cards as the perfect way to spend tax refunds wisely while keeping options open for future purchases.

  • Encourage Gifting Behavior: Position gift cards as a way for consumers to share tax refund benefits with family and friends, boosting transaction volumes.

By prioritizing digital gift cards as a primary sales driver, retailers can extend tax refund spending beyond the initial rush and create a sustainable revenue boost well into the summer shopping season.

Premium Perks

Since you are an Executive Subscriber, you get access to all the full length reports our research team makes every week. Interested in learning all the hard data behind the article? If so, this report is just for you.

Tax Refund Season.pdf259.92 KB • PDF File

Want to check the other reports? Access the Report Repository here.

Sources & References

IRS. (2025). Filing season statistics by year. https://www.irs.gov/newsroom/filing-season-statistics-by-year 

Statista. (2024). Leading ways consumers planned to spend their tax return refund in the United States in 2024. https://www.statista.com/statistics/1370607/ways-to-spend-tax-return-refund-usa/