What Tax Refund Use May Say About Someone

Among 1,049 affluent investors surveyed in February by John Hancock Financial, half said they expect to receive a 2014 Federal income tax refund while 29% expect to owe taxes.

According to the 22nd quarterly Allstate/National Journal Heartland Monitor poll of 1,000 American adults ages 18 and older, more than half (55%) expect to receive a refund on their taxes this year and nearly four-in-ten (39%) do not expect a refund. Six percent of those polled do not know or did not state if they will receive a government refund.

John Hancock found that 52% of affluent investors who expect to receive a Federal tax refund will funnel their check into a savings account, while 25% plan to pay down debt. Close to one in five (17%) say they plan to spend their refund. Only 2% will direct their refund toward their work-related retirement plan.

Of the refund spenders, nearly four in ten (38%) plan to spend their tax refund on a vacation, a decrease from last year when 56% were headed out on vacation. Twenty percent will devote their refund to basic household needs. Last year, 13% said they would treat themselves to a luxury item with their refund money, but this year only 5% plan to do so.

The Allstate poll found among those expecting a refund, most (57%) will use it to cover financial obligations (37% will pay off debt and 20% will spend it on necessities), while only 29% of refund recipients will save or invest their refund. Eight percent say they will spend it on something “nice or fun” and 2% will donate their check to charity.

Among Americans categorizing themselves as upper middle class, 53% expect a refund and almost half (45%) say they’ll save it or invest it for the future.

Refund recipients who are single are more likely to spend their refund on “something nice or fun” (12%) than their married/cohabitating counterparts (7%).  Forty-six percent of Americans designating themselves as lower class believe they will receive a tax refund this year. Of those respondents, a majority expect to spend their refunds to pay off debt (46%) or to purchase necessities (29%). In addition, 64% of Americans who identify themselves as lower middle class and who are expecting a refund plan to use it to cover financial obligations (37% expect to pay off debt and 27% will pay for necessities).

Also in February, a Harris Poll, on behalf of Lexington Law, surveyed more than 4,000 adults ages 18 and older. Results show that one in three Americans plan to spend their tax refund on non-essential items, such as vacations, entertainment, electronic and mobile devices.

Thirty-three percent of men reported they consider a tax refund as a bonus check to be used to buy themselves something rather than pay off a debt, compared to 27% of women who say this. Those with good or fair credit scores who expect a tax refund this year are more likely than those with excellent or poor credit scores to spend it on something non-essential.

However, according to the study, Americans who say they have poor credit scores are more likely than those claiming excellent credit scores to agree that tax refunds are to be used for fun purchases (47% vs. 33%), would rather buy something for themselves or a loved one from a tax refund rather than pay off a debt (51% vs. 20%), and to consider a tax refund as a bonus check that should be used to buy themselves something rather pay off a debt (39% vs. 22%).