Finance
Will you get a tax refund this year? Experts have ideas on how to use the money
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The Internal Revenue Service has doled out millions of tax refunds amid the ongoing 2025 tax filing season.
More than 8 million tax refunds have gone out during the 2025 season as of Feb. 7 and, according to the IRS, those refunds have averaged $2,065 each.
When taxpayers receive their refunds, addressing debt, socking away money in an emergency fund and contributing to retirement are some good avenues for using those funds, experts said.
TAX TIP: DON’T FILE UNTIL YOU GET ALL NECESSARY DOCUMENTS
Debt
Jonathan Ford Jr., president of JFJ Advisory Services, said paying high-interest debt “would be one of my top recommendations” for people looking to put their tax refund to use.
“Any outstanding credit card debt would be very good to pay down, personal loans, anything financed at especially double-digit percentage rates but anything really above the current market rates could be a really good target for paying down,” he told FOX Business.
Meanwhile, Karla Dennis, the CEO and founder of tax strategy firm KDA, Inc., said tackling high credit card debt, specifically, could be a good use of someone’s tax refund.
U.S. household credit card debt amounted to a collective $1.21 trillion at the end of December, according to the Federal Reserve Bank of New York.
A woman holding credit cards. (iStock / iStock)
“The cost of their debt is eating away at the money that they could be spending on something else so I would definitely pay down all of my credit card debt” if possible, Dennis said.
Emergency Fund
“The next thing that I would do with the refund is, I would make sure I had some emergency money, at least $1,000 of emergency cash,” Dennis said.
Emergency funds give people the ability to “purchase things in the event of an emergency,” she said.
“If you maybe this month can’t make your rent, you can pull from your emergency fund,” Dennis continued. “With the price of consumer goods going up, especially food, you can utilize your emergency fund for that, but it really does need to be for an emergency-type situation. I think a lot of consumers look at saved money as ‘oh, let me use this money for want.’ It really needs to be a need.”
As record high inflation has prompted consumer prices to soar, many U.S. households are feeling uneasy about their emergency savings, a new survey released by Bankrate finds. (iStock / iStock)
Ford said putting money in an emergency fund “would probably be [his] top” recommendation for a tax refund, especially if someone doesn’t already have one or hasn’t fully funded theirs.
A recent U.S. News survey indicated 42% of Americans lack one.
“The emergency fund is pretty much always the number one thing that I have to look at before I come up with any plan, is make sure that we’re building out the emergency savings,” he explained. “The benefit of having the emergency fund is just being able to sleep at night and if you do have a $1,000 or $2,000 expense pop up … then you can pay that expense, and it doesn’t interrupt any other aspect of your financial life.”
He said he tells his clients to try to sock away “three to six months” in an emergency fund because it “provides a little deeper safety net.”
Retirement
Both Ford and Dennis also said tax refund recipients should consider setting some aside for retirement.
“Once I established my emergency fund, I would then invest some of that money, maybe in an IRA or a Roth IRA, even if I only put in a couple hundred bucks or $500,” Dennis told FOX Business. “I think consumers need to know that investing builds up over time, and you may or may not have the full contribution amount of, say, $7,000 or $6,000, to fully fund your retirement account, but if you could start building a nest egg now, which is putting in a little amount, I think that would be very helpful.”
Ford said he often tells clients to invest in a Roth IRA.
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“There’s additional tax savings there because in the Roth you only pay taxes on the money you contribute,” he explained. “Whereas with the traditional, you pay on the money you withdraw, and so you’re getting taxes on the growth as well, whereas you don’t in the Roth.”
Businessman in suit is holding piggy bank. Finance Savings concept (iStock / iStock)
More than 42% of U.S. households had some form of IRA in 2023, according to a report from the Investment Company Institute.
Should tax refunds be used on things other than finances?
With the arrival of one’s tax refund, there may be a desire to use some of it on something other than improving your finances.
“I do recommend, and I have myself always recommended, taking a small, small percentage of that – maybe less than 25% – and maybe treat yourself to something nice, if there’s something you’ve been having your eye on for a while,” Ford told FOX Business. “I do think buying something to make yourself happy is an important step in making sure you are able to stay on track with your financial goals.”
Dennis said it “depends on what your finances look like” whether you should treat yourself with your tax refund.
“Tax refund money is your money that you’ve allowed the government to keep all year,” she said. “You really need to establish a budget and, within your budget, there should be an allocation of a certain amount of money to go for fun things if you can afford it. But I think a lot of taxpayers are under the misnomer ‘Oh, this is extra money coming in to me.’ No, it’s your money that the government has kept.”
How long does it take for the IRS to distribute refunds?
The time it takes to receive a tax refund can vary, depending on how one filed their taxes, the IRS said.
TAXPAYERS LEAVING THOUSANDS OF DOLLARS ON THE TABLE AT TAX TIME: EXPERT
Taxpayers who filed electronically usually get them within 21 days, the agency’s website said. For amended or paper tax returns, refunds usually take four weeks or longer.
The IRS has a webpage where taxpayers can check up on the status of their refund.
Cybersecurity and enterprise software stocks have been market dogs in 2026, with fears that AI will wipe out a wide range of companies in the enterprise space dominating the narrative. But they snapped a brutal losing streak this past week, joining in the broader market rally that saw all losses from the U.S.-Iran war regained by the Dow Jones Industrial Average and S&P 500.
Cybersecurity has been “a victim of some of the AI-related headlines,” Christian Magoon, Amplify ETFs CEO, said on this week’s “ETF Edge.”
It wasn’t just niche cybersecurity names. Take Microsoft, for example, which was recently down close to 20% for the year. Its shares surged last week by 13%.
A big driver of the pummeling in software stocks was a rotation within tech by investors to AI infrastructure and semiconductors and some other names in large-cap tech, Magoon said, and since cybersecurity stocks and ETFs are heavily weighted towards software companies, they were left behind even as those businesses continue to grow on a fundamental basis.
But Wall Street now has become more bullish with the stocks at lower levels. Brent Thill, Jefferies tech analyst, said last week that the worst may be over for software stocks. “I think that this concept that software is dead, and then Anthropic and OpenAI are going to kill the entire industry, is just over-exaggerated,” he said on CNBC’s “Money Movers” on Wednesday.
“Big Short” investor Michael Burry wrote in a Substack post on Wednesday that he is becoming bullish about software stocks after the recent selloff. “Software stocks remain interesting because of accelerated extreme declines last week arising from a reflexive positive feedback loop between falling software stocks and changes in the market for their bank debt,” he wrote.
The Global X Cybersecurity ETF (BUG), is down about 12% since the beginning of the year, with top holdings including Palo Alto Networks, Fortinet, Akamai Technologies and CrowdStrike. But BUG was up 12% last week. The First Trust NASDAQ Cybersecurity ETF (CIBR) is down 6% for the year, but up 9% in the past week.
Piper Sandler analyst Rob Owens reiterated an “overweight” rating on Palo Alto Networks which helped the stock pop 7% — it is now down roughly 6% on the year. Its peers saw similar moves, including CrowdStrike.
Performance of Global X cybersecurity ETF versus S&P 500 over past one-year period.
Magoon said expectations may have become too high in cybersecurity, and with a crowding effect among investors, solid results were not enough to to push stocks higher. But the down-and-then-back-up 2026 for the sector is also a reminder that when stocks fall sharply in a short period of time, opportunity may knock.
“Once you’re down over 10% in some of these subsectors, you start to see the contrarians start to say, ‘well, maybe I’ll take a look at this,'” Magoon said.
He said AI does add both opportunity and uncertainty to the cybersecurity equation, increasing demand but also introducing new competition. But he added, “I think the dip is good to buy in an AI-driven world,” specifically because the risks to companies may lead to more M&A in cyber names that benefits the stocks.
For now, investors may look for opportunity on the margins rather than rush back into beaten-up tech names. “I think investors are still going to remain underweight software,” Thill said.
But Magoon advises investors to at least take the reminder to keep an eye on niches in the market during pronounced downturns. “The best-performing are often the least bought and do the best over the next 12 months versus late-in-the-game piling on,” he said.
While that may have been a mindset that worked against the last investors into cybersecurity and enterprise software in mid-2025 when the negative sentiment started building, at least for now, it’s started working for the stocks in the sector again.
Meanwhile, this year’s biggest winner is also a good example of what can be an extended trade in either a bullish or bearish direction. Last year, institutional ownership of energy was at multi-year lows, Magoon said, referencing Bank of America data. “Reverse sentiment can be a great indicator,” he said.
But he cautioned that any selective buying of stocks that have dipped does have to contend with the risk that there is a potentially bigger drawdown in the market yet to come in 2026. That is because midterm election years historically have been marked by large drawdowns. “If you think it is bad right now, it could get a lot worse,” Magoon said. But he added that there’s a silver-lining in that data, too, for the patient investor. The market has posted very strong 12-month returns after midterm election drawdowns end. So, for investors with a longer-term time horizon and no need for short-term liquidity, Magoon said, “stick in there.”
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New innovation in the exchange-traded fund industry could come at a cost to investors during extreme conditions.
According to MFS Investment Management’s Jamie Harrison, ETFs involved in increasingly complex derivatives and less transparent markets may be in uncharted territory when it comes to violent downturns.
“Those would be something that you’d want to keep an eye on as volatility ramps up,” the firm’s head of ETF capital markets told CNBC’s “ETF Edge” this week. “As innovation continues to increase at a rapid pace within the ETF wrapper, [it’s] definitely something that we advise our clients to be really front-footed about… Lack of transparency could absolutely be an issue if we’re going to start seeing some deep sell-offs.”
His firm has been around since 1924 and is known for inventing the open-end mutual fund. Last year, ETF.com named MFS Investment Management as the best new ETF issuer.
“It’s important to do due diligence on the portfolio,” he said. “Having a firm that has deep partnerships, deep bench of subject matter experts that plays with the A-team in terms of the Street and liquidity providers available [are] super important.”
Liquidity as the real issue?
Harrison suggested the real issue is liquidity, particularly during a steep sell-off.
“We’ve all seen the news and the headlines around potential private credit ETFs. That picture becomes much more murky,” he added. “It’s up to advisors, to investors [and] to clients to really dig in and look under the hood and engage with their issuers.”
He noted investors will have to ask some tough questions.
“What does this look like in a 20% drawdown? How does this liquidity facility work? Am I going to be able to get in? Am I going to be able to get out? And if I’m able to get out, am I able to get out at a price that’s tight to NAV [net asset value], and what’s the infrastructure at your shop in terms of managing that consideration for me,” said Harrison.
Amplify ETFs’ Christian Magoon is also concerned about these newer ETF strategies could weather a monster drawdown. He listed private credit as a red flag.
“If your ETF owns private credit, I think it’s worth taking a look at, kind of what the standards are around liquidity and how that ETF is trading, because that should be a bit of a mismatch between the trading pace of ETFs and the underlying asset,” the firm’s CEO said in the same interview.
Magoon also highlighted potential issues surrounding equity-linked notes. The notes provide fixed income security while offering potentially higher returns linked to stocks or equity indexes.
“Those could potentially be in stress due to redemptions and the underlying credit risk. That’s another kind of unique derivative,” Magoon said. “I would very closely look at any ETF that has equity-linked notes should we get into a major drawdown or there be a contagion in private credit or something related to the banking system.”
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