How to Save Your IRS Tax Refund with Direct Deposit

For many people, a tax refund is the largest single deposit they receive all year. And once it hits your account, it can disappear faster than expected. That’s why it helps to decide exactly where your refund should go ahead of time. One of the best options? Direct depositing your tax refund into savings. That way, you can start growing your balance right away!

Keep reading to learn why putting your tax refund into savings can be a smart move and how to choose the best account.

Smart Reasons to Put Your Tax Refund in Savings

Tax refunds often feel like “extra” money. For that reason, it’s easy to spend them without a plan. When you deposit your IRS refund into checking, it mixes with your daily cash flow and transaction activity.

Savings accounts, on the other hand, are built for a different purpose. They help you:

• Set money aside for emergencies
• Work toward short-term goals
• Keep funds safe and accessible
• Earn interest over time

Even if you haven’t decided the best purpose for your refund, depositing it into savings is a smart first move.

Choosing the Right Savings Account for Your Refund

Not all savings accounts serve the same purpose. The best option depends on your plans for the money and your timeline for keeping it saved.

Traditional savings accounts are a good starting point if you want a simple place to hold your refund. They are often used for emergency funds and short-term savings goals.

Money market accounts are better if you receive a larger refund and want to earn more while maintaining easy access. These accounts typically offer higher yields than traditional saving accounts, which can help your refund grow faster!

Certificates of deposit (CDs) are great for the money you don’t plan to use right away. With a CD account, funds are set aside for a fixed period of time in exchange for a guaranteed CD interest rate. This option is ideal if your refund is intended for a future purchase and you are comfortable waiting until the CD matures.

Individual retirement accounts (IRAs) are built for long-term retirement savings. With their tax advantages on your side, directing part of your refund into an IRA can be a powerful addition to your broader retirement strategy.

What Info Do I Need for Direct Deposit?

A tax refund direct deposit requires the following:

• Your bank routing number (Academy Bank’s number is ‍107001481)
• Your bank account number
• The account type (savings vs. checking)

You can usually find these details through online banking or your account statements. Having this information ready before you file reduces the chance of delays and helps ensure your refund is deposited correctly the first time!

How Do I Direct Deposit My Tax Refund into Savings?

When filing your tax return, you will be asked how you want to receive your refund. Here’s how the process typically works:

• STEP 1: Select Direct Deposit as Your Refund Method — This tells the IRS to send your refund electronically instead of issuing a paper check. A tax direct deposit is the fastest and most reliable option.
• STEP 2: Choose “Savings Account” When Prompted — Most tax filing software will ask you to choose an account type. Savings and checking accounts are processed differently behind the scenes, so it’s important to choose the correct type of bank account.
• STEP 3: Enter Your Bank Routing Number — This number identifies your financial institution. It tells the IRS where to send the refund. The number is the same for every account at that bank.
• STEP 4: Enter Your Savings Account Number — The account number directs the refund to your specific savings account. It ensures the money lands in the right place, especially if you have more than one account at a specific bank.
• STEP 5: Review Everything Before Submitting — Once your return is filed, you might not be able to change your tax direct deposit details. Be sure to take the time to confirm the numbers upfront, preventing delays or misdirected funds.

Can I Split My Tax Refund Between Savings and Checking?

Yes. The IRS supports split tax refund direct deposit preferences, so you can divide your refund between multiple bank accounts.

Therefore, some people choose to save a portion of their refund, while using the remainder for everyday expenses or debt repayment. This splitting approach also works well if you file taxes jointly and want to divide the refund between spouses or accounts.

Savings Account Options at Academy Bank

Before you file your taxes, it helps to decide which savings option aligns with your goals. Academy Bank offers several FDIC-insured choices:

• Money Market Accounts¹ — Higher yields with check-writing and debit access for larger refunds.
• Savings Accounts² — A simple option for emergency funds and short-term goals.
• Certificates of Deposit (CDs)³ — Lock in your rates for future savings goals. While you can’t direct deposit into a CD, you can easily open one with your refund once it arrives. Terms from 1 to 60 months are available.
• IRA Accounts^4,5 — Our Money Market IRA and CD IRA accounts are built for long-term retirement savings with potential tax advantages.

Let’s make your tax refund work harder! Visit a local Academy Bank branch, compare savings options, or open an account today.

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Tax Refund Frequently Asked Questions

Is it better to put a tax refund in savings or checking?

Savings is usually considered the better starting point, especially for larger refunds. Why? Because it separates the money from everyday spending and allows it to earn interest/grow.

How long do tax returns take to direct deposit?

Direct deposit is generally faster than receiving a paper check from the IRS, though exact timing depends on processing factors. In many cases, an IRS direct deposit tax refund payment will arrive within about 21 days after the IRS accepts your return.

Can I change my direct deposit after filing my taxes?

In most cases, you cannot update your direct deposit information once the IRS accepts your return. However, if the deposit is rejected by your bank, the IRS will typically mail a paper refund check to the address on your tax return.

What happens if I enter the wrong account information for my tax refund?

If the routing number or account number is incorrect, your tax refund may be delayed or returned to the IRS instead of being deposited into your account. When a deposit is rejected—like if the account doesn’t exist or is closed—the IRS reissues the refund by paper check.

Will depositing my tax refund into savings affect my taxes next year?

Not exactly. Simply depositing your tax refund into a savings account does NOT change your tax situation next year. A tax refund isn’t considered taxable income.

HOWEVER, the interest you earn on that money may be taxable. If your account earns interest, your bank will typically report those earnings to the IRS and send you a tax form. That means you might need to include the interest as income in your next tax return if it meets reporting thresholds.

Main Takeaway: The deposit itself doesn’t affect your taxes, but any interest you earn on that refund could.

If we file a joint return, who does the refund legally belong to?

When you file a joint tax return, the IRS treats the refund as belonging to both spouses together, not just one person. The refund represents an overpayment of your combined tax liability, so it is considered a joint refund. It doesn’t matter if most of the income or withholding comes from one of the spouses—it legally belongs to both of you.

If the refund is issued by direct deposit, it is sent to the bank account(s) listed on the tax return. Of course, how the money is ultimately used or divided is considered a personal or household decision, not a tax issue.

Bottom Line: Decide Before You File Taxes

You only choose where your tax refund goes once each year. Deciding to deposit into savings—like money market accounts, CDs, or traditional savings accounts—helps protect the value of your refund. It also gives you time to plan and keep your financial goals front and center!

Remember, a few minutes of preparation before filing can make a significant difference in how long your refund lasts while supporting your financial goals.

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MORE TAX SEASON RESOURCES:
Best Tax Calculators to Simplify Tax Filing
Tax Checklist: How to Get Ready for Tax Season
Avoid These Common Tax Filling Mistakes
How to Build Credit with a Tax Refund