Americans may be pleasantly surprised by the size of their tax refunds this year, judging by the latest IRS filing data.
In 2023, taxpayers received lower refunds on average than the previous year. But so far this year, the average tax refund amount is $3,182, an increase of more than 5% over the same period last season. (Just to clarify: Taxes filed in spring 2024 are for 2023.)
As for dollar signs, that’s more than $150 more than last year’s average refund as of the first week of March. The increase is likely due to changes to tax brackets made by the IRS to combat inflation after the 2023 filing season.
At the same time, a smaller share of taxpayers found themselves owing money to the IRS instead of receiving refunds. About 13.7% fewer refunds have been issued so far compared to the same period last year, although only 2% fewer returns have been processed.
As an example, more than 54 million returns have been received so far, and the IRS expects to receive nearly 129 million returns this year.
Will my tax refund be bigger in 2024?
A tax refund is money you receive from the government for overpaying taxes during the previous calendar year. The size of your refund depends on a number of factors, including the amount you chose to withhold from your paycheck, any tax credits you are entitled to, deductions and more.
Last year, many taxpayers received smaller refunds during a time of still-high inflation as pandemic-related benefits, such as the expanded child tax credit, expired. Yields are higher on average this year after the IRS adjusted some tax provisions to offset inflation.
The standard deduction was increased by a historically high 7% for 2023 tax returns. This pushed the standard deduction up to $13,850 for individual filers, allowing them to reduce their taxable income significantly more than they could have. ‘Last year. Because of the increase, taxpayers may also have fallen into a low-paying tax bracket if they were near the bottom of the previous one.
As a result, your tax refund could be larger this year, especially if your pay failed to keep up with inflation last year. Your refund may also be larger if you purchased an electric car that qualifies for the new EV tax credit, which is worth up to $7,500.
When will I receive my tax refund this year?
Typically, tax returns are processed in less than 21 days if filed electronically. If you mail your return, it could take four or more weeks, the IRS says.
While you wait, you can track the status of your tax refund by using the IRS Where’s My Refund? tool, which this year provides more detailed updates than ever before.
How can I increase my tax refund?
Millions of taxpayers look forward to receiving their refunds each year. This makes sense: According to research published last year by Credit Karma, about a third of people rely on that money to make ends meet.
But large tax returns aren’t always beneficial: Depending on your financial situation, it may be better to not get a refund at all. Think of it this way: While it may feel good to receive a bigger check, it means you’ve overpaid the government. You are essentially giving Uncle Sam an interest-free loan with the money you earned.
While it’s too late to adjust your 2023 tax withholding now, this is another way to increase your refund. You can prepare to do this next year by planning ahead (you can use the IRS tax withholding calculator) and submitting a new Form W-4 to your employer.
In some cases, you can get more money in your refund by claiming refundable tax credits. Right now, for example, the child tax credit is worth up to $2,000 per child, of which $1,600 is refundable. (Note that this is constantly changing: Congress is considering a bipartisan deal to reexpand the child tax credit, which would increase the maximum refundable credit to $1,800 for 2023 returns.)
Doing your 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 preparation services, which tend to charge for features like live help and refund processing. This year, many taxpayers are eligible to use tools that allow them to file their taxes for free, including the IRS’s Direct File pilot.
If you need help filing, be sure to use a trusted professional who will make sure you claim the correct 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:
How to File Your Taxes for Free This Year
The IRS Free File is open for the 2024 tax season, with a major expansion of eligibility
2024 Tax Changes: What’s New for Filing Taxes with the IRS This Year?