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 in 2024 was $3,138, a 0.9 percent drop from 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.
The average tax refund by year
Each year, taxes come out a little different. This is a result of many factors, including tax laws, 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. (Or, 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 (Federal Insurance Contributions Act) taxes. 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.
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 the 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. Use the IRS’s tax withholding estimator to figure out exactly how much to have withheld from each paycheck.
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