A pair of surveys show the COVID-19 pandemic shifted many Americans’ plans to use their tax refunds, with household necessities taking top priority over saving and debt reduction.
The “best-laid plans” adage applies to tax refunds as much as anything else in life: Plan what you will for how you’ll spend that refund, but by the time it arrives, your ideas may have changed.
That can be true in any year. But with this tax season occurring during a global pandemic that is keeping millions homebound, the wrench thrown in Americans’ tax refund plans could hardly be bigger.
Two recent surveys by Investment Property Exchange Services, Inc. (IPX1031) highlight how the coronavirus has impacted Americans’ plans for putting their tax refund to use. And the shift in priorities from pre-pandemic to mid-pandemic is dramatic.
In early February, IPX1031 found that paying off debt was handily the No.1 choice for where to deploy tax refund money, with almost 4 in 10 U.S. adults saying they would use some or all of their refund for this purpose (39%).
After that, putting the refund in savings was the most common response, at 31%. Investing it (14%), spending it on a vacation (8%) and using it for a major purchase (4%) rounded out the top five priorities.
Fast forward six weeks to the end of March and almost everything about those plans had changed. Instead of debt reduction being front and center, it slipped all the way to fifth priority, with only 10% of U.S. adults saying they plan to pay down debt with their refund.What moved up to take debt reduction’s place was food and groceries, along with mortgage payments and rent. About a quarter of respondents (24% and 23%, respectively) cited these uses for their refund when asked in late March.
Savings still held second rank, but now at 24% instead of its previous 31%. Utility bills also moved ahead of debt reduction, with 12% of Americans saying they would put some of their refund toward these bills.
A similar tax refund poll by CreditCards.com conducted in late January found 31% of taxpayers expecting refunds were planning to save it, while 24% intended to pay off debt and only 11% earmarked their refund dollars for day-to-day expenses.
IPX1031 conducted its first survey in February among 1,007 Americans ages 18-78, and its second survey among 2,000 respondents on March 27-28. It released its later results on April 10.