Tax Refund

Personal Finance

A tax refund is money the IRS returns when you've paid more in withholding or estimated taxes than you actually owed for the year. The average US refund is about $3,000. Mechanically pleasant but financially suboptimal: a refund means you gave the government an interest-free loan all year. Adjusting your W-4 to reduce withholding lets you keep that money in your paycheck monthly — invest it, pay down debt, or build emergency savings. The exception: behavioral economics. If receiving a forced-saving lump sum each spring is the only way you save, the lost interest is a fair price.