Understanding the Decline in Your Tax Refund This Year
Why Tax Refunds Are Lower This Year
Many taxpayers in the USA and Canada have noticed a significant drop in their tax refunds in 2024. This trend can be attributed to several factors, including changes in tax laws, adjustments in withholding, and the expiration of pandemic-related tax benefits.
Key Factors Influencing Lower Tax Refunds:
- Expiration of Pandemic Relief Programs:
During the pandemic, various relief programs, such as stimulus payments and enhanced child tax credits, provided substantial tax benefits. With these programs now expired, taxpayers are seeing lower refunds.
- Changes in Withholding:
If you received a salary increase but did not adjust your tax withholding accordingly, you might owe more taxes, resulting in a smaller refund.
- Increased Income from Gig Economy and Investments:
Many individuals have earned additional income through gig work or investments. Without corresponding estimated tax payments, this can lead to higher tax liabilities and lower refunds.
Statistics Highlighting the Trend
- The average tax refund issued by the IRS through February 2024 was $1,395, compared to $1,963 at the same time last year.
- The IRS expects to process over 128.7 million individual tax returns by the April 15 deadline, with three out of four filers typically receiving a refund.
What Can You Do
To avoid surprises in your tax refund, consider the following steps:
- Adjust Your Withholding:
Review and adjust your W-4 form to ensure the correct amount of tax is withheld from your paycheck.
- Plan for Estimated Taxes:
If you have additional income from freelance work or investments, make estimated tax payments throughout the year.
Tax laws can be complex and ever-changing. Consulting with a tax professional can help you navigate these changes and optimize your tax situation.
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