Tax Refunds Are Coming Up Shy This Year
Tax Refunds Are Coming Up Shy This Year — to the tune of $300, on average. Here are the 2 big reasons why and what you should do about it
Bigger Isn't Always Better Though.
What are you looking forward to this spring? The Oscars? The return of Succession? King Charles III's coronation? If you answered "a juicy tax return," we've got some bad news.
Early data from the Internal Revenue Service shows that as of Feb. 3 the average refund amount for those keeners who have filed their taxes is $1,963. That's a 10.8% decrease from average return of $2,201 on Feb. 4, 2022.
This comes as less of a surprise, as the IRS warned in a news release earlier this year that 'refunds may be smaller in 2023'.
What gives? Here's why 2023 won’t bring a hefty tax return for many households and what else you should know now that this year’s filing season is underway.
Why Refunds May Be Smaller This Year
During the pandemic, the IRS was doling out some pretty sizable refund checks. In 2022, the average tax refund was $3,176 — a 14% jump from $2,791 in 2021, according to the IRS.
But in 2022, there were no new stimulus checks from the federal government. And some expanded tax credits and deductions, like for charitable gift deductions and child care, have reverted back to pre-pandemic amounts.
Back in 2020, Congress introduced a new incentive to encourage charitable giving. Taxpayers could claim up to $300 for cash donations (or $600 for married couples filing together), even if they didn’t itemize — but this provision wasn’t extended for 2022.
And families with children will see their child tax credit shrink, since it’s reverting back to the pre-pandemic level of $2,000 per child. In 2021, the credit was as high as $3,600 per child.
Which means the days of supersized refunds are over. To make matters worse, those smaller refunds may take longer to arrive in your bank account.
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