Next to avoiding legal trouble with the IRS, a tax refund is the best part of filing taxes for most people. The average refund is $2,476, as of Feb. 13, 2026. That kind of money could go pretty far, and you might already have some ideas about how you want to use it.
There isn't really a right or wrong answer to what you should do with your tax refund. But some moves can definitely deliver more long-term value than others. Here are three options you may want to consider.
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1. Build an emergency fund
Everyone should have an emergency fund containing at least three to six months of living expenses. This helps you avoid debt if unexpected costs arise or you suddenly find yourself out of a job.
Your tax refund may not cover three months of living expenses, but it's still a good start. It'll enable you to tackle most small expenses without altering your budget. Then, as you're able to, you can gradually add to your emergency fund.
2. Pay down high-interest debt
High-interest debt can add to your stress and make it difficult to achieve other financial goals, so it's often worth paying this down as soon as you can. This includes credit card debt, payday loan debt, and, sometimes, personal loan debt.
Your refund may not be enough to pay off all your debts, so it's important to be strategic about how you allocate that money. Make a list of all your debts, including their interest rates and minimum monthly payments. If you have a few small debts, you could allocate a portion of your refund to paying these off. Or you could just put your entire refund check toward the debts with the highest interest rates. This will get you out of debt more quickly.
3. Save for retirement
If you have an emergency fund and have paid off your high-interest debt, consider putting your savings in an IRA. You probably won't be able to touch the money without penalty until you're 59 1/2, but during that time, it will remain invested. When you reach retirement, it could be worth tens of thousands of dollars.
Consider saving in a traditional IRA if you want to reduce your 2026 taxable income. But if you want tax-free withdrawals in retirement, a Roth IRA could be a better fit. You could also split your refund between the two account types.
Just make sure you don't exceed the annual contribution limits. You may set aside up to $7,500 in an IRA in 2026 if you're under 50, or $8,600 if you're 50 or older.
