The average tax refund is larger than it was in 2023 -- here's why

The deadline for most Americans to file their federal tax return has passed. And while the IRS is still processing paperwork, refunds for tax year 2023 are tracking considerably higher than they were in 2022.

As of April 19, 2024, the IRS processed about 136 million returns and refunded roughly $245 billion to U.S. taxpayers. That's 3.6% more than was refunded last year.

The average individual refund is also larger — and by an even wider margin.

So far in 2024, the average federal income tax refund is $2,850, an increase of 3.5% from 2023.

It's not entirely unexpected: To adjust for inflation, the IRS raised both the standard deduction and tax brackets by about 7%. That put some people into lower brackets and let taxpayers who weren't itemizing deduct more of their income.

For most Americans, the tax filing deadline was April 15, 2024. If you got an extension, you can hire a tax professional or do them yourself.

The IRS's free e-filing platform, Direct File, is only available in 12 states and other free online options have income and deduction limitations. Fortunately, there is great tax-prep software that addresses a variety of tax situations. Most guarantee their work, but TaxAct's accuracy policy is a standout: If you don't get the biggest refund possible, TaxAct will issue you a refund and pay the difference.

TurboTax's easy-to-use platform guides you through the filing process from start to finish, with a library of explainers, videos and tip sheets. You can also pay extra for live assistance or let a professional file for you.

Most top tax-prep programs have a free tier, but the features and support options are limited. Among the paid editions, TaxSlayer Classic is one of the most budget-friendly — and doesn't have income or deduction limits.

If you filed an electronic return and enrolled in direct deposit, you should get a refund within 21 days of filing, according to the IRS, as long as there are no issues with your return.

If you mailed a print return or filed an amended return, it will take at least four weeks for your refund to be processed.

To check your refund status, you can use the IRS' Where's My Refund? tool. You'll need to input your Social Security number, filing status and the refund amount listed on your return. The site is updated overnight, so checking it once a day is plenty.

Over a third (37%) of taxpayers expecting refunds say they'll use some of their refund on rent, groceries and other necessities, according to a January 2024 Credit Karma survey. Another 34% said they'll pay off outstanding bills.

If you're carrying a credit card balance, prioritize paying it down to free yourself from high-interest debt. Otherwise, you can deposit your refund into a high-yield savings account, where it could earn an APY of over 5% while still being readily available in an emergency. The Lending Club High-Yield Saving Account has one of the highest yields on the market and it doesn't carry a monthly maintenance fee or a minimum balance requirement beyond the initial $100 deposit.

A hefty refund could be a healthy start toward a down payment on a car: MyAutoLoan is a loan aggregator that provides up to four bids from participating lenders with just one soft credit pull, so it won't ding your credit. It offers competitive rates and flexible terms, and some lending partners will work with borrowers with credit scores as low as 575.

You could also use that refund to book a dream vacation with the Capital One Venture X Rewards Credit Card (see rates and fees), which earns 5X miles on flights and 10X miles on hotels and car rentals made through Capital One Travel, plus 2X miles on all other purchases.

The card's $395 annual fee is further offset by a 75,000-mile welcome bonus which you'll earn after spending $4,000 in the first 3 months of account opening, a $300 travel credit to use on Capital One Travel purchases, a 10,000-mile bonus on each account anniversary, access to Capital One and partner airport lounges and more. (See rates and fees).

So far, the average tax refund in 2024 is outpacing 2023. If you're among the millions of Americans getting something back from the IRS, make the most of it — either by paying down debt, depositing it in an interest-earning account or financing a major purchase.

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