Published in: Research | Jan. 31, 2020

The Average Tax Refund: A Visual Guide to Your Money Back

By:  Lyle Daly

Filing taxes isn't anyone's idea of a good time, but a tax refund is a light at the end of the tunnel. And, considering the Internal Revenue Service (IRS) refunded almost $400 billion in income tax in 2018, plenty of filers get a sizable return.

But what's the average tax refund? And do certain characteristics, such as income or marital status, influence tax refund amounts?

To find out, we analyzed the most recent IRS data on tax refunds. In the sections that follow, you'll learn exactly which filers get the biggest refunds.

Summary of key findings

  • The average tax refund in 2018 was $2,881.
  • Tax refund amounts tend to rise with income.
  • Tax refunds peak for adults in the 35-to-44 age range and then steadily decline.
  • Heads of household have the largest refunds of any filing status, getting an average of $4,595 back.
  • Single persons receive the smallest tax refunds, with an average of $1,556.
  • Texas was the state with the largest average tax refunds in 2017 and 2018, while Maine had the lowest average in both those years.

The average tax refund: $2,881

The average individual income tax refund was $2,881 for the 2018 fiscal year, which was a minor increase from 2017, when the average refund was $2,811.

For many consumers, tax refunds are the biggest influx of extra cash they get each year. Because of that, it's common for people to plan their finances around their refunds.

Our study on Christmas spending showed that many people plan to use their refunds to pay off their Christmas debt. Some others put their funds in the bank to boost their savings. And there are those who earmark their upcoming tax refunds for big purchases, such as a TV or a down payment on a car.

Average tax refund by income level

There's a clear correlation between income and tax refund amounts. Filers who have higher incomes get more back.

Although there's a huge jump in the average refund amount at incomes of $200,000 and over, it's because that group includes all the biggest earners in the country. To provide a more accurate idea of the average refund at different income levels, here are the numbers when using narrower income brackets:

With these more detailed statistics, tax refund amounts and incomes are still closely related, but we can also see some anomalies.

Filers with no adjusted gross income (AGI) recorded an average tax refund of $5,438, more than every income range up to $200,000. It's important to remember that a $0 or negative AGI doesn't mean the filer had no income. It means that through allowable tax deductions, the filer had an AGI of $0 or less.

How did these filers get so much money back? Some of them had income tax withheld throughout the year -- among those who did, the average amount withheld was $4,604. After deductions brought their AGIs to $0 or less, they received refunds for overpayments on income tax. In addition, many received refundable tax credits.

It's also notable that the group making from $15,000 to $19,999 has a higher average refund than every subsequent group up to those making $50,000 to $74,999. This isn't just a one-year quirk, either. That same pattern occurs in every tax year dating back to 2012. And even in earlier years when it doesn't occur, those making between $15,000 and $24,999 tend to have higher or similar refund amounts to those making up to $74,999.

The overall trend may be for tax refunds to rise with incomes, but it appears that most of the lower and middle class have similar refund amounts. For those with AGIs of between $10,000 and $74,999, the average return fell in the $2,400-to-$3,000 range.

Average tax return by age

Tax refund amounts rise with age until reaching a peak with the 35-to-44 group. After that, there's a steady decrease.

For the most part, this follows how incomes rise with age. Most filers under the age of 18 work part-time in entry-level positions. Since they're not earning much compared to other age ranges, they also have significantly smaller tax refunds. Those in the 18-to-25 range average more hours and higher pay, but they're still just starting out in their careers. Peak earnings generally occur anywhere from the mid-30s to the mid-50s.

There's one difference between the average tax refund and median income by age. In 2017, median household income peaked at $80,671 for the 45-to-54 age range, while those in the 35-to-44 range had a slightly lower median income of $78,368.

Average tax refund by filing (marital) status

Filing status makes a huge difference in the amount of taxes you pay and how much you get back. In particular, there's a chasm between the average refunds of heads of household, married persons filing jointly, and surviving spouses compared to those of married persons filing separately and single persons.

Heads of household average the largest refunds. This filing status applies to unmarried filers who pay for at least half their household expenses and have a qualifying dependent. In terms of income, single persons and heads of household are very similar -- the former average $39,120, the latter $40,577. But heads of household benefit from wider tax brackets and the second-largest standard deduction ($9,350 in 2017), both of which lead to bigger refunds.

Married couples who file jointly and surviving spouses have the widest tax brackets and the largest standard deduction ($12,700 in 2017), which also helps them get more back.

While some couples consider filing separately to save on taxes, this can end up being a costly tax mistake. Except in select circumstances, filing jointly tends to provide greater savings.

Average tax refund by state

In 2017 and 2018, the same two states were at the top and bottom of the average refund list.

Texas had the highest average return at $3,205.67 in 2017 and a slight decrease to $3,202.61 in 2018.

Maine was last, with an average return of $2,335.87 in 2017 and $2,361.74 in 2018.

If you'd rather see a state-by-state breakdown, here's a table of the average tax returns in 2018:

The filers who get the most back

Based on IRS data, the filers who get the biggest tax refunds are those who

  • earn higher incomes;
  • are in the 35-to-44 age range; and
  • file as head of household, married filing jointly, or a surviving spouse.

We should keep in mind, however, that a large tax refund isn't necessarily good for you from a financial perspective. The IRS only refunds money that you overpaid during the year. Had you kept that money and invested it or put it into a high-yield savings account, it could have grown in value.

If you get a tax refund every year, see if you can adjust your withholdings and keep more of the money you make. You don't want to underpay, but overpaying doesn't do you much good, either.

Sources

  1. Internal Revenue Service. "SOI Tax Stats - Individual Income Tax Returns Publication 1304 (Complete Report)," Table 1.3 (2017), Table 3.3 (2011—2017), Table 3.7 (2017).
  2. Internal Revenue Service." SOI Tax Stats - IRS Data Book Index of Tables," Table 7 (2017, 2018), Table 8 (2017, 2018)
  3. Kayla Fontenot, Jessica Semega, and Melissa Kollar (2018). U.S. Census Bureau. "Income and Poverty in the United States: 2017," Table 1.

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