Invest

how to invest

Live

career, food, travel

Save

saving, credit, debt

Protect

insurance, security

Retire

401K, IRA, FI, Retire

Home » Taxes

Average Tax Refund: How Does This Year Stack Up to the Historical Average?

Last updated by on 13 Comments

I just found some data from the IRS on tax refunds, which, I found interesting (and hope you do too).

Let’s look at the numbers.

As of December 27, 2013, 148,035,000 tax returns have been submitted.

122,515,000 of the 148,035,000 returns were e-filed (impressive). This is a 2.5% increase over last year.

And 109,563,000 of the 148,035,000 returns received refunds (not impressive).

You know what that means…

It looks like Tax Refund Windfall Syndrome (TRWS) got the best of us once again!

Average Tax Refund

average tax refundThe math works out to just over 74% of all returns resulting in a refund.

The average tax refund works out to $2,755.

This means that Uncle Sam received an average of $2,755 in interest-free loans from 101,082,000 lenders (aka taxpayers), for a combined $228.46 billion.

Pretty ridiculous.

The silver lining is that the average tax refund has actually declined 1.7% from $2,803 at this point last year. Baby steps, as some finance guru might say.

How does 2013 stack up against the historical average?

Average Historical Tax Refund:

Over time, the historical average tax refund has gone up and down, but is on a recent downward trend (my guess: incomes have slowly increased since the Great Recession). Here is a look at the last 6 years.

  • Average 2008 Refund: $2,728
  • Average 2009 Refund: $3,036
  • Average 2010 Refund: $3,003
  • Average 2011 Refund: $2,913
  • Average 2012 Refund: $2,803
  • Average 2013 Refund (thus far): $2,651

If you’re looking to dig in further to some data, check out the IRS individual income tax database.

And remember, if you’re expecting an outsized tax refund, you can change your withholding tax allowances to increase your withholding, and owe more taxes at the end of the year. It may seem counter-intuitive, that sending a check or getting a smaller one is good, but that is the case.

Tax Refund Discussion:

  • What was your tax refund this year? Were you happy, sad, indifferent?
  • Do you aim to decrease/increase your refund next year?

Related Posts:


About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 7,500+ others by getting FREE email updates. You'll also find every post by category & every post in order.


13 Comments »
  • Sarah says:

    We ended up getting about $725 back, which I think is pretty reasonable. Last year we got back twice that – primarily because we bought our house that year and were able to deduct closing costs. We also had significantly higher school taxes to deduct, since we missed the deadline for the STAR exemption.

    This year, I was worried we would owe money. One of my jobs is as an independent contractor, so I don’t pay any taxes on that income until we file. My income is also variable, so it’s pretty much impossible to adjust our withholdings and break even.

  • Amanda M. says:

    I hate refunds. I have since I started working. The mindset that someone else will take better care of my money until April the next year seems ridiculous to me. Also, if you give them more than $1000, you get no bonus, but if you underpay by more than $1000 there is a tax penalty. Apparently the road doesn’t go both ways. I was told when I was 15 that it is a good “forced savings” account. Even then I thought “do it yourself you lazy bum.”

  • Tom says:

    My wife and I got back about $1650 from the Federal and owed under a hundred for State. We are trying to trim down our Federal withholdings, but the estimation software doesn’t really account well for bonuses and raises, so we are kind of shooting in the dark. First world problems I guess… :)

  • Jake Erickson says:

    This is interesting data. We did receive a refund, but it was not as much as it has been in past years. Our total state and federal combined was around $1,000. I have no problem loaning the government $1,000 interest free. Would I rather it be 0 so that I could have the money throughout the year, sure, but I really don’t want to have to pay in. We would probably put that extra money into savings only earning less than 1% anyways, so we’re not really losing out on too much.

  • Marcie says:

    I tend to get a fairly average tax refund because of my year end bonus. The bonus takes a huge tax hit, usually close to half, and then I get a large refund in February or March when I file my taxes. Thus I’m not loaning the govt. money all year, only for several months. I don’t see a good way to avoid this since I don’t know the bonus amount in advance and underpaying taxes has a penalty that I want to avoid.

    I have to agree with the comment from Tom that it is really hard to estimate taxes. So many anticipated and unanticipated things affect taxes: bonuses, mid-year raises, job changes, home purchases, sales, or refinances, capital gains, marriages or divorces, children, inheritances, and side businesses. The IRS calculator isn’t close to accurate in my case and I’d guess that is true for many Americans. I’ve just had to increase my deductions until the number is pretty close, with the exception of bonus income.

    When I was younger I would have wholeheartedly agreed with you since my taxes were easy and I usually got back a few hundred dollars. But as I’ve gotten older, life is a lot more complicated and my taxes reflect that.

  • Ted says:

    If you are an employee that gets a year end bonus, your federal tax withholding on that bonus will most likely be 25%. Most companies won’t even give you an option to withhold less as the law requires a separate wage payment that is not considered regular wages to have this automatic 25% withholding rate or another very complicated withholding rate that most companies (including mine) don’t bother with (see IRS Publication 15, Page 19). For many people whose effective tax rates are less than 25% (different than what your highest marginal tax rate is), this will automatically cause you to be over withheld. Thus, the fact that many people get refunds is not surprising and somewhat unavoidable as anticipating your bonus in this economy and under withholding your taxes throughout the year is risky and really not a smart planning tool as it could lead to interest and penalties if the bonus is less than anticipated.

    Mr. Miller – I believe you should be aware that many people’s tax refunds (as some have shared above) are more a product of circumstances and many moving financial pieces (purchase of a home, birth of a child, going back to school, or receiving a nice year end bonus for a job well done) than consciously using the government as a piggy bank.

    • G.E. Miller says:

      Totally get it. A lot of this is a guessing game, and is out of your control. I think the point is:
      a. don’t get excited about or aim to get a refund.
      b. if you do get a big refund, make changes.
      c. look how many people are getting refunds.

    • Steve M says:

      I agree with GE Miller on this to some extent. I think with a little forethought (especially since most people do not get bonuses and have relatively predictable salaries), you can estimate how much your total tax will be at the end of the year. In addition, there are calculators and IRS documents to help you determine how much to claim as deductions on your tax forms for the year. Then, simply change your W4 at work.

      However you need to be comfortable with the idea of owing taxes and saving. I try to err on the side of owing tax every year but not so much that I incur a penalty. I find myself now thinking about making sure I have saved up enough to pay my taxes. In addition, throughout the year, I’ll estimate how deficient I might be in taxes and pay an estimated tax. Point is, it’s not hard to pay the tax owed but you need to save for it. It’s a different way of thinking and has had the benefit of giving me just another reason to form good saving habits.

      Also, you need to have a clear idea of how exactly you’ll make “interest” on money over the course of a year. Are you going to leave money in a savings account? If so, it’s not really worth it. Are you going to invest it in stocks or bonds? If so, there is always the risk of losing that money. Investing in risky assets with money you owe the government is the same thing as investing with borrowed money (although at no interest…until you are late on your tax payment anyway).

      Since most people are poor savers (a fact your blog definitely tries to correct) and not financially savvy when it comes to investing, getting a refund makes more sense emotionally than it does mathematically or financially.

  • AW says:

    FYI, the IRS Where’s My Refund service will be unavailable beginning 7:00 p.m. ET on Thursday, May 23, 2013 until 5:00 a.m. ET on Tuesday, May 28, 2013, due to “several factors,” (hmmm…IRS scandal???) including scheduled maintenance.

  • AJ says:

    I don’t mind a little refund. I always save at least 75% of it and I only ever get five or six hundred back. Seems reasonable to me and it’s a nice (albeit small) padding to my budget.

  • I got around $2800 back this year and plan on making it as close to zero as possible next year. I realize its silly of me to let uncle sam have a free loan for the year, so no more.

  • ~Matt~ says:

    It is still quite amazing the overwhelming happiness around rebate time. Refunds are detrimental in my opinion, I try to keep it as close to zero as possible. More than a few people really cant follow that the government held on to your money all year for free. Just go buy a new flat screen I am done trying to explain.

  • Jon D says:

    I regularly get tax refunds from our tax authority in the UK. It’s amazing how many times they get it wrong after I’ve submitted my tax return. So annoying! :(

SPEAK YOUR MIND

Enter your:


Home | Sitemap | Terms | © 20somethingfinance.com