Here's the Average Tax Refund as of Early April. How Does Yours Compare?

You may be surprised at the number.

Most people who file a tax return end up getting a refund on their taxes. And this year seems to be no exception. In fact, as of April 8, the IRS had issued more than $222 billion in refunds. And the average refund per tax filer amounted to $3,175.

Now to be fair, the IRS still has a lot of returns to process for the 2021 tax year. That's because many filers no doubt waited until the April 18 deadline to submit their returns. As such, that $3,175 average figure could change in the coming weeks.

But so far, the average tax refund this year is nearly 10% higher than it was last year. That's due in part to the enhanced Child Tax Credit, which got a major boost for 2021 that unfortunately didn't carry into 2022 as lawmakers had initially planned. Tax refunds may also be up this year due to more people claiming missing stimulus funds on their returns.

How to put your tax refund to good use

No matter what your tax refund looks like this year, it's important to use that money wisely. And your first priority in that regard should be to shore up your emergency fund.

Ideally, you should have enough money in your savings account to cover a minimum of three months of essential expenses. If you haven't yet hit that threshold, it’s advisable to take all of the refund money you don't need for immediate bills and stick it directly into the bank.

From there, it pays to use your refund to pay off high-interest debt, such as your credit card balances. Many consumers have been forced to rely on credit cards lately in the wake of higher living costs. Paying off a large balance could spare you from having to deal with massive amounts of accrued interest.

If you're in decent shape as far as your emergency savings and debt levels go (meaning, you either have no debt, or you only have healthy debt, like a mortgage), then you can start looking to the future. Maybe your tax refund could serve as seed money for a business idea you want to launch that will generate a nice amount of income on the side. Or, you could use that money to make a large IRA contribution. You might even take some of that money and use it to pay for a class that helps you boost your job skills and line yourself up for a higher-paying role.

What if your tax refund is smaller?

While some taxpayers may be getting a larger refund this year, perhaps yours is smaller than usual. If so, don't get too upset. A smaller refund really only means that you collected more of your earnings upfront last year, and that's not a bad thing.

In fact, as a general rule, your goal should be to come as close as possible to breaking even when you file your taxes, so that you either owe the IRS very little or it owes you very little. It's hard to get your taxes just right, so owing $0 and getting $0 back is extremely rare. But if you're looking at, say, a $300 refund, that's not something to beat yourself up over. If anything, it means you did a good job of estimating what you owed the IRS last year and didn't let the government hang onto too much of your hard-earned money.