Yes, You Can Now Get Up to $4,000 With a Tax Refund Advance – But It’s Risky

If there’s one highlight of tax season for most of us, it’s it Get a tax refund. in spite of Tax filing season It hasn’t officially started yet – we expect it to open by the end of the month – you may want to get your tax refund sooner Pay off vacation debt Or finance an upcoming trip or expense.

Some tax software companies advertise tax refund advances, which is a short-term loan that can give you access to your tax refund sooner. It may seem tempting to get your money now, but most experts don’t recommend applying for it.

“Although tax refund advances may seem attractive when finances are limited, I recommend withdrawing them only if necessary,” said Dana Ronald, president of the Tax Crisis Institute. “They often come with high interest rates and fees, which can increase your overall cost of borrowing.”

If you take out a tax refund advance loan, you may end up paying for it, either upfront or in the long run. Before applying for a tax refund advance, make sure you know how it works and what the risks are.

Read more: Child Tax Credit: Find out if you qualify

What are tax refund advances and how do they work?

A tax refund advance (also called a refund anticipation loan) is a short-term loan that offers you a portion of your expected tax refund weeks or months before your actual refund. This idea may seem compelling, especially if you’re still paying off holiday bills. You can usually borrow between $100 and $4,000 through February with a tax refund advance.

“Tax refund advances are not free money and should be treated with caution,” Ronald said. “It is always best to carefully consider all potential risks and alternative options before making a decision.”

You will apply for a tax refund advance on the tax preparation company’s website. You may need to provide proof of income, a pay stub or W-2 (if available) and other financial records.

Tax refund advance loans typically do not have the same credit score requirements as other loans, and the amount you are approved for may depend on the amount of your expected refund. So, even if a service advertises a $3,000 down payment, and you expect a $3,000 refund, that doesn’t mean you’ll be eligible for that full amount.

You usually receive your money within a few business days, sometimes the same day. If you are required to file your taxes with a tax preparation company, the amount due may be automatically deducted from your refund once the IRS sends it. Otherwise, you will need to repay your loan by the agreed upon due date.

How much do tax refund advances cost?

Having extra money at your disposal can be helpful, but a high-interest tax refund advance is generally not the right approach. Interest on this type of loan is high, with annual percentage rates reaching 35%. For context, the average APR for credit cards is around 20%, while the average APR for personal loans is around 11.56%.

Some tax filing services do not charge interest for the service as long as you agree to file your taxes with them, but this may mean that you will end up paying a fee to file your taxes. There are also other fees you should be aware of, even if the APR on the loan is 0%. When it’s time to repay your loan, for example, if you choose to pay it directly from your refund, fees may apply.

What are the risks of getting a tax refund advance?

There are a few reasons to be wary of tax refund advance loans.

“One of the biggest risks is that your tax refund may be less than the amount you borrowed,” Ronald said. Since these loans are based on an expected recovery, there is always a possibility that the recovery amount may be less than expected. In this case, you will be responsible for paying the balance in full.

Second, it may cost you to get your advance refund, even if it is advertised as having a 0% APR. There may be hidden fees, including the requirement to pay for tax filing services, which can be expensive. In addition, some services may charge high interest rates, making this type of loan more expensive.

Note: Be careful of Payday lenders Which may advertise similar loans during this time of year. These companies often have unusually high interest rates and fees. In some states, interest rates on payday loans can be average up to 400% (Yes, you read that correctly). Personal finance experts recommend avoiding payday loans at all costs.

Where to get a tax refund advance in 2025

Most large tax preparation companies offer some type 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 top tax preparation companies:

• Jackson Hewitt It offers two products: an early redemption advance, which you can get using just your pay stubs and comes with an APR of up to 35.96%, and a no-fee redemption advance, which is a no-fee, 0% APR loan available at most Jackson Hewitt locations.
• H&R block He has a 0% APR cash back advance loan of up to $4,000 through February 28th. You will be charged a $42 fee if you decide to repay your loan using the refund from H&R Block’s Money Back Transfer account.
• TurboTax It offers a down payment of up to $4,000 with no loan fees and 0% APR through 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 taking out a larger loan than you can repay when your refund arrives. To get your refund as quickly as possible, the IRS recommends filing online early in the tax season and choosing direct deposit delivery.

You can also tap into your emergency savings account, then replenish it when your tax refund arrives. If you’re still working on building your emergency fund, there are other, less expensive options to consider.

If you need your money back faster for a surprise expense or necessity, consider a Personal loan Or a 0% APR credit card. Just make sure you can make monthly payments to minimize interest, late fees, and other penalties.