The biggest tax question on most people’s minds, once filing season gets underway, is whether they’ll get a refund or owe the IRS money.
The average tax refund so far this year is $3,221, a full $140 higher than the average tax refund of $3,081 for the same week a year ago, according to IRS data through the week ending March 21, 2025. That’s a 4.6 percent increase in the average refund amount. At this point, it’s unclear exactly why refunds are trending higher, or whether the higher average amount will hold through 2025.
The average tax refund for all of 2024 was $3,138, just slightly less than the average refund of $3,167 in 2023, based on IRS data through Dec. 27, 2024. Almost 105 million tax refunds were processed by the end of December, totaling more than $329 billion.
A majority of taxpayers do end up with a tax refund: About two-thirds of returns (64 percent) filed in 2024 resulted in tax refunds, according to IRS data. But a big tax refund isn’t always the best financial result. Read on to find out the average tax refund by year, and why a small refund can be a good thing.
The average tax refund by year
Every year, everyone’s tax return, and tax refund, comes out a little different. This is a result of many factors, including tax laws, annual IRS inflation adjustments (such as for the standard deduction), the unemployment rate and more. Here’s the average tax refund since 2015:
| Tax filing season | Average tax refund |
|---|---|
| 2015 | $2,797 |
| 2016 | $2,860 |
| 2017 | $2,895 |
| 2018 | $2,899 |
| 2019 | $2,869 |
| 2020 | $2,549 |
| 2021 | $2,815 |
| 2022 | $3,252 |
| 2023 | $3,167 |
| 2024 | $3,138 |
| Source: IRS |
How tax refunds work
As a U.S. taxpayer, you must pay a portion of your earnings to the federal government to meet your tax obligations. Your employer is responsible for collecting taxes from every paycheck and paying the IRS on your behalf. If you’re self-employed, you’re responsible for paying estimated taxes.
How much you pay in federal withholding depends on your earnings and how you fill out IRS Form W-4, which determines how much in taxes your employer withholds from your paycheck.
In addition, taxes for Social Security and Medicare are withheld from your paychecks. These are called FICA taxes, for Federal Insurance Contributions Act. The current rate for FICA taxes is 7.65 percent: 6.2 percent for Social Security (listed as OASDI on your pay stub) and 1.45 percent for Medicare. You pay this rate, and your employer pays the same amount on your behalf. If you’re self-employed, you need to pay both halves, for a total rate of 15.3 percent.
There is a wage ceiling for Social Security taxes, which means that Social Security taxes aren’t levied on income above that limit. For 2024, it’s $168,600, up from $160,200 in 2023. In 2025, the Social Security wage ceiling is $176,100. Gross income above that threshold is exempt from Social Security taxes.
When it’s time to file your taxes, you tally your income, claim any tax deductions and tax credits you might qualify for, and then see what your total tax obligation is for the year. If you had too much money withheld from your pay, the IRS owes you a refund. If too little was deducted from your pay, you owe the IRS the difference.
A small tax refund can be a good thing
It’s nice to see a tax refund show up in your bank account, especially if it’s a sizable one. But a big refund means that over the previous year, you gave the IRS more money than you had to. That means your paychecks were smaller than necessary. And when the IRS sends you a refund, it doesn’t come with interest.
On the other hand, if you owe the IRS at tax time, it means you’re not having enough taxes withheld from your pay throughout the year. While it may be nice to have that extra money every pay period, you’ll have to write a check to the IRS, and if you underpaid by a significant amount, you may owe penalties and interest.
Ideally, you want your tax bill to come out to $0 or very close to it. If you’re paying the IRS too little or too much throughout the year, adjust your W-4. If you’re not sure how much to have withheld, check out the IRS’s tax withholding estimator to figure out exactly how much to have withheld from each paycheck.
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