Tax Refunds Are Bigger But There Are Fewer Of Them

Tax Day 2024 is officially behind us. For many Americans, this means refund checks are on the way — but not as many as in previous years.

IRS data shows that while this year’s average tax refund check is bigger than last year’s, fewer taxpayers expect to receive them. Here’s why.

Average Refund Size

In the first week of April, the average tax refund was more than $3,000, up from just under $2,900 the year before. This increase is likely due to recent updates to the tax code.

For example, the IRS introduced a higher standard deduction for single filers – $13,850, up from $12,950 in 2022. The IRS also increased contribution limits for retirement plans. Both of these updates make it easier for taxpayers to reduce their taxable income and liability, which can lead to receiving a higher refund.

However, the total number of refunds issued was down 3.3% from last year.

Fewer Refunds

That’s becoming something of a trend: the number of refunds has fallen in the two previous years as well. This may be related to the rise of the gig economy and independent contract work. Without traditional employers to withhold taxable income or file on their behalf, contract employees may be paying less in taxes throughout the year, and consequently receiving smaller refunds or even owing money.

Some see this trend as a positive development, since refunds aren’t really free money, but rather money you’ve already spent in overpaid taxes – almost akin to a savings stash that isn’t collecting interest.

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