Tax refunds have increased from last year. Will that help fuel high electricity prices?

The average tax refund is up nearly 11% from last year, totaling $3,623 in the week of March 13, according to data from the Internal Revenue Service.

Total government refunds, meanwhile, rose 12% over the same period, to $182.6 billion, the IRS said. Visits to IRS.gov are also up more than 54% from last year as the tax filing season marches into its final weeks, with nearly $70 million in benefits already received by the government before the April 15 filing deadline.

Provisions in the One Big Beautiful Bill, including new and expanded deductions, were expected to give Americans a nice return this year. But high fuel prices amid the US-Israeli war in Iran may eat into that expected fund: An analysis by economists at Oxford Economics last week predicts that 2026 could bring the slowest growth in annual consumption since 2013, without the pandemic, as consumers pull back on spending.

“We expected spending to pick up from the big tax refund period, but rising fuel prices, if sustained, could dampen that growth,” economists Michael Pearce and Bernard Yaros wrote in a report.

Simply put, a large tax refund is a loan to the government – and it pays no interest.

“While a refund sounds like a bonus, it’s really just a refund of your overpayment,” said David Perez, founder and CEO of Tax Maverick, via email. “This money was used every month to pay expenses or manage debts.”

Debt is one of the reasons why high tax returns are so worrisome. American household debt is expected to increase by about 4% by 2025, according to data from the Federal Reserve Bank of New York. And serious delinquencies, payments that are at least 90 days past due, also increased.

So it’s not just about interest-free government debt. Given the high rate of inflation, rising unemployment, high fuel prices, and long-term financial goals, the money could be better spent throughout the year.

Whether the money is tight or you’re living comfortably, overpaying your taxes is a missed opportunity. Here are just a few ways your hard-earned money can do more for you throughout the year.

If you’re struggling to meet everyday expenses (like high gas prices), a small tax refund could mean more financial breathing room.

“Adjusting your tax deductions gives you more money in every paycheck,” says Perez. “This can provide quick cash to cover living expenses, speed up debt payments, or reduce reliance on high-interest credit cards.”

You can use the money to increase your savings, which can cover emergencies or large purchases, so you don’t have to pay off credit card debt again.

High-interest debt generally refers to debt with an annual percentage rate (APR) of 8% or more. However, credit card rates are often very high.

The average credit card APR was 22.30.% in the fourth quarter of 2025, according to the Federal Reserve. That means that while the money you overpay in taxes sits with the government, earning no interest, your credit card balance costs you more each month.

Instead, you can adjust your savings and use the money to pay off your debt balances and save on interest.

Read more: 4 ways to pay off debt fast

Invest and earn interest

Perhaps the highest cost of tax refunds is the interest your money could earn in the market.

The average long-term return on the stock market is 7% adjusted for inflation. Although it is not guaranteed, and any year you may experience a profit or a loss, investment returns offer a much higher potential than having your money sitting with the government.

“Use the increased monthly cash flow to invest systematically in retirement accounts, brokerages, or high-yield savings,” says Perez. “This strategy allows money to start working for you immediately, increasing potential growth over time.”

Read more: The 10 best savings accounts right now

If you usually get a large refund, it usually means that more tax is withheld from the amount paid throughout the year. Preparing your Form W-4 can help you keep more of your earnings in your pocket instead of waiting for a refund.

Here’s how to adjust each step on your W-4 to reduce your refund:

• Adjust Step 3 (dependants): Increasing the number of dependents reduces the amount of tax withheld. This is one of the easiest ways to increase your take home pay if you qualify.

• Use Step 4(b) to find the deduction: If you expect to claim more than the standard deduction (such as mortgage interest or charitable contributions), adding it here tells your employer to withhold less tax — resulting in more paychecks and less refunds.

• Avoid or reduce income in step 4(a): Adding additional income (such as self-employment) increases the deduction. If your goal is a minimum return, it’s usually you don’t do it you want to add income here unless you need to adjust the non-taxable earnings.

• Reduce or remove additional grips in step 4(c): This is where you can request any additional withholding amount from your paycheck. If you previously entered a number in this step, reducing or removing it will increase your take-home pay.

Note: If you leave Step 4 blank, your employer calculates the withholding based on your filing status and standard deductions. If that results in a large refund, it may mean that your holding is still higher than necessary in your situation.

When adjusting your grips, be careful not to over-adjust.

“Reducing hard holdings can result in a larger tax bill and possible underpayment penalties at the time of filing,” Perez said. “The ideal goal at tax time is to be close to the break-even point — whether it’s a minimum balance due or a minimum refund — to ensure you’re maximizing your income throughout the year.”

To find the correct balance, use the IRS Withholding Estimator or work with a certified tax professional. And be sure to update your W-4 after major life events, such as getting married or divorced, buying a home, having a child, or starting a business.