Americans received a financial boost as the Internal Revenue Service (IRS) issued higher average tax refunds than in the previous year. As of February 23, the average refund stood at $3,213, marking a 4% increase from the same period last year. This uplift comes as a relief to many households that faced reduced refunds last year due to the expiration of pandemic-related benefits, at a time when inflation pressures were already impacting finances. The increase in this year’s refunds is attributed to the IRS adjusting various tax provisions for inflation, including a 7% rise in the standard deduction and tax brackets for the 2023 tax year.
Financial experts, including Jackson Hewitt’s chief tax information officer Mark Steber, predict that workers whose salaries did not match the high inflation rates of the previous year could see up to a 10% increase in their tax refunds for 2024. This adjustment is expected to benefit taxpayers by applying more of their income to lower tax rates, thanks to inflation-linked adjustments to the tax code such as the standard deduction and the Earned Income Tax Credit (EITC).
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Despite the positive trend in refund amounts so far, it’s noted that taxpayers are still receiving less than they did two years ago when pandemic-era benefits like the expanded child tax credit were in effect. However, refunds are generally higher than those issued during the tax seasons from 2018 to 2021. With the tax filing deadline of April 15 approaching, the size of the average tax refund may continue to evolve, but the early figures suggest a potential economic uplift as many Americans use their refunds for significant purchases or to improve their financial health.
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