Expecting Another Big Tax Refund Next Year? Don’t Hold Your Breath

Throughout the COVID-19 pandemic, the federal government provided relief through a number of programs meant to help Americans make it through an uncertain and stressful period of time. Now that the worse of the global health crisis is (hopefully) behind us, those forms of assistance are rapidly drying up.

As a result, millions of individuals and families that had become accustomed to receiving enlarged tax refunds over the past couple of years could be unpleasantly surprised when they file their 2023 returns.

What you should expect

According to Jackson Hewitt Chief Tax Information Officer Mark Steber, there are a number of reasons that tax refunds will be generally smaller next year. Several governmental benefits helped send the average size of a 2022 tax refund up to $3,200, which is about 14% higher than it was in 2021.

These factors include a more robust child tax credit, stimulus checks, and a host of more specific programs aimed at Americans from virtually all walks of life.

Most of them have either shrunk significantly or completely evaporated this year, however, and folks suffering from the impact of runaway inflation aren’t likely to get too much relief from the IRS.

Several specific factors

Experts believe next year’s average tax refund will be about $500 less than it was this year, putting it on par with the 2021 level. Of course, there are plenty of variables that will determine your particular situation.

In addition to the smaller child tax credit and absence of stimulus checks, here are some things to keep in mind:

• The maximum Child and Dependent Care Tax Credit fell by nearly two-thirds.
• The Earned Income Tax Credit is also way down.
• Contributing to a pre-tax contribution retirement account might help boost your refund.

Chris Agee December 10th, 2022

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