What is the average tax refund? Why yours might be lower or higher
The average tax refund filers have received this year is $3,271, up about 5% from this time in 2024, according to the IRS data released on March 14.
But at that point, a month before Tax Day, tens of millions had yet to file. Experts agree that waiting until the last minute to meet the now past April 15 deadline ensures people are more likely to make mistakes. TurboTax CPA and tax expert Lisa Greene-Lewis said the earlier you start, the better.
“People who procrastinate tend to rush and they leave things out,” Greene-Lewis said.
If you’re among the nearly 70 million Americans who have already received your tax refund, you may be wondering why yours is higher or lower than the average. Although the direct deposit or check is sometimes Americans’ largest financial transaction of the year, experts say it’s not necessarily a bad thing if your refund was far from $3,271. Everyone's circumstances are different.
There were no major changes in tax law in the last year. Experts said the average refund is expected to be relatively similar to what it was in 2024, adjusting for inflation, as the standard deduction and some credits are taken into account.
Tax returns are deeply personal and many factors and life changes can affect yours. Here’s what to know about why your refund may be different from the average:
What affects your tax refund?
A raise boosting your income bracket, a new job or side hustle, a newborn baby – these are just some of the reasons your tax refund might look different this year.
“It’s intensely personal. Well, did you have another kid? Did you get married? Did someone go to college? Did you increase your withholding with your employer? Did you become self-employed?” said Andy Phillips, vice president of the Tax Institute at H&R Block.
Some of the most important factors affecting your refund are your income and the amount you or your employer withheld for taxes throughout the year. Broadly speaking, if you withheld a lot, you’ll see a higher refund than someone who did not.
However, that’s not always the case. If you withheld a lot for taxes but didn’t take advantage of credits and deductions you qualified for, your refund could be lower than someone who withheld less but made sure to take the earned income tax credit, the saver's credit, and relevant deductions.
The IRS estimates that roughly 1 in 5 eligible taxpayers miss out on claiming the earned income tax credit each year, which can save filers up to $7,830, depending on their filing status.
Is it better to have a high or low tax refund?
The truth is, it depends on personal preference.
“Some people like that forced savings mechanism,” Phillips said. “Or it may be that their choice is ‘No, I’d like to get as close to zero as possible.’”
He added that for some, a high refund enables them to pay for car repairs, braces for their kids, or unplanned expenses, but “it’s really a choice.”
Mark Steber, chief tax officer at Jackson Hewitt Tax Services, said if you’re unhappy with your low refund, it might be because you didn’t hire a trained professional or didn’t put in time yourself to learn how to maximize it.
“TikTok videos are not the investment in your largest single financial transaction, nor is talking with your uncle Bob, who watches TikTok,” Steber said.
He added that you can learn by reading articles and listening to reputable podcasts, but you’ll need to set aside time to understand how things like self-employment, working from home, cryptocurrency investments, and property ownership can all affect your tax balance.
What can you do if you owe money to the IRS?
If you think you aren’t eligible for a refund and instead may owe money to the IRS, Phillips said the best thing you can do is file your taxes early.
“Even if you file today, you don’t have to pay until April 15,” Phillips said in a March interview. “If you wait to the last minute, you’re going to be rushed. You may not have the same time to figure out ‘What are my options?’”
Those options may include pulling money from a savings account, paying with a credit card, or setting up an installment agreement with the IRS.
You may have a few other options to reduce your federal taxes after the year's end. The biggest one, experts said, is making a tax-deductible contribution to a traditional IRA if you’re eligible and haven’t already hit your maximum contribution.
“You can make a contribution if you’re eligible, right now, up to April, and take a deduction in 2024 and basically have the government subsidize your contribution to a degree,” Steber said.
There are a lot of caveats, including income level and spousal status with this option, Steber said. However, he said it’s a time-tested and proven tax benefit filers can take advantage of after year's end.
Reach Rachel Barber at rbarber@usatoday.com and follow her on X @rachelbarber_