Tax refunds so far this year are markedly smaller than the same time a year ago, according to the earliest tax season data from the Internal Revenue Service.
The average refund amount was $1,395 as of Feb. 2, down 28.9% from $1,963 for the same period last year, the IRS reported. That’s based on nearly 2.6 million refunds disbursed so far versus 7.9 million refunds disbursed by this point last year.
The data is based on five days of data instead of the typical 12 days because filing season opened Jan. 29 instead of Jan. 23 last year.
The average amount likely will change as more returns are processed. Refunds that include the earned income tax credit (EITC) and the additional child tax credit (ACTC) are delayed by law until mid-February. The IRS estimates most EITC filers will see their refunds by Feb. 27 if there are no issues with their returns and if they chose direct deposit.
The early data suggests that the return to pre-pandemic credit allowances will mean smaller refunds for many taxpayers.
Overall, the average refund last year was $3,167 based on nearly 163 million returns, according to the latest IRS data. However, tax experts say a big tax refund may not be better than having that money in your paycheck throughout the year by selecting the proper withholding on your W-4 form.
Last year, the amounts of the child tax credit (CTC) and earned income tax credit (EITC) returned to pre-COVID levels — meaning less money back for taxpayers.
Smaller refunds could be a blow for some households that rely on this windfall to shore up their financial position.
Last year, Americans said they used their refunds to pad their savings, pay down debt, and pay for necessary household expenses, according to a survey.
Ronda is a personal finance senior reporter for Yahoo Finance and attorney with experience in law, insurance, education, and government. Follow her on X @writesronda
Read the latest personal finance trends and news from Yahoo Finance.