Overview of 2025 Tax Refunds
The Internal Revenue Service has distributed millions of tax refunds during the ongoing 2025 tax filing season. As of February 7, more than 8 million refunds have been issued, each averaging $2,065 according to IRS data.
Any outstanding credit card debt would be very good to pay down, personal loans, anything financed at especially double-digit percentage rates but anything really above the current market rates could be a really good target for paying down.
Prioritizing Debt Repayment
Experts emphasize tackling high-interest debt as the first use for tax refunds. Jonathan Ford Jr., president of JFJ Advisory Services, identifies paying down credit card debt and personal loans with double-digit rates as a top priority. Karla Dennis, CEO and founder of KDA, Inc., specifically highlights credit card debt, noting U.S. household credit card balances reached a collective $1.21 trillion at the end of December per the Federal Reserve Bank of New York.
The cost of their debt is eating away at the money that they could be spending on something else so I would definitely pay down all of my credit card debt if possible.
Building an Emergency Fund
Following debt reduction, establishing or funding an emergency fund is critical. Dennis recommends at least $1,000 in emergency cash to cover unexpected needs like rent or rising food costs, stressing it should be reserved for true emergencies rather than wants. Ford concurs, calling it his top recommendation, particularly for those without one or with underfunded accounts. A recent U.S. News survey found 42% of Americans lack an emergency fund. Ford advises aiming for three to six months of expenses for a deeper safety net, enabling restful sleep and handling surprises like $1,000-$2,000 costs without disrupting other finances.
Contributing to Retirement
Both experts advocate allocating funds to retirement after securing an emergency fund. Dennis suggests investing in an IRA or Roth IRA, even small amounts like a few hundred dollars, to start building a nest egg over time. Ford frequently recommends Roth IRAs for their tax advantages, where taxes apply only to contributions, not growth or withdrawals. More than 42% of U.S. households held some form of IRA in 2023, per the Investment Company Institute.
Once I established my emergency fund, I would then invest some of that money, maybe in an IRA or a Roth IRA, even if I only put in a couple hundred bucks or $500.
Allowing for Personal Rewards
While prioritizing finances, experts permit a modest self-reward. Ford recommends less than 25% for something desired, as it supports motivation for financial goals. Dennis conditions it on budget allowances, reminding that tax refunds are not extra money but overpaid taxes held by the government.
Refund Processing and Status
Refund receipt times vary by filing method: electronic filers typically wait up to 21 days, while paper or amended returns take four weeks or longer. Taxpayers can track status via the IRS 'Where's My Refund?' webpage.
