The latest data from the Internal Revenue Service reveals a notable dip in this year’s average tax refund, which is down by 10.4% compared to last year. Moreover, the pressures of inflation are biting into those refunds more than ever before.
According to initial figures from the IRS, refunds have decreased significantly, with the average refund amount dropping by 32.4% from the previous year. By February 14th, the typical refund was $2,169, a noticeable decline from the $3,207 seen around the same time last year. It’s important to note that these figures only represent current-year refunds.
Interestingly, this early data doesn’t account for refunds associated with the earned income tax credit or the additional child tax credit, as these are typically disbursed after mid-February. Last year’s data did include filings with these credits, and they can be quite substantial—sometimes adding up to refunds in the five-figure range.
In other financial news, experts predict a more favorable market for renters by 2025, although some types of properties might not see the same benefits. There’s also discussion about an underutilized tax break for retirement savers that’s worth exploring. Additionally, some believe the tariffs introduced during the Trump administration could lead to an increase in car insurance premiums.
Generally speaking, when individuals overpay on their taxes throughout the year—often through paycheck withholdings or estimated quarterly payments—they end up with a refund. Conversely, if they’ve paid too little, they’ll likely face a tax bill.
The IRS mentions that while the average refund might seem lower now, the numbers tend to level out as more returns are processed throughout the season. By mid-February, the IRS had received about 33 million individual tax returns out of the anticipated 140 million before the April 15th deadline. For comparison, in the previous season, the average refund was $3,138 by late December 2024, slightly down from $3,167 in December 2023.
During this busy filing season, the IRS is undergoing mass layoffs under Elon Musk’s Department of Government Efficiency, or DOGE, which may affect taxpayer services, though the full impact remains uncertain. Experts advise carefully reviewing returns for accuracy to minimize the need to contact the agency.
Tom O’Saben, a seasoned tax professional, cautions against reaching out to the IRS for refund updates. Instead, taxpayers can track their refunds using the “Where’s My Refund?” tool or the IRS2Go app, both accessible 24/7. Typically, refunds are processed within 21 days after receipt, although some may require further examination, delaying the process.
