Here's the Average Tax Refund for 2022. How Did Yours Compare?
- Most people who file a tax return wind up with a refund.
- The average number this year is pretty substantial at over $3,000.
- A smaller refund isn’t a bad thing.
Did you get more than the average tax filer or less?
Now that the 2022 tax season is in most people's rearview mirror, a lot of people are in the enviable position of having a refund to spend. If you're wondering how your tax refund stacks up to the average, the IRS may be able to give you an answer.
As of the week ending May 6, the average 2022 tax refund amounted to $3,025. That's a notable uptick from 2021, when the average refund came in at $2,863.
Now to be clear, that $3,025 figure could change as the IRS finishes processing returns for the 2022 tax season. Remember, a lot of people still file their taxes on paper, and those returns need to be processed manually. The IRS has been slow to get to paper returns due to staffing shortages and backlogs. So tax returns submitted around the April 18 filing deadline may not be accounted for in that average refund figure.
Still, that number should give you some sense of whether the refund you received was more than the average filer's or less. And now comes the fun or tricky part, depending on how you look at it -- what should you do with that money?
Put your tax refund to good use
If you're in a really good place financially, then you should feel free to spend your tax refund on something that makes you happy. Maybe that's a vacation, a new phone, or a nicer couch. But before you use your refund to splurge, you'll want to make sure you can say "yes" to all of these questions:
- Do I have enough money in my savings account to pay for three full months of living expenses?
- Am I covering my monthly bills with my existing paycheck?
- Are my credit cards fully paid off?
- Am I on track with my retirement savings?
- Am I up to date on home maintenance and repairs?
- Is my car in good working condition?
If you can answer "yes" to all of these items, then you're probably good to spend your refund however you want. But if the answer to any item is a “no,” then you're better off addressing it first.
For example, say you have a solid emergency fund, no credit card debt, and a nice nest egg, but you've been putting off a car repair and your washing machine is on its last legs. In that case, you should really address those two issues before using your refund for fun purposes.
What if you got a smaller refund than the typical filer?
A smaller tax refund is not a bad thing -- even though you might think it is. When you get a smaller refund, it means you collected more of your earnings upfront. That's better than having to wait on that money.
In fact, if you're sitting on a $300 refund, or something in that ballpark, don't change a thing in regard to your tax withholding. Instead, you can make some spending changes to free up more cash in your upcoming paychecks. But don't give the IRS a larger portion of those paychecks upfront when that just isn't necessary.
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