The total amount refunded to taxpayers by the Internal Revenue Service to date this year is approximately $172 billion — $16.4 billion less than in in 2022, the latest data from the agency shows.
That equates to an average refund of $2,903 — $360 less per person than in 2022, the data shows.
Given the importance of these refunds to many households’ annual budgets, those spending plans are likely to be dramatically affected, according to Ted Rossman, senior industry analyst at Bankrate.
‘Lots of people like refunds,’ Rossman said. ‘It’s the largest windfall many households get throughout the year.’
A recent Bankrate survey found 75% of respondents said this year’s tax refund would be very or somewhat important to their financial health, compared with 67% who said so in 2022.
The IRS previously forecast that refund checks were likely to be lower in 2023 due to the expiration of pandemic-era federal payment programs, including stimulus checks and child-related tax and credit programs.
Still, the lower-dollar checks come at a time of ongoing inflation and may put many households into further financial distress. Rossman said that historically, refund-reliant households have used the money to pay down debt or boost savings. The recent Bankrate survey found just 3% of respondents said they’d use their refunds on retail splurging.
At the same time, the lower-dollar refunds may help further the Federal Reserve’s goal of lowering inflation if it ultimately causes households to curb spending, Rossman said.
If the refunds were higher, ‘there would have been some inflationary pressure,’ he said. ‘So being down a bit maybe contributes to disinflation.’
In general, Rossman advises taxpayers that, by adjusting the withholding amounts from their regular paychecks, they can maximize the take-home pay they earn throughout the year. If you’re getting a refund at tax time, it means you paid too much income tax during the previous year, which is essentially an interest-free loan to the government.