If you haven’t received your tax refund yet, you’re probably eagerly awaiting its arrival. You also might be wondering how the amount of your refund compares to the average in the U.S.
You’ve come to the right place, so keep reading.
How Much Is the Average Refund?
The average refund as of April 21, 2023, was $2,753, 8.6% less than the $3,012 average last year. The number increased by the end of last year: About two-thirds of taxpayers were entitled to refunds with an average amount of nearly $3,200 in 2022, according to the National Taxpayer Advocate’s Annual Report to Congress.
Average refunds are down because several tax credits that had been temporarily expanded to help with COVID-19 relief either expired or returned to their usual amounts for tax year 2022. But even a smaller than usual refund can make a big difference in your finances if you make the most of it.
[READ: Why Tax Refunds May Be Smaller in 2023.]
When Should I Get My Refund?
The IRS issues most refunds in fewer than 21 days if you filed your tax return electronically and signed up for direct deposit. That means most people should receive their refunds by mid-May, even if they filed their return on the April 18 deadline.
If you filed a paper return, it can take about six to eight weeks from the time the IRS receives your return to get your refund, Lisa Greene-Lewis, certified public account and tax expert with TurboTax. Requesting a paper check, rather than direct deposit, also slows down the process.
You can check on the status of your refund using the IRS Where’s My Refund? tool. You can use the tool starting 24 hours after e-filing or four weeks after mailing a paper return. Input your Social Security number and the dollar amount of your refund and you’ll find out if the IRS has received received, approved or sent your refund. The information is updated daily.
“The tool will provide an actual refund date as soon as the IRS processes your tax return and approves your refund,” Melanie Lauridsen, director of tax practice & ethics for the American Institute of Certified Public Accountants, says.
[Read: When You Should (and Shouldn’t) Worry if Your Tax Refund Is Delayed.]
How Can I Make the Most of My Refund?
The extra money can provide a great opportunity to help improve your financial situation without affecting your everyday finances.
“Since this year’s tax refund may be lower than last year’s, I encourage you to spend time thinking about how this money can go the furthest towards your financial goals,” Thomas Racca, manager of the personal finance team at Navy Federal Credit Union, says. “Be strategic in how you use this money.”
For example, paying down high-interest credit card debt can help you save extra money in interest — especially now that rates are rising.
“Credit card or loan payments can strain your budget, so think about paying down or paying off any debt you have to lighten your load,” Racca says. “Since this money isn’t usually factored into your budget, it’s easy to put it towards your debt without missing it.”
[14 Easy Ways to Pay Off Debt]
Another good move is to set aside the money in an emergency fund — a separate bank account you can access without penalty if you have unexpected expenses. “That way, if anything comes up you don’t have to rack up more credit card debt,” Greene-Lewis says.
You can expand the value of the money by contributing to an IRA. Traditional IRA contributions may be tax deductible and the money will grow tax-deferred for the future. Roth IRA contributions don’t provide a tax deduction now, but the money grows tax-free for retirement.
And, depending on your income, you may qualify for the retirement saver’s tax credit, which can reduce your tax liability by up to $1,000 per person. “The saver’s credit is something you can automatically get just for investing” in a retirement savings account, Greene-Lewis says.
You can also use the money to help plan for future big expenses, such as a vacation or college fund, Racca says.
“Your tax refund is a great way to get ahead on saving for future plans,” he says. “I recommend opening a separate account to keep these funds sequestered from your daily spending and saving habits, potentially considering a money market account, which may earn a higher rate of return. Additionally, keep it out of your normal account view, removing the temptation to use those funds for unintended purchases.”
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How Much Is the Average Tax Refund and When Will I Get Mine? originally appeared on usnews.com
