For many Americans, tax refunds have evolved from a welcome bonus to a crucial financial lifeline. According to a recent survey by Credit Karma, the role of tax refunds has become even more significant, with half of millennials depending on their refunds to make ends meet. This growing reliance highlights the impact of rising living costs and the shifting financial dynamics faced by younger generations.
Millennials and the Dependence on Tax Refunds
The Credit Karma survey revealed that 37% of all taxpayers depend on their tax refunds to meet their financial obligations. However, among millennials, this number jumps to 50%. The survey participants cited the rising cost of living and the increasing prices of everyday necessities as key reasons for their reliance on tax refunds.
In today’s economic climate, where inflation and soaring housing and food costs continue to challenge households, many people, especially millennials, find themselves turning to their annual tax refunds to help cover their living expenses. For younger adults, this financial cushion often makes the difference between making ends meet and struggling financially.
Early Access to Tax Refunds
The anticipation of receiving a tax refund is so high for many Americans that some are willing to pay a fee to access it earlier. According to the survey, about a third of those surveyed said they would either pay a fee or plan to pay a fee to access their refund early. This growing trend indicates just how crucial tax refunds have become for managing cash flow, particularly when unexpected expenses arise.
Taxpayers are not only eager to access their refunds early, but many have specific plans for how they’ll use the funds. The survey found that nearly half of respondents, 47%, plan to use their refunds to pay down debt. Among millennials, this number rises to 59%. This highlights how the financial pressures facing younger generations are affecting their spending habits and priorities.
The 2025 Tax Filing Season
The 2025 tax filing season officially begins on January 27, and the deadline to file taxes is April 15, 2025. As the season kicks off, many people will anxiously await their refunds, hoping to get back some of the money they’ve overpaid in taxes throughout the year.
For many, a sizable tax refund can feel like a windfall, but it’s essential to consider what this refund really represents. A large refund means that taxpayers have overpaid their taxes throughout the year, essentially providing the government with an interest-free loan. While a refund can be useful in the short term, consistently overpaying on taxes may not be the best financial strategy.
Taxpayers who regularly receive large refunds should consider adjusting their tax withholding. By completing a new W-4 form with their employer, they can adjust the amount of money taken from their paycheck each month. This can result in a larger paycheck and less need for a tax refund at the end of the year.
The IRS offers a tax withholding calculator to help individuals determine how much should be withheld from their paycheck to avoid overpayment. By taking advantage of this tool, taxpayers can optimize their tax situation and keep more of their earnings throughout the year.
The Stress of Tax Season
While many eagerly anticipate their refunds, tax season brings anxiety and stress to others. The Credit Karma survey found that nearly a fifth of millennials (18%) would rather drive 20 hours straight than file their taxes. Another 15% of millennials said they would even take a vow of celibacy for a year to avoid dealing with their taxes.
This humorous yet telling response underscores the anxiety and dread many feel when it comes to tax filing. Filing taxes can be a complicated and overwhelming process, and for those who find themselves in difficult financial situations, the added pressure of tax season can feel unbearable.
To mitigate the stress, financial experts recommend creating a clear plan ahead of time. Resources like the IRS’s online tools can help individuals estimate their potential refund or balance owed, and there are ways to access refunds early without incurring fees. Seeking professional help from tax experts or using reliable online tax preparation software can also make the process smoother and less daunting.
