If you haven’t filed your tax return yet, now is the time — and there’s genuinely good news this season. Refunds are coming in higher than last year. According to IRS data through February 6, the average refund was $2,290, up 10.9% from the $2,065 reported at the same point in 2025. That’s an extra $225 in the average American’s pocket, with the gap expected to widen as more returns are processed.
In Brief (TLDR):
- The average tax refund is up 10.9% this year, per IRS data through February 6.
- Two main drivers: deduction changes under the One Big Beautiful Bill and higher employer withholdings throughout 2025.
- Maximizing deductions — health insurance, education, and IRA contributions — can increase your refund further.
- The most important decision isn’t how much you get back. It’s what you do with it when it arrives.
Why Is This Year’s Refund Higher?
The short answer is that two things happened at once. First, the One Big Beautiful Bill — the tax legislation signed by President Trump in 2025 — expanded several deductions for individual filers. Second, and perhaps more directly felt, many employers adjusted how much they withheld from each paycheck during 2025. The result: the government held onto more of your money throughout the year than it needed to, and now it’s returning the difference.
Carlos García, CEO and founder of Finhabits, puts it plainly: the bigger refund isn’t a gift from the government — it’s your own money coming back to you. Which makes what you do with it all the more important.
The 2026 filing season opened January 26 and runs through April 15. More than 22 million people have already filed, but many more still haven’t. If you’re in that group, the clock is running.
How to Maximize Your Deductions
Receiving the standard refund is one thing. Making sure you claim everything you’re actually owed is another. There are three areas where filers commonly leave money on the table.
Health Insurance Premiums and Education Expenses
If you paid health insurance premiums out of pocket — not through an employer plan — or had qualifying education expenses during the year, you may be able to deduct them. Many people skip these simply because they don’t know they apply or didn’t keep their receipts. Ask your tax preparer specifically about both categories before you finalize your return.
Traditional IRA Contributions: The Most Underused Deduction
“IRAs are retirement savings accounts you can open yourself. Especially with a traditional IRA, you can contribute money and deduct that amount from your taxes.” — Carlos García, CEO of Finhabits
A traditional IRA lets you contribute pre-tax dollars, which directly reduces your taxable income for the year. For the 2025 tax year, the contribution limit is $7,000 (or $8,000 if you’re 50 or older). The critical detail: you can make that contribution up until April 15, 2026 and still have it count for 2025. If you don’t have an IRA yet, or haven’t maxed it out, you still have time to act before the deadline.
An analysis by Principal Asset Management found that higher-income households tend to see the largest impact from the current tax environment. But lower- and middle-income workers have real options too — particularly through the Earned Income Tax Credit and IRA contributions, both of which are specifically designed to benefit working families.
When Does the Refund Arrive?
If you filed online and set up direct deposit, expect your refund in roughly three weeks. Paper returns take longer. You can check the status anytime using the IRS tool “Where’s My Refund?” — you’ll need your Social Security number, filing status, and the exact refund amount you’re expecting.
The Most Important Question: What Do You Do When the Money Arrives?
This is where most people miss the real opportunity. Surveys consistently show that the majority of Americans use their refund for basic needs — rent, groceries, paying down credit card balances. That’s completely valid. But having a plan before the money hits your account makes all the difference between spending it reactively and using it strategically.
Carlos García recommends thinking about it in a clear order of priority.
Step One: Build Your Emergency Fund
Before anything else, make sure you have at least $500 to $1,000 set aside somewhere accessible. Without that cushion, any unexpected expense — a medical bill, a car repair, a slow month — can push you straight back into debt. A high-yield savings account is a good home for this money: it stays liquid and earns interest while it waits.
Step Two: Attack High-Interest Debt
If you’re carrying credit card balances at high interest rates, your refund is a real opportunity to make a dent. Don’t settle for the minimum payment — that path is designed to keep you paying interest for years. If you can pay off the full balance, do it. If not, put as much as you can above the minimum toward the card with the highest interest rate first, and work your way down from there.
Step Three: Invest in Your Future
“That money left over — you should be investing it in your future and leaving that legacy for your family.” — Carlos García, CEO of Finhabits
Once your emergency fund is in place and high-interest debt is under control, whatever remains has one job: grow. Investing in a diversified portfolio* is the most proven way to build wealth over time. You don’t need to be a market expert or have thousands of dollars to start. With Finhabits, you can open an investment account starting with a small amount and set up automatic monthly contributions so your money keeps working without you having to think about it.
Comparison: How You Use Your Refund
| How You Use It | Immediate Impact | Long-Term Impact |
|---|---|---|
| Unplanned spending | Temporary relief | Money disappears with no lasting financial benefit |
| Emergency fund | Protection against the unexpected | Prevents falling into debt when life happens |
| Pay off credit card debt | Reduced balance and interest | Frees up monthly cash flow for saving and investing |
| Contribute to a traditional IRA | Lower taxable income this year | Tax-deferred compound growth* toward retirement |
| Invest in a diversified portfolio* | Your money enters the market | Potential for growth over 5, 10, 20 years* |
Have Kids? There Are Options for Them Too
Your tax refund can also be a starting point for your children’s financial future. Investment accounts and high-yield savings accounts can be opened in a minor’s name with an adult as custodian. Even $50 or $100 invested today, given enough time and the power of compound interest*, can become a meaningful resource for a child’s education, first car, or first business. The earlier you start, the less you need to contribute to reach a meaningful goal.
How Finhabits Fits Into This
Finhabits was built for exactly this kind of moment: when you have money available, you know you should do something smart with it, but you’re not sure where to start. With Finhabits you can open an investment account, choose a professionally designed diversified portfolio*, set up automatic monthly contributions, and access financial education in plain language — all in minutes.
If you’ve already filed and you’re waiting for your refund, use that time well. Decide right now how much will go to your emergency fund, how much to debt, and how much to investing. When the money lands, the decision will already be made — calmly, not in the moment.
Explore how to get started with Finhabits, and learn to build long-term wealth without needing to earn more.
Frequently Asked Questions
Why is the 2026 tax refund higher than last year?
Two main reasons. First, the One Big Beautiful Bill — the 2025 tax legislation — expanded several deductions for individual filers. Second, many employers adjusted their paycheck withholding amounts during 2025, which meant the government held onto more than necessary throughout the year and is now returning the difference.
What is the deadline to file my taxes?
The deadline is April 15, 2026. If you need more time to file, you can request an extension — but keep in mind that an extension to file is not an extension to pay. Any taxes owed are still due by April 15.
How long does it take to receive my refund?
If you filed online and set up direct deposit, your refund typically arrives in about three weeks. Paper returns take longer. You can track the status at irs.gov/refunds.
What is a traditional IRA and how does it help with taxes?
A traditional IRA (Individual Retirement Account) is a retirement savings account where you contribute pre-tax dollars. The amount you contribute reduces your taxable income for the year, which can result in a larger refund or a smaller tax bill. The limit for the 2025 tax year is $7,000 (or $8,000 if you’re 50 or older), and you can make that contribution up until April 15, 2026.
Can I open an investment account with my tax refund?
Yes — and it’s one of the best moves you can make. With Finhabits, you can open an investment account with a small initial amount, choose a diversified portfolio* tailored to your goals, and set up automatic contributions so your money continues to grow over time.
What if I need the money for basic expenses?
That’s completely valid — stability always comes first. Cover rent, food, and essential bills before anything else. If there’s anything left after that, even a small amount, that’s the money to put to work. There’s no magic minimum needed to start saving or investing.
Sources
- Internal Revenue Service (IRS) – Filing Season Statistics, February 2026
- CNBC – Average IRS tax refund is up 10.9% so far this season
All sources were consulted and verified in February 2026. External links open in a new window.
Disclaimer:
This material is provided for informational purposes only and is not intended to offer investment, legal, or tax advice. All images and figures are for illustrative purposes. Investment advisory services are offered through Finhabits Advisors LLC, a registered investment advisor with the SEC. Registration does not imply a certain level of skill or training. Past performance is not indicative of future returns. All investments involve risk, including the possible loss of principal. Securities are offered through Apex Clearing Corporation, a Member of FINRA and SIPC. Securities held at Apex are protected up to $500,000, which includes a $250,000 cash limit. See SIPC.org for more details.
Projections are for educational and illustrative purposes only. They are based on the assumptions stated and will change if those assumptions change. They do not predict or reflect the actual performance of any Finhabits portfolio, and they do not account for economic, market, or individual financial factors that can impact real investment outcomes.
For tax-related questions, consult a qualified tax professional and refer to the official information available on the IRS website (irs.gov).
© Finhabits, Inc. All rights reserved.
