Tax Refunds Are Higher This Year. Here's What Your Fellow Americans Are Getting Back

When tax-filing season rolls around, many Americans are excited to submit their returns to the IRS. That's because it is common for taxpayers to get a big refund deposited into their bank account or sent via check.

Taxpayers may be excited to find that, on the whole, these refunds are generally trending a little bigger this year than in 2023.

Here's what most people are getting back, along with some advice on what to do with your own tax refund if the IRS sends you one.

Here's what the average tax refund looks like for the 2024 filing season (so far)

The IRS regularly provides tax season updates, and is doing so during the 2024 filing season (which is going on now, and involves paying taxes on income earned in 2023).

According to the update issued ​​Feb. 23, 2024, which compares this year's data to last year's data, it's clear that the typical tax filer is getting a larger sum of money refunded to them this year than they did last year.

Specifically, the average tax refund as of the most recent report was $3,213 as of late-February, up from $3,079 during the same time period in the 2023 filing season. This reflects a 4.3% year-over-year increase in the money the IRS must return to taxpayers when they file returns. It also means that the IRS has sent out a total of almost $93 billion in refunds to those who overpaid their taxes during the 2023 year.

These larger refunds may be explained, at least in part, by the fact that the IRS changed both the tax brackets and the standard deduction this year to ensure they kept pace with inflation. (Don't worry, tax software has been updated to reflect these changes so there's no additional math for you to do.) With tax brackets changing and taxpayers now required to earn more money before they move up into a higher bracket, many people will end up being taxed at a lower marginal rate.

Furthermore, with a higher standard deduction, people will be able to reduce their taxable income by a larger amount -- thus leaving them with a smaller bill since they aren't paying tax on as much of their earnings.

What should you do with your tax refund?

If you are one of the many getting a big tax refund, you'll want to use it wisely. Usually, this means doing something that can help you reach your meaningful personal finance goals.

For example:

• You might use your refund to finally finish building the emergency fund you've been dreaming of, for peace of mind.
• You may decide to pay off credit card debt.
• You may decide to invest your refunded money.

The important thing is to consider where the refunded money can best serve you and to send it there, rather than just spending it. For most people, getting a few thousand dollars at once isn't a common occurrence and it really makes sense to make the most of it and use it to accomplish something bigger.

For the 2024 tax year, the best thing to do with your refund would be to not get one at all. A refund means you overpaid the IRS, essentially giving them an interest-free loan for no reason. You can adjust your withholdings next year, essentially telling your employer to take less out of each paycheck. This move will make sure this doesn't happen again and a large refund won't be in the cards -- instead, you can have your money to enjoy for yourself all year long.