MCLEAN, Va., March 6, 2014 /PRNewswire/ -- With the April 15th tax filing deadline fast approaching, Capital One Bank (NYSE: COF) launched its annual Taxes and Savings Survey to find out how refund recipients are planning to use their dollars. According to the latest IRS statistics, the average federal tax refund this year will be $3,116, up 4.2 percent compared to 2013. Capital One's survey found that most Americans (80 percent) expect to get a refund and more than half of those (52 percent) plan to spend the majority of their refund.
Paying Off Debt Tops Use of Refund Money Although 52 percent of Americans who will be receiving a tax refund this year are spending the majority of it (as opposed to saving), that spending includes paying down debt. The majority (58 percent) will use the money to pay down debt or pay off bills. Other ways people are spending their refunds include:
Everyday expenses or necessities (15 percent)
A vacation (7 percent)
Major purchase, such as a car, appliances, etc. (7 percent)
New clothing or accessories (1 percent)
A TV, iPad, smartphone or other electronics (1 percent).
Uncle Sam's Savers According to the survey, 40 percent of those people receiving a refund are saving the majority of it, which includes investing. For those who plan to save, many (32 percent) are using it to help plan for "short-term" savings needs such as an emergency or rainy day fund. Fewer consumers are saving toward "longer-term" goals such as retirement (15 percent) or a child's college education (8 percent). "Four in five Americans are expecting to get tax refunds this year and most of them are already thinking about what they intend to do with the money," said Jim Kelly, Head of Direct Banking, Capital One. "Whether your goal is to save for the future, pay down debt to help get your finances in order or even to spend all or some of your refund on something important to you, planning ahead is essential to help keep yourself on track. A tax refund isn't a year-end bonus or magic windfall, it's the government giving you some of your own money back, so it makes sense to think carefully about how you plan to use it, putting that refund to work for yourself and getting on a path to save more and invest in your financial future." Of those consumers who will owe taxes this year (9 percent), 34 percent say they will need to dip into their personal savings or emergency fund to cover the cost; however, just as many (35 percent) said they have set aside savings to pay for their owed taxes. Nearly one quarter (22 percent) will do an installment agreement or payment plan with the IRS. Only a handful will "draw down retirement funds" (6 percent) or pay with a credit card (4 percent).