As of Feb. 6, the IRS paid an average tax refund of $2,290, up a few hundred dolalrs from the same time in 2025. However, the average refund typically increases as the filing season progresses. The overall average for tax year 2025 was $3,167, up from $3,138 in 2024.
Conservatively optimistic, I decided to plan for an even $3,000 in overpaid withholdings to come back to me as a refund — but what would be the best way to use it?
Reluctant to pay a tax professional for a refund I don’t even have yet, I decided to rely on years of machine learning, instead, so I asked ChatGPT. It informed me the answer is different for everyone, but the right choice “is usually the one that improves your long-term net worth, not your short-term lifestyle.”
First, Ask Yourself 2 Questions
The world’s first artificial intelligence (AI) chatbot instructed me to start by asking myself two questions:
Question No. 1: Do You Have High-Interest Debt?
The bot considers anything from 6% to 8% rates or higher to be “high interest,” advising the following:
If yes — this is your guaranteed return.
- Credit cards (18% to 29%)
- Personal loans
- High-rate auto loans
Paying off a 22% credit card is the same as earning a risk-free 22% return.
Smartest move: Put most (or all) of the $3,000 toward that debt.
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Question No. 2: Do You Have 3 to 6 Months of Emergency Savings?
Here’s how ChatGPT interprets the answer to this question:
If no — build that first.
Keep it in:
- High-yield savings account
- Money market fund
You want:
- Three months if income is stable
- Six months if income is variable/self-employed
It closed out the Q&A segment by advising, “This prevents future credit card debt.”
3 Strategies for Those With Solid Foundations
ChatGPT offered three strategies for those on a strong financial footing with no debt and robust savings.
Option No. 1: Invest It
It offered these suggestions for using your refund to build long-term wealth.
- Fund a Roth IRA
- Add to your brokerage account
- Increase contributions to 401(k) and live off the refund
Three thousand dollars invested at 8% average return for 25 years would equate to around $20,000 or more.
Option No. 2: Improve Your Income
ChatGPT considers income-building an “underrated” use of tax refunds.
Spend on:
- Certification
- Skill training
- Equipment for side income
- Business startup costs
A raise of even $3,000 per year pays back instantly.
Option No. 3: Hybrid Strategy (Often Smartest)
Finally, ChatGPT explained that financially stable people have the luxury of splitting the windfall this way:
- $1,500 invest
- $1,000 emergency savings
- $500 lifestyle/enjoyment
This builds wealth and avoids burnout.
With that in mind, ChatGPT reminded me that what I don’t spend my refund on is just as important as what I do, so I promised the bot that I’d follow its advice and resist the urge to blow it impulsively, spend it on depreciating luxury items, or let it collect dust in a checking account.
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This article originally appeared on GOBankingRates.com: As IRS Refunds Rise, ChatGPT Offers the Smartest Uses for a $3,000 Tax Refund
