The best way to use a tax refund? Create a holistic plan

Many Americans will be pleasantly surprised during this year’s income tax filing season – 2026 is shaping up to deliver the largest average tax refunds on record.

The retroactive tax changes in the One Big Beautiful Bill Act passed in July 2025, combined with the fact that employers continued to withhold taxes using IRS tables that were not updated prior to passage of the bill, mean many Americans overpaid throughout 2025.

Treasury Secretary Scott Bessent said in December that an estimated $100 billion to $150 billion in refunds is expected to go out this year, an average of between $1,000 and $2,000 per household.

Notable tax changes that went into effect in the second half of 2025 include a higher standard deduction, a higher cap on state and local tax deductions, an additional $6,000 deduction for taxpayers over age 65, no tax on tips, no tax on overtime and no tax on car loan interest.

There’s no shortage of businesses that will encourage taxpayers to give them some of that unexpected windfall – car dealerships, home improvement companies and travel agents come to mind. But one industry association leader said he believes Americans should put that tax refund to a different use.

“File early, get your refund and then use that refund to do something positive with it, like creating a holistic financial plan,” Marc Cadin, Finseca CEO, told InsuranceNewsNet.

He said advisors can do two things to help people use their tax refunds to create a better financial future. One is to discuss those refunds with their current clients.

“Maybe not all of your clients will fit in the category of those who get a big refund. But maybe it’s your client’s parent, or their child. Explaining to them about how this is the biggest tax refund season ever is a huge value in and of itself.”

But creating a holistic financial plan for those who have never met with a financial professional is another way advisors can help people use their tax refund to benefit them down the road.

“People want to create a financial plan but a lot of consumers are living paycheck to paycheck,” he said. “But they may not know that they’re getting a big refund, so the beauty of this is that it creates an opportunity to let them know that they have something to create that plan, instead of going out and spending that refund on a TV or something. It’s a good time to engage consumers.”

Those who pay for financial advice are more likely to implement the plan they create and hold themselves accountable to follow it, Cadin said.

“I joke that if I were in the profession, I’d go out to lunch and dinner, and I’d talk to the servers and ask them if they were aware they’re likely to get a materially large tax refund and now is a good time to use that refund to build a financial plan and I can help them do that.”

Consumers have options - holistic planning is best

Consumers have many options for saving or investing their tax refund: bank accounts, certificates of deposit, individual retirement accounts, to name a few. Cadin recommended tax refund recipients sit down with an advisor and draw up a plan for the best use of that money.

“The best thing that consumers can do with this money is to use that resource to create a holistic financial plan – full stop,” he said. “Two-thirds of Americans aren’t working with an advisor and they don’t have a written financial plan. We have millions of people who don’t have a road map for their finances. And it goes beyond budgeting – it’s about how you’re managing risk and how you’re planning for retirement.”

Recent Finseca research found that among those who don’t work with an advisor, the top barriers include not knowing how to get started (31%), it’s too expensive (19%) and the belief that advice is only for the wealthy (15%).

Cadin acknowledged that many consumers already have funds stashed into a CD or an IRA, but that doesn’t take the place of having a plan.

“Most people’s finances are all over the place,” he said. “And if you don’t have a plan, then what? A lot of our members say if you don't have a plan, then you're planning to fail. And so this is an enormous opportunity to create a plan, and then the investment strategy, the life insurance strategy, the retirement strategy fits in.

“You don’t have to do it all at once. But it’s about creating a framework for financial success that can help you deal with whether inflation goes up or the market goes down.”

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