This Is The Average Tax Refund Americans Are Getting This Year

Tax day — April 15 — is right around the corner. Millions of Americans have already filed their tax returns and may be getting a refund.

While tax refund amounts are up this year — and we’ll share the average amount people are receiving — getting a big refund may not be wise. You are basically giving Uncle Sam an interest-free loan during the year, and your money could be earning interest in a high-yield savings account instead.

Here is the average tax refund that Americans can expect this year, plus some other interesting statistics about the tax-filing season so far.

As of Feb. 16, 2024, the IRS has sent out 20,883,000 refunds since the filing season opened on Jan. 23. That’s almost 25% less than this time last year, even though the dollar amount of returns filed is only 5% less than this same time last year.

The average refund is currently sitting at $3,207, which is 2.1% higher than last year’s average. This could change as tax season progresses.

The higher refund amount could be due to the inflation adjustments made for the 2023 tax year. The standard deduction amount was raised about 7%. Similar raises were made across other tax categories.

Where's My Refund? is the official tax return tracking tool from the IRS. To track your return you will need your Social Security or individual taxpayer ID number (ITIN), your filing status, and the exact refund amount on your return.

According to the IRS, this is how the Where's My Refund?  tool shows your refund status:

• Return Received – Your return has been received and is being processed.
• Refund Approved – Your refund has been approved, and the IRS is preparing to issue it by the date shown.
• Refund Sent – The refund has been sent to your bank or to you through the mail. It may take five days for it to be credited to your bank account or several weeks for your check to arrive in the mail.

If you’ve already filed your taxes, you can check the status of your return on the IRS site.

Eight out of 10 people get their tax refunds by using direct deposit. Using direct deposit combined with electronic filing is the quickest way to get your refund. And the IRS has the statistics to prove it.

The IRS says nine out of 10 people get their tax return within 21 days. As of Feb. 16, 2024, the IRS has issued 20,574,000 direct deposit returns, with an average amount of $3,265.

While getting a big tax refund may feel good, the truth is getting a tax refund isn't necessarily a good thing. If you get a big refund, it likely means you've been overpaying your taxes.

That means you could’ve been using that money throughout the year. Instead, Uncle Sam has been holding on to it.

The goal is to get your tax refund as close to $0 as possible, without owing taxes. With that goal, you get to keep using your money, rather than waiting for tax season to spend your hard-earned cash.

Your goal should be to pay as close to the exact amount of tax you owe as possible. You don’t want to overpay, and get a huge tax refund. You also don’t want to underpay, then get stuck with a big tax bill and penalties.

The IRS tax has a withholding calculator to help you calculate your correct withholding amount.

To use the calculator, you will need pay stubs for all jobs you did during the previous year and your spouse’s too. You’ll also need to know how much other income you had from side jobs, self-employment, investments, and so on, and your most recent tax return.

A deduction is an amount you subtract from your income total. When you file your taxes, deductions lower your income, which lowers your total tax amount. Most people opt to take the standard deduction rather than itemizing each deduction. Here are the standard deduction amounts for the 2023 tax year:

• $13,850 for single or married filing separately
• $27,700 for married couples filing jointly or qualifying surviving spouse
• $20,800 for head of household

A tax credit is subtracted from the tax you owe (after deductions are already factored in). This can lower your tax payment or increase your refund. Some credits are refundable, so you’ll get that money back even if you don't owe any tax. Here are some of the common tax credits:

• Earned Income Tax Credit
• Education Tax Credit
• Child and Dependant Care Credit

Certain retirement or investment accounts, like a 401(k) or an IRA, can be used to reduce your taxable income. You defer paying taxes on the contribution now, but will pay tax on the withdrawals when you retire.

Other accounts that an employer may offer, such as a flexible spending account (FSA), a dependent-care flexible spending account (DCFSA), and Health Savings Account (HSA), allow you to pay for qualified expenses like day care costs and medical expenses with pretax dollars.

Getting a big tax refund may feel like you’re getting free money, but it’s not. Correctly calculating your tax withholding can give you access to that money during the year. By overpaying your taxes, you are essentially giving the government an interest-free loan on your money.

Rather than being excited for that big refund check, celebrate every payday with more money in your pocket. You can use that money to pay off debt or add to your emergency fund.

And if you do get a large refund, use it wisely.