More than half of higher-earning Americans plan to save a chunk of their tax refund, a study says

More than one in two Americans who make $100,000 a year or more plans to save at least a portion of their tax refunds in 2021, according to an academic study.

NORC of the University of Chicago found that 52% of such individuals intend to tuck away an unspecified portion of their refunds in savings accounts. After that top priority, 23% of respondents intend to use a chunk of their refunds to pay down debt. The average tax refund last year was just over $2,700, according to the IRS.

Some 15% of high earners plan to use part of their refunds to pay everyday bills and expenses, while 9% will invest in the stock market. Splurges on something fun are a goal of 8%, while 7% intend to make a major purchase.

NORC (it’s not an acronym), a nonpartisan research organization, interviewed 1,076 adults aged 18 and over between Feb. 25 and March 21 of this year. Polled by phone and through an online survey, some 22% of all respondents earned income of $100,000 or more.

Data from NORC at the University of Chicago; chart by Financial Planning

Nearly half, or 46%, of all respondents were paid employees, while 8% worked for themselves. The rest were either laid off, looking for work, retired or disabled.

Nearly one in three persons, or 32% of all of those polled at all income levels, said they didn’t know whether to expect a refund or additional tax bill this year. Nearly one in seven, or 69%, of those who expect to owe additional taxes this filing season said that they would use savings amassed last year and this year to pay their IRS bill. NORC says its survey sample is designed to be representative of the U.S. household population.

The study revealed a wide gulf in understanding of the tax rules and how they affect individuals’ bills. Overall, more than one in five respondents, or 22%, of all income levels said they thought that unemployment benefits were not taxable. The IRS has exempted only the first $10,200 of such benefits received in 2020 from federal tax. State tax rules differ by states. All additional unemployment benefits, including those received this year, are taxed at ordinary rates. Some 15% of all respondents thought that income from a side hustle was not taxable. (It is.) And 27% thought that the three stimulus checks of up to $1,200, $600 and $1,400 are taxable. (They are not.)