The Average Tax Refund Each Year, And How Refunds Work

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The average tax refund tends to be just over $3,000, but that number might climb to north of $4,000 in 2026, thanks to the massive tax bill that became law in 2025. That law included a higher standard deduction amount, more generous tax brackets and other changes that will reduce taxes for some taxpayers.

All told, the average tax refund could rise by as much as $675 to $1,000 this year for some taxpayers, according to a few different estimates. The average tax refund in 2025 was $3,167, a 0.9% increase from $3,138 in 2024, according to IRS data.

Of course, the amount of your tax refund will depend on your specific financial situation and which tax breaks you qualify for. Some of the tax-law changes that went into effect in 2025 include:

A majority of taxpayers do end up with a tax refund: About two-thirds of returns (63%) filed in 2025 resulted in tax refunds, according to IRS data.

But a big tax refund isn’t always the best financial result. Read on to find out the average tax refund by year, and why a small refund can be a good thing.

The average tax refund by year

Every year, everyone’s tax return, and tax refund, comes out a little different. This is a result of many factors, including tax laws, annual IRS inflation adjustments (such as for the standard deduction) and more. Here’s the average tax refund since 2015:

How tax refunds work

As a U.S. taxpayer, you must pay a portion of your earnings to the federal government to meet your tax obligations. Your employer is responsible for collecting taxes from every paycheck and paying the IRS on your behalf. If you’re self-employed, you’re responsible for paying estimated taxes.

How much you pay in federal taxes each paycheck depends on your earnings and how you fill out IRS Form W-4, which determines how much in taxes your employer withholds from your paycheck.

In addition, taxes for Social Security and Medicare are withheld from your paychecks. These are called FICA taxes, for Federal Insurance Contributions Act. The current rate for FICA taxes is 7.65%: 6.2% for Social Security (listed as OASDI taxes on your pay stub) and 1.45% for Medicare. You pay this rate, and your employer pays the same amount on your behalf.

If you’re self-employed, you need to pay both halves, for a total rate of 15.3%.

There is a wage ceiling for Social Security taxes, which means that Social Security taxes aren’t levied on income above that limit. For 2026, it’s $184,500, up from $176,100 in 2025. Gross income above that threshold is exempt from Social Security taxes.

When it’s time to file your taxes, you tally your income, take any tax deductions you might qualify for, see what your total tax obligation is for the year, and then reduce it with any tax credits you can claim. If you had too much money withheld from your pay, the IRS owes you a refund. If too little was deducted from your pay, you owe the IRS the difference.

A small tax refund can be a good thing

It’s nice to see a tax refund show up in your bank account, especially if it’s a sizable one. But a big refund means that over the previous year, you gave the IRS more money than you had to. That means your paychecks were smaller than necessary. And when the IRS sends you a refund, it doesn’t come with interest.

On the other hand, if you owe the IRS at tax time, it means you’re not having enough taxes withheld from your pay throughout the year. While it may be nice to have that extra money every pay period, you’ll have to write a check to the IRS, and if you underpaid by a significant amount, you may owe penalties and interest.

Ideally, you want your tax bill to come out to $0 or very close to it. If you’re paying the IRS too little or too much throughout the year, adjust your W-4. If you’re not sure how, check out the IRS’s tax withholding estimator to figure out exactly how much to have withheld from each paycheck.

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