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Home/Markets & Investing/CRYPTO IRS RULING · HIGH-YIELD SAVINGS RATE

Tax Refund Savings Strategies Cost Americans $1,335 in Lost Interest

NK

Noa Kingsley

crypto IRS ruling · Apr 16, 2026

Tax Refund Savings Strategies Cost Americans $1,335 in Lost Interest

Source: DojiDoji Data Terminal

A typical saver with a median account balance of $8,000 who deposits an average tax refund into a traditional savings account earns $165 in interest over three years. That same saver using a high-yield savings account or CD offering 3.50% APY earns more than $1,500. The difference is $1,335 in lost interest.

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More than 53 million filers claimed a deduction under new Republican tax provisions, including no tax on tips, overtime, and interest on certain car loans, as well as deductions for seniors and children's savings accounts. This followed the passage of a Republican tax and spending law. 6 million people claimed the tax break on tips, 21 million claimed the overtime deduction, and 30 million older Americans claimed the enhanced deduction.

This gap exists despite a stated desire to save. A Santander Bank survey found that 76% of Americans say saving more is their top financial goal for 2026. Of those expecting a tax refund, 88% plan to save a portion of it.

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Large RMDs at 73 Can Push Retirees Into Higher Tax Brackets — and Raise Medicare Premiums

Large RMDs can push retirees into higher marginal tax brackets — and raise Medicare premiums. That’s the financial pivot at age 73, when the IRS requires withdrawals from most tax-deferred retirement accounts. These required minimum distributions count as ordinary taxable income, even if spending habits haven’t changed. More income means taxes go up — not just on returns, but on Social Security benefits too. Higher adjusted gross income can trigger taxation of up to 85% of those benefits. It also activates IRMAA, the mechanism that scales Medicare Part B and Part D premiums with income. A single large withdrawal could lock in higher monthly costs for up to two years. Yet many retirees take the full distribution at once, unaware of the cascade. Spreading withdrawals, executing partial Roth conversions in low-income years, and coordinating taxable and tax-deferred account draws can smooth income. The goal isn’t to avoid taxes — it’s to avoid paying more than necessary, unnecessarily.

Yet 58% of consumers plan to put these funds into checking accounts, traditional savings accounts or cash. Only 27% plan to use higher-yielding accounts. This preference for low-yield options is attributed to a lack of familiarity with these products following a low-interest rate environment from 2008 to 2022.

Related Brief3d ago
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The 2025 Act provides a $6,000 deduction for seniors that does not eliminate Social Security taxes

A single adult with $40,000 in Social Security income and $40,000 from a 401(k) or IRA would owe $5,685 in taxes instead of $7,190. This senior would realize a tax reduction of over $1,500. The 2025 Act introduces a temporary $6,000 deduction for people 65 and older. This deduction is in addition to the existing additional standard deduction for seniors under existing law. The $6,000 deduction alone accounts for approximately $900 of that reduction.

Choosing a traditional savings account over a high-yield option results in a $1,335 difference in interest earned over three years.

Related Brief12h ago
savings accounts

CD yields are not always a trade for liquidity

A person who withdraws funds from a certificate of deposit before the maturity date pays an early withdrawal penalty. This occurs because funds deposited into a CD are tied up for a set period of time. The penalty is a cost the person pays to regain access to their money. The result is the only way to avoid these penalties is to ensure funds are not needed for bills, living expenses, or a large purchase before the maturity date. The result is that the person loses a portion of the funds in the CD.

crypto IRS rulinghigh-yield savings rate

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