Your federal tax refund is probably going to shrink. But your state refund could go up
Chances are your federal income tax refund this year is going to be a lot less than it was last year.
But your state refund could be higher.
New federal Internal Revenue Service data show that through the end of March, federal tax refunds are averaging $2,878, down 9.3% from the $3,175 recorded at this time last year.
But the average California income tax refund so far in 2023 is $1,220, up from $1,030 at this point in 2022, an 18.5% increase.
Taxpayers in most of the country must file their federal returns by Tuesday. In California, because of the weather-related problems this winter and spring, the deadline for federal and state returns in most counties has been extended to October 16.
People seeking refunds tend to file as soon as possible, and they’ll find varied reasons for the difference in refund trends.
“Tax refunds are down this year due to the expiration of COVID-19-related tax relief,” said Chris Lewis, Miami-based head of data and research at FinanceBuzz, a website that aims to help people make finance decisions..
Federal taxes in 2022 no longer include many of the Covid pandemic’s breaks. Gone is the boost in the child tax credit, which provided up to $3,600 per child to qualifying parents. Also reduced was the tax credit for child care.
Charitable deductions are now generally available only to those who itemize, and the earned income tax credit, a break aimed at helping lower and moderate income people, has been scaled back.
Refunds also could drop because many people were able to claim their Covid-inspired economic stimulus payments on their 2022 return.
So far, the IRS is issuing refunds this year at roughly the same pace as last year — 69 million refunds, down only slightly from last year’s 70 million. About 70% of filers so far have received refunds.
In California, officials are reluctant to attribute the increase in refund amounts to any trends.
“Refunds are a function of how much tax liability taxpayers are expected to have when making payments, compared to/with how much liability they end up actually having,” said H.D. Palmer, spokesman for the state Department of Finance.
As a result, he said, “refunds may simply reflect a mismatch or miscalculation between a taxpayer’s expected liability and their actual liability, which is likely in a year that’s particularly strong or weak.”
Not included in the refund total is the Middle Class Tax Refund that went to taxpayers last year.
Californians with 2020 adjusted gross incomes of less than $250,000 for single filers and of less than $500,000 for joint filers and heads of household could receive a payment. Couples filing jointly could get up to $1,050 if they had dependents and their income was less than $150,000.
.jpg)