A Shocking 32% Decline in Tax Refunds: Here’s How to Protect Your Money
If you’re counting on a big tax refund this year, you might be in for a rude awakening. New IRS data shows that the average tax refund for 2025 is down by 32% compared to last year. That sounds alarming, but before you start worrying, let’s take a closer look at what’s really going on.
The Numbers: What’s Actually Happening?
So far, the IRS has processed about 23.5 million tax returns and has sent out more than 8 million refunds. The average refund right now is $2,065—which is actually higher than the $1,741 average refund at this same time last year.
So why is there all this talk about refunds being down 32%? The truth is, it’s a little more complicated than just one number.
Three Big Reasons Your Refund Might Be Smaller
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Early Filers Usually Get Bigger Refunds
The people who file their taxes in the first few weeks of the season are usually those expecting large refunds. These tend to be taxpayers who qualify for big credits or had too much taken out of their paychecks. As more returns are filed closer to the April deadline, the average refund amount tends to drop. -
You May Have Gotten More Money in Your Paychecks Instead
If you’re getting a smaller refund, it doesn’t necessarily mean you paid more in taxes. Some people may have had more accurate withholdings throughout 2024, meaning they took home more money in each paycheck and are now seeing a smaller refund as a result. -
The Economy and Tax Law Changes Are Playing a Role
Your refund depends on a lot of things—your income, tax credits, deductions, and any changes in tax laws. If you made more money, changed jobs, or had different deductions than last year, that could impact how much you’re getting back.
Could Refund Delays Be Another Problem?
Another thing to consider is that the IRS is dealing with some challenges of its own. Reports suggest they might be cutting up to 7,000 jobs, which could slow down tax return processing times. If your refund is taking longer than expected, that might be part of the reason.
How to Make Sure You Get Your Refund ASAP
- File electronically and choose direct deposit to speed up the process.
- Double-check your tax return to avoid mistakes that could delay your refund.
- Use the IRS “Where’s My Refund?” tool to track your status.
- Ignore social media tax “hacks.” The IRS has warned that bad advice online could actually cause delays.
Bottom Line
Yes, refunds are looking lower this year, but the situation isn’t as bad as it sounds. As more people file, the average refund may shift. The best thing you can do? File early, be accurate, and use direct deposit to get your refund as fast as possible.
