The Average Tax Refund This Year Is Huge. How Does Yours Compare?

Filers have been getting a large amount of money back from the IRS.

At this point, we still have more than a month to go until 2022's April 18 tax-filing deadline. But many people have already submitted their taxes, and the IRS has already issued almost 30 million tax refunds.

The good news? So far, refunds are coming in higher this year than they did in 2021.

The average tax refund this year is $3,473 as of Feb. 25. That's an increase of $658 compared to last year, when the average tax refund came in at $2,815.

What's interesting is that many tax filers were warned to expect smaller refunds in 2022. The reason? Tax credits are often a big source of tax refunds. But many families who were eligible for payments under the Child Tax Credit got half of their money in 2021.

That said, the Child Tax Credit also got a significant boost for 2021. Its maximum value increased from $2,000 to $3,000 for children aged 6 to 17 and $3,600 for children under the age of 6. Despite having received half of the credit upfront, many families are still in line for a big refund this year.

If you're getting a large tax refund this season, it's important to put that money to good use. Here are some options to consider.

1. Bulk up your emergency fund

You never know when a sudden need for cash might arise. That's why it's important to have enough money in your savings account to cover three to six months of essential bills. If you haven't met that savings threshold yet, consider putting your tax refund into your emergency fund.

2. Pay off high interest debt

The longer you carry high interest debt, the more it's apt to cost you. It pays to use your tax refund to whittle down a credit card balance. Doing so could also help your credit score improve.

3. Get started on retirement savings

Once you retire, Social Security generally won't pay you enough money to maintain the lifestyle you're used to. That's why you need to save for retirement throughout your career. If you've yet to get the ball rolling, your tax refund could serve as nice seed money for your IRA.

4. Invest in your career

The labor market is loaded with opportunities these days. If taking a course to sharpen some skills could lead to a better job, then it pays to spend some money on one. Your tax refund could end up covering that bill and then some.

5. Give yourself more leeway for everyday expenses

A lot of people are struggling with everyday bills due to rampant inflation. If you need your tax refund to cover your basic expenses, then that's a good way to use it -- even if it means not being able to apply that money to a longer-term financial goal.

As the 2022 tax season moves along, the average refund amount could change. It'll be interesting to see if the final number is higher or lower than the average refund in 2021. But either way, if you have a pile of money coming your way, be mindful about how you use it -- especially since you don't know whether this year's refund will be your last or largest one for a while.