Wallet Hacks

What is the Average Tax Refund? $2,769 (as of February 23rd)

It's huge.

I've been watching the average tax refund statistic for years, ever since the Bargaineering days, and it's always been around $3,000.

For the 2018 filing season average tax refund is (as of May 11, 2018):

$2,769

That's based on 141.5 million tax returns received, of which 135.8 million have been processed.

Historical Average Refund Amounts

The average refund rate tends to fall as we near tax day and keep drifting down. The folks due a refund want to file as early as possible. The folks who owe taxes are going to wait with the procrastinators.

How does this compare to previous years?

Here are the previous year's average refund amounts:

Tax Filing Year Average Tax Refund
2018 (as of 2/23/2018) $2,778
2017 $2,769
2016 $2,832
2015 $2,797
2014 $2,792
2013 $2,755
2012 $2,803
2011 $3,129
2010 $3,149

What can you buy with the average tax refund?

Hmmm… that's $2,878 to play with. (we did the math based on March 31st, 2017 numbers when the average refund was $2,858)

How about:

Finally, if you have credit card debt, making a $2,878 payment on it now rather than paying the minimum each month will save you $2,347 in interest. You'll nearly double your money in a relatively short period of time.

Here's the math on that…
A $5,000 credit card debt at 18% and minimum payments of $125 will be fully paid off in 5 years and 2 months. You'll pay $7693, 35% of which ($2,693) will be interest.

Chop off the value of your tax refund (if it's average), and now a $2,122 balance with the same APR and monthly payment, will be done in 1 year and 8 months. You'll pay $2,468, 14% of which ($346) will be interest.

The difference is $2,347.

What should you do if you have a huge tax refund?

$3,000 is a lot of money.

All it means is that the government withheld more than necessary from your paycheck. The government isn't mean – they take out what you tell them to take out.

How do you fix this? You need to submit a new W-4 with your employer. The Form W-4 is what your employer uses to calculate how much federal income tax to hold back. This is required by law, you're supposed to pay taxes on your earnings as you collect them.

How do you compare with other taxpayers?

This is where the average tax refund statistic can be misleading.

It's not a measure of how much in taxes you're paying, it's only telling you how much you overpaid.

People with big tax refunds aren't “better” at doing their taxes. They didn't find more deductions or more credits, they simply overpaid their taxes throughout the year.

The closest figure for that is average tax rates. For that, we turn to The Joint Committee on Taxation and their look of the Federal Tax System for 2015. The Tax Foundation did us a favor and in their look at average tax rates from 2015, produced this chart:

If you use tax preparation software or a tax preparer, you probably get all the deductions and credits you're due. You probably could've played a year end tax move games but you're not missing out on a huge deduction or credit that other people know about but you don't. (if you e-file, you'll get that tax refund very quickly)

If you get a massive tax refund, you should adjust your withholding to make the refund smaller.

How much was your refund this year and what do you plan on doing with it?