Here’s Why Your Tax Refund Could Be a Little Bigger This Year.
It’s officially Tax Day. If you already applied months ago, first of all: well done. And secondly, you may have already received a pleasant surprise in the form of a slightly larger tax refund compared to last year. More than $211 billion was returned this cycle, up 5% from last year, according to the latest IRS report. Individually, the average direct deposit refund amount is $3,186, up 3.2% from last year ($3,088). But what’s driving these big refunds?
Inflation adjustment increases refunds
The main reason for the increase in tax refunds is due to the annual IRS adjustments for inflation. For tax year 2024 (filed in 2025), the IRS implemented significant increases to both the standard deduction and tax brackets.
Standard deduction increases
The standard deduction—the amount taxpayers can subtract from their income before income taxes are applied—has increased significantly:
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Single filers: $14,600 (up from $13,850 for tax year 2023).
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Married couples filing jointly: $29,200 (up from $27,700 for tax year 2023).
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Heads of household: $21,900 (up from $20,800 for tax year 2023).
Filers who are 65 years of age or older or who are blind may be eligible to claim an even higher standard deduction. For 2024 the amounts are:
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Single or head of household: additional $1,950.
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Spouses filing jointly: additional $1,550.
So, for example, a 68-year-old filer would claim the standard deduction of $16,550 for the 2024 tax year. This increase means that taxpayers who do not itemize deductions (that is, the vast majority of Americans) are shielding more of their income from taxation.
Tax bracket adjustments
In addition to the higher standard deduction, the IRS also adjusted tax brackets to account for inflation. This adjustment effectively moved some taxpayers into a lower tax bracket, reducing their overall tax burden even if their income increased slightly from the previous year.
What do these amendments mean for taxpayers?
For many Americans, these adjustments resulted in lower tax bills or higher refunds for the 2024 tax year. However, it’s worth noting that a bigger return isn’t necessarily a financial win—it means you gave the government an interest-free loan for a year.
Financial advisors often recommend adjusting your tax withholding if you consistently receive large tax refunds. This allows you to access more of your money throughout the year, potentially using it for investments or to pay down debt.
If you haven’t applied yet, today is the last day you can apply for an extension . Remember, it’s always better to file (even if you can’t pay the debt) than not to file at all. Penalties for failure to file are significantly higher and can lead to much more serious consequences.