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If there is a highlight of tax season for most of us, it is receive a tax refund. Although the tax filing season hasn’t officially started yet – we expect it to open at the end of the month – you may want your tax refund sooner rather than later pay off holiday debt or finance an upcoming trip or expense.
Some tax software companies advertise tax refund advances, a short-term loan that can give you access to your tax refund even sooner. Getting your money now may seem tempting, but most experts don’t recommend asking for one.
“While tax refund advances may seem attractive when finances are tight, we recommend only removing them if necessary,” said Dana Ronald, president of the Fiscal Crisis Institute. “They often come with high interest rates and fees, which can add to the overall cost of the loan.”
If you take out an advance tax refund loan, you may end up paying for it, early or in the long run. Before applying for a tax refund advance, make sure you know how they work and what the risks are.
Read more: Child tax credit: find out if you’re eligible
What are tax refund advances and how do they work?
A tax refund advance (also called a refund advance loan) is a short-term loan that offers you a portion of your expected tax refund weeks or months before your actual refund. The premise may seem compelling, especially if you’re still stuck on holiday bills. You can usually borrow between $100 and $4,000 until February with a tax refund advance.
“Tax refund advances are not free money and should be approached with caution,” said Ronald. “It is always best to carefully consider all potential risks and alternative options before deciding.”
You can apply for a tax refund advance on the website of a tax preparation company. You may need to provide proof of income, your pay stub or W-2 (if available) and other financial records.
Advance tax refund loans do not have the same credit score requirements as other loans, and the amount you are approved for may depend on your expected repayment amount. Therefore, even if a service announces advances of $3,000, and you expect a refund of $3,000, it does not mean that you qualify to receive this entire amount.
You usually receive your funds within a few business days, and sometimes the same day. If you need to file your taxes with a tax preparation company, the amount owed can be automatically taken from your refund once the IRS submits it. Otherwise, you need to repay your loan by the agreed due date.
How much do tax refund advances cost?
Having extra funds at your disposal could be helpful, but a high interest tax refund advance is generally not the way to go. The interest for this type of loan is high, with annual percentages higher than 35%. For context, average credit card APRs hover around 20%, while personal loan APRs are around 11.56%.
Some tax services do not charge interest for this service as long as you agree to file your taxes with them, but this could mean that you end up paying a fee to file your taxes. There are also other fees that you should watch out for, even if the loan has a 0% APR. When it comes time to repay your loan, for example, if you choose to repay directly from your repayment, fees may apply.
What are the risks of taking a tax refund advance?
There are a few reasons why you should be wary of advance tax refund loans.
“One of the biggest risks is that your tax refund could end up being less than the amount you borrowed,” Ronald said. Since these loans are based on an expected repayment, there is always the possibility that your repayment is smaller than expected. In this case, you will be responsible for paying the full balance.
Second, a cash advance can cost you, even if it is advertised as 0% APR. There may be hidden fees, including the requirement to pay for tax filing services, which can be expensive. Additionally, some services may charge high interest rates, making this a more expensive type of loan.
Note: Watch out for payday lenders which may advertise similar loans at this time of year. These companies often have extraordinarily high interest rates and fees. In some states, the payday loan rates can be average up to 400% (yes, you read that right). Personal finance experts recommend avoiding payday loans at all costs.
Where to get a tax refund advance in 2025
Most major tax preparation companies offer some sort of tax refund advance, although the terms, conditions, qualifications, and amounts vary from company to company. Here’s a quick look at the products offered by some of the biggest tax preparation firms:
- Jackson Hewitt offers two products: an early repayment advance, which you can get with just your pay stubs and comes with an APR of up to 35.96%, and a tax-free repayment advance, which is a tax-free, 0% loan APR available at max. Jackson Hewitt Locations.
- H&R Block has a 0% APR advance loan for up to $4,000 by February 28th. You will be charged a $42 fee if you decide to repay your loan with your refund from your H&R Block refund transfer account.
- TurboTax offers a cash advance of up to $4,000 with no loan fees and a 0% APR until February 28 if you meet certain eligibility requirements. If you choose to repay your loan with your federal refund, separate fees may apply.
Alternatives to tax refund advances
If you can, wait until your tax refund comes in 2025. This can prevent you from receiving a larger loan than you can afford to pay when your refund comes due. To get your refund as quickly as possible, the IRS recommends filing online before tax season and opting for direct deposit delivery.
You can also tap into your emergency savings account, then withdraw it when the tax refund arrives. If you’re still working to build your emergency fund, there are other, more affordable options to consider.
If you need your refund money faster to cover a surprise expense or need, consider a personal loan or 0% APR credit card. Just make sure you can make monthly payments to minimize interest, late fees and other penalties.
