The First Tax Returns Are In. Here's the Average Refund So Far

The tax deadline is still two months away, so don't feel bad if you haven't gotten around to filing your return just yet. You're definitely in good company. But there are plenty of early birds out there too who have already filed their 2023 returns -- more than 15 million as of Feb. 2.

So far, that's led to over 2.6 million refunds issued. Here's a closer look at how much the IRS has given out so far, and why you might not be excited about getting a big check in the mail.

The average tax refund is down $568 from 2023

In 2023, the average American who got a tax refund received $1,963 by about this point in the tax season. Those who had their refunds direct deposited received $2,056 on average. But so far, refunds aren't quite that high in 2024.

As of Feb. 2, the average tax refund is just $1,395, and the average refund for direct depositors is $1,543. But don't get discouraged.

The 2024 data is based on a shorter filing period than 2023's. In 2023, the tax season began on Jan. 23, 2023, and the first report about tax refunds came in on Feb. 3, 2023, covering a 12-day span. This year, the filing season opened on Jan. 29, so the report only covers five days of data. The average refund amount may continue to rise as more people continue to file their taxes over the coming weeks.

Why you might not want a tax refund

Though most people are happy to get a large tax refund, it could actually be a sign that you've had too much withheld during the year. The government withholds money from your paychecks all year long to cover your taxes, and during tax season, it looks at your actual income and tax breaks to determine whether you've paid too much or not enough. Not enough results in a bill and too much results in a refund.

But that refund is essentially an interest-free loan you gave the government all year long. You could've had that money months sooner if you'd had the correct amount withheld from your paychecks throughout the year.

You can avoid this issue in future years by adjusting your tax withholding. To start, gather your W-2s, 1099s, and all other income forms for yourself and your spouse, if you're married. Have the details of any investment income and your most recent tax return on hand too.

Then, use the IRS's Tax Withholding Estimator tool to determine the best withholding amount for you. It'll ask you a few basic questions about your tax filing status and income, then you'll be able to see how changing your tax withholding would affect your take-home pay and your tax refund.

How to change your withholding and what to keep in mind

If you decide to change your tax withholding, you'll need to fill out a new Form W-4 and submit it to your employer. Keep in mind that it may take a few weeks for this change to take effect. Ask your employer if you're unsure how long this will be.

A few words of warning: First, if you have complicated taxes or you're a nonresident alien, the above tool isn't right for you. Consult a tax professional in your area who can provide you with more personalized advice on tax withholding.

Second, be careful not to reduce your tax withholding too much. This might benefit you in the short term with larger paychecks, but it could come back to bite you if you owe taxes at the end of the year. Again, if you have any questions, it's best to consult with a tax professional who can give you advice that's tailored to your unique situation.