While 3 out of 4 Americans will receive an IRS tax refund this year, not all refunds are the same. According to a recent analysis of IRS data from the Lending Tree financial site, residents of certain states often receive larger checks than others.
The largest tax returns are in Wyoming, where residents received an average of $ 5,027, according to the most recent data available, which is from 2019. The second largest tax returns were for Connecticut residents, with an average check for $ 4,461, while New York residents earned an average of $ 4,444, placing the Empire State in third place, according to the analysis.
In comparison, the average U.S. tax refund in 2019 was $ 3,651. (As of early April this year, the average tax refund for the current fiscal season is about $ 3,200, the IRS said earlier this month).
According to LendingTree chief credit analyst Matt Schulz, the range of tax refunds comes from income differences. Residents of states that typically have higher average incomes are likely to get higher refunds, as the size usually depends on how much you paid in taxes throughout the year to the IRS. People with higher incomes have more withholdings from their taxes and can therefore see larger refund checks when tax time arrives.
“One of the things you notice when you look at this report is that you tend to see higher-income statements and lower-income statements stuck in a lot of ways,” Schulz said.
Wyoming, however, has lower average family incomes than Connecticut or New York, according to the Federal Reserve Bank of St. Louis. The median income for a household in Wyoming is about $ 65,000, compared to about $ 79,000 for Connecticut residents. But Wyoming also has one in the nation greater income disparitieswith a concentration of extremely wealthy residents grouped in cities like Jackson Hole.
On the other hand, residents in lower-income states tend to see lower average reimbursements. With less money to send to the IRS on every paycheck, they tend to get less at the time of tax. Maine residents receive the lowest reimbursements of $ 2,752, while other states with below-average reimbursements include Oregon, Vermont and Iowa.
Where more people owe
While most Americans receive a refund, a significant portion of taxpayers end up owed to the IRS - about 21% of taxpayers end up sending a payment to the tax agency. The average amount owed is $ 5,893, Lending Tree said.
As with refunds, higher payments by the state are tied to revenue. Massachusetts residents had the highest payments, according to Lending Tree, with an average tax bill of $ 7,605. Wyoming residents had the second largest tax bill, at $ 7,541. Washington State residents ranked third, averaging $ 7,145.
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Tax refunds may seem unexpected, but it really means you've lost the use of that money over the next year, Schulz said.
“With anything with money, there’s the math part, and then there’s the psychology part,” he noted. "From a mathematical point of view, it's definitely better not to get a big repayment because it just means you're giving an interest-free loan to the government when you could put that money to work yourself."
But from a psychological standpoint, some people may find it helpful to obtain a check at the time of tax, as they may use it to pay off debt or start an emergency savings fund, which may not be disciplined. to face during the year.
“One of the oldest tips on money is the best, which is‘ get to know yourself, ’” Schulz noted.
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