Tax Refunds Are Down 11% So Far This Year. Here’s Why

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

There’s a reason tax-filers aren’t seeing the same numbers they did last year. 

Filing taxes can be a drag. The good news, though, is that there’s often a silver lining for many taxpayers — seeing a refund hit their checking accounts after submitting their returns to the IRS.

But this year, tax-filers may not be as happy with their refunds — namely, because they might end up with less money than they did in 2022. And at a time when inflation is surging and driving living costs upward in a very big way, a lower refund could be a huge source of financial stress.

What the average tax refund looks like so far in 2023

The IRS reports that as of the week of Feb. 24, the average tax refund is $3,079. A year prior, the average tax refund was $3,473. That’s a difference of 11.3%. And it’s a notable one at a time when so many people are no doubt counting on their tax refunds to do things like pay bills, tackle lingering debt, or cover necessary purchases they’ve been putting off, like new appliances to replace failing ones.

Why tax refunds are lower

It’s actually not so surprising to see lower tax refunds so far this year. In 2021, lawmakers passed the American Rescue Plan, a massive stimulus bill that boosted a number of key tax credits, including the more well-known Child Tax Credit. That bill also put stimulus checks in Americans’ pockets.

Last year, filers got to benefit from those expanded credits in the form of higher refunds. And those who didn’t receive stimulus funds in 2021 were able to claim that money on their tax returns last year for a higher payday, too.

But in 2022, the U.S. economy recovered from the pandemic. And so federal lawmakers couldn’t justify another stimulus round and therefore didn’t send out more checks. Meanwhile, the pandemic-era tax breaks that applied to several credits went away, so a number of credits, including the Child Tax Credit, were worth less in 2022 than in 2021.

What to do if your tax refund is lower

A smaller tax refund can be a blow when it’s money you’re counting on. Now to be clear, it’s actually not a great practice to count on a refund, or a specific one, to pay bills. So going forward, it could pay to change your mindset there. But for now, you may be reeling over the smaller IRS payday that’s coming your way.

Before you resign yourself to that, though, consider having a tax professional look at your return before submitting it to the IRS. A professional might be able to identify tax breaks you didn’t know about that result in a higher refund amount.

If you don’t want to pay a professional, do a little research yourself on credits and deductions to make sure you aren’t missing any important ones. At a time when inflation is still raging, getting a few extra hundred dollars in refund form could go a long way, so it pays to do some legwork to make sure you’re not leaving money on the table.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More