The average tax refund has shrunk by more than $800 over the last two years, an unfortunate statistic considering inflation’s devastating impact on hard-working Americans.
U.S. taxpayers will receive 28.9% less in tax refunds this year compared to the 2023 tax season, according to early data from the Internal Revenue Service (IRS). The average direct deposit refund amount is also down. Direct deposits are currently averaging $1,542 in 2024, a 25% drop compared to the $2,056 clocked a year earlier.
Refunds so far this tax season have averaged around $1,395, a nearly 29% drop compared to the $1,963 average in 2023 and a 36% decline compared to the $2,201 in 2022, IRS filing statistics show.
The IRS began receiving 2024 returns a week later than the previous tax season, with the agency noting a loss of seven days in the annual comparison.
Since the IRS is behind schedule this year, it received 3.6 million (19.1%) fewer tax returns by February 2, 2024, than it did last year. Therefore, the IRS has only been able to issue 2.6 million refunds so far this year, compared to almost 8 million in 2023.
Despite the seven-day delay, the IRS stated the data indicated “a strong start to filing season 2024, with all systems running well.”
However, with inflation continuing to erode the purchasing power of Americans, many taxpayers may want to consider putting their refund toward a specific purpose, according to Cynthia Flannigan, a financial planner at Mainstreet Financial Planning.
“It’s easy to feel like your tax refund is free money, but while you may have forgotten about it, it’s definitely something that you’ve earned. So, you should spend it with a purpose to achieve your goals,” said Flannigan.
While the median income for workers rose 5.5% in 2023, the annual wage increase fell below the 7.1% inflation-related tax adjustment adopted by the IRS.
This could mean that many middle- and lower-income Americans are actually due for a higher tax refund in 2024, according to Mark Steber, chief tax information officer at Jackson Hewitt.
“Say your income didn’t keep pace with inflation — you made the same as the prior year but didn’t increase your income by that inflation rate of 7% or so — you could see a better refund,” said Steber in an interview with CBS MoneyWatch. “We are predicting a higher refund for those people, up to 10%.”
The IRS publishes cumulative statistics for each filing season, with new data published on a weekly basis.
