Why Your Tax Refund Is Probably Bigger This Year Than in 2023
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Americans may be pleasantly surprised by the size of their tax refunds this year, judging by the IRS’s latest filing data.
In 2023, taxpayers received smaller refunds on average compared to the previous year. But so far this year, the average tax refund amount is $3,182, a more than 5% increase from the same time last season. (Just to clarify: The taxes being filed in spring 2024 are for 2023.)
As far as dollar signs go, that’s over $150 higher than last year’s average refund as of the first week of March. The increase is likely due to tax bracket changes the IRS made to counteract inflation after the 2023 filing season.
At the same time, a smaller share of taxpayers have ended up owing the IRS money as opposed to receiving refunds. About 13.7% fewer refunds have been issued so far compared to the same time last year, even though only 2% fewer returns have been processed.
For context, more than 54 million returns have been received so far, and the IRS expects to get nearly 129 million returns this year.
Will my tax refund be bigger in 2024?
A tax refund is money you get back from the government for overpaying in taxes during the previous calendar year. The size of your refund depends on a handful factors, including how much you elected to withhold from your paychecks, any tax credits you’re eligible for, your deductions and more.
Last year, many taxpayers received smaller refunds during a period of still-high inflation due to the expiration of pandemic benefits like the expanded child tax credit. Returns are larger on average this year after the IRS adjusted certain tax provisions to offset inflation.
The standard deduction was increased by a historically high 7% for 2023 tax returns. That pushed the standard deduction up to $13,850 for single filers, allowing them to lower their taxable income significantly more than they could last year. Because of the increase, taxpayers may have also dropped into a lower-paying tax bracket if they were near the bottom of their previous one.
As a result, your tax refund might be bigger this year, especially if your pay didn’t keep up with inflation last year. Your refund may also be bigger if you purchased an electric car that qualifies for the new EV tax credit, which is worth up to $7,500.
When will I get my tax refund this year?
Normally, tax returns are processed in less than 21 days if you file electronically. If you mail in your return, it could take four or more weeks, the IRS says.
While you wait, you can track the status of your tax refund using the IRS’s Where’s My Refund? tool, which this year is providing more detailed updates than in the past.
How can I increase my tax refund?
Millions of taxpayers look forward to getting their refunds every year. This makes sense: Roughly a third of people rely on that money to make ends meet financially, according to research released last year by Credit Karma.
But large tax returns aren’t always beneficial — depending on your financial situation, it may be better to get no refund at all. Think of it this way: Even though it may feel good to get a bigger check, it means you overpaid the government. You’re essentially giving Uncle Sam an interest-free loan with money you earned.
While it’s too late to adjust your 2023 tax withholding now, this is another way you can increase your refund. You can prepare to do this next year by planning ahead (you can use the IRS’s tax withholding calculator) and submitting a new Form W-4 to your employer.
In some cases, it's possible to get more money in your refund by claiming refundable tax credits. Right now, for instance, the child tax credit is worth up to $2,000 per child, and $1,600 of that is refundable. (Note that this is in flux: Congress is weighing a bipartisan agreement to re-expand the child tax credit, which would increase the maximum refundable credit to $1,800 for 2023 returns.)
Doing your own taxes can also help you keep more of your refund. Some taxpayers will have more complicated returns that require paying for professional help, but you should generally try to avoid unnecessary fees from tax prep services, which tend to upcharge for features like live help and refund processing. This year, many taxpayers are eligible to use tools that allow them to file taxes for free, including the IRS’s own Direct File pilot.
If you do need help filing, make sure to use a trusted professional who will ensure you’re claiming the proper credits and deductions. Tax experts may be able to give you tips you didn’t know about, like making last-minute contributions to your retirement plan to reduce your taxable income — and, yes, increase your refund.
More from Money:
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