Tax refunds can offer a much-needed boost to your finances, but they’re not always consistent. Your geographical location, local tax policies, income bracket, and other factors can influence the amount you get back. In recent years, the process of managing tax refunds has undergone significant shifts, prompting MoneyBot5000.com to conduct an in-depth study on the current state and future outlook of tax refunds. Our objective was to explore the evolving dynamics and provide insights that empower taxpayers to make informed decisions about how to allocate tax refunds.

The landscape of tax refunds in 2025 is marked by noticeable changes. It appears from the reports released about 2025 tax returns from the IRS, while the overall number of refunds is declining, there is a notable increase in the average refund amount for those who receive one. This trend underscores the changing nature of tax filings and highlights the need for strategic planning to maximize benefits. Our study delves into these phenomena, offering a comprehensive understanding of how taxpayers can navigate these changes effectively.

First, we explored the changes in tax returns and found that fewer people have received large tax refunds in recent years. Then, we dug into the data to explore how tax returns vary across the US and how factors like geographic location and income bracket can affect the amount of your tax refund.

Finally, we looked at how best to spend your tax refund and other ways to grow your wealth, like accessing unclaimed assets and receiving personalized financial strategies.

So, here’s everything you need to know about tax refunds.

Tax refund trends: Fewer people, higher amounts

Tax returns have dropped by nearly 5% on average, but the average refund amount has increased by about 2%, reaching over $2,600 so far in 2025.

This can be caused by several factors, like changes in tax withholding, moving to a higher income bracket, and new tax credits and deduction policies. For example, during the COVID-19 pandemic, the US government issued stimulus payments that could be claimed through ‘Recovery Rebate Credit’ when people filed their tax return.

But it’s not just about the numbers—it’s about what these refunds can mean for your personal finances. A larger refund can be a valuable financial asset, offering a chance to pay down debt, build an emergency savings fund, or even make an investment in your future. For many, these lump sum payments can act as a financial reset, providing an opportunity to get ahead on financial goals or cover unexpected expenses.

Whether you’re getting a large refund or not, understanding how tax changes can affect you—and taking the right steps to adjust accordingly—can help you make the most of your financial situation.

To understand these tax patterns further, we analyzed tax return data by state.

How Big of a Refund Should You Expect?

The size of your refund can vary depending on a variety of factors—your income, deductions, and credits, to name a few. But did you know that where you live can also play a significant role in determining your refund?

Tax refunds differ not only by individual circumstances but also by state. In some states, taxpayers are seeing larger refunds, while in others, the amount might be more modest. Whether it’s due to state-specific tax laws, the cost of living in the area, or local credits, understanding how your state impacts your refund can help you better plan for tax season.

Here is a breakdown of the average tax return in each state in the US, based on the IRS records from past tax seasons. The average nationally came to around $5,000, with the highest state average being nearly $10,000 and the lowest just shy of $3,000.

The top 10 states with the highest state average tax refunds are: Wyoming ($9,957), Mississippi ($8,006), Nevada ($7,829), Florida ($6,754), Utah ($6,638), Texas ($6,389), Nebraska ($5,836), Idaho ($5,829), Illinois ($5,563), and Indiana ($5,510) . The 10 states with the lowest average tax refunds are North Carolina ($4,391), Oregon ($4,363), Kentucky ($4,290), Alaska ($4,281), New Jersey ($3,989), New Mexico ($3,907), California ($3,898), Delaware ($3,884), Hawaii ($3,871), and Alabama ($2,821) with the lowest state average tax refund.

Average State Tax Refunds by Income Brackets

Beyond analyzing the average tax return for each state across the US, we dug deeper to break down the tax refunds into different income brackets, to better understand what one might expect for their own tax refund.

This map highlights various income brackets starting at $1 and going up to more than $1,000,000. The average tax return is calculated for each income bracket in each state, showing how the amounts differ across income classes and geographical locations.

In addition to having the highest state average tax return, Wyoming also has the highest average tax return in the largest income bracket, at about $71,000. This is close to the median US household income. In most states, the biggest income bracket has a substantially larger average return compared to the smaller brackets. For example, the smaller income brackets in Mississippi have an average tax return of around $1,000-$7,000. In contrast, the largest income bracket in the state has an average tax return of around $54,000. However, states with the highest median incomes don’t necessarily have the biggest tax returns. For example, states like Massachusetts, New York, and California don’t even feature in the top 10.

Tips for Strategizing your Refund

For those navigating their tax refunds, strategic planning is crucial. The MoneyBot5000.com Spending Tracker feature is a helpful feature that can make planning easy. It analyzes data to offer personalized advice for various income brackets. For low-income individuals, strategies may focus on debt reduction or building an emergency fund. Mid-income earners might consider a mix of saving and investing, while high-income individuals could explore diverse investment portfolios or charitable contributions.

The tool offers specific guidance for different life situations. Families with children might prioritize educational savings or family emergency funds. Singles could focus on personal investments or travel savings. Each recommendation is tailored to ensure that users maximize the potential of their refunds according to their specific needs and goals. Here are some examples of recommendations:

 

Retiree with a $1K Refund

User: How should a retiree spend a $1,000 tax refund?

MoneyBot5000.com: A retiree can effectively utilize a $1,000 tax refund check in several beneficial ways. First, consider adding to an emergency fund to ensure financial stability for unexpected expenses. Next, paying down any outstanding debt, such as credit cards or loans, can enhance financial freedom. If debt is not a concern, allocating funds towards healthcare expenses or insurance premiums can provide peace of mind. Additionally, investing in a hobby or activity that promotes well-being can enhance quality of life.

Lastly, consider contributing to a retirement account or savings for future needs, ensuring long-term financial security.

 

Single Person with a $5k Refund

User: How should a single person spend a $5,000 tax refund check?

MoneyBot5000.com: A single person can utilize a $5,000 tax refund check in several impactful ways. First, consider building or enhancing an emergency fund to cover 3-6 months of living expenses, providing financial security. Next, paying off high-interest debt, such as credit card balances, can lead to significant savings over time. If debt is manageable, investing in a retirement account, like an IRA, can help secure long-term financial health. Additionally, allocating some funds for personal development, such as education or skills training, can enhance career prospects. Lastly, setting aside a portion for leisure activities or travel can contribute to overall well-being and life

 

Family with 2 Children and a $10K Refund

User: How should a family with two kids spend a $10,000 tax refund

MoneyBot5000.com: A family with two kids can consider several options for spending a $10,000 tax refund check. Prioritizing financial stability is key. First, consider building or adding to an emergency fund, ideally covering 3-6 months of expenses. Next, paying down high-interest debt, such as credit cards, can save money in the long run. If those areas are secure, investing in a 529 college savings plan for the children’s education can be beneficial. Additionally, allocating some funds for family experiences, like a vacation or activities, can enhance family bonding. Lastly, consider contributing to retirement accounts to secure long-term financial

 

Single Parent with 1 Child and a $550 Refund

User: How should a single parent with one child spend a $550 tax refund?

MoneyBot5000.com: A single parent with one child can make the most of a $550 tax refund check by focusing on both immediate needs and future planning. First, consider setting aside a portion for an emergency fund to cover unexpected expenses. Next, paying down any high interest debt, such as credit card balances, can provide financial relief. If debt is manageable, investing in a child’s education savings account can be a wise choice for future educational expenses. Additionally, allocating some funds for essential needs, such as clothing or school supplies, can be beneficial. Lastly, consider using a small portion for a family activity or outing to strengthen bonds and create lasting memories.

While today’s internet age offers the best financial tools at your fingertips, we recommend consulting a financial advisor to get more personalized guidance backed by a deep understanding of the market and decades of experience. Combining expert advice with MoneyBot5000.com’s recommendations can provide a balanced approach, equipping you with the knowledge and tools to make the most informed financial decisions.

Methodology

1. The Weekly filling season data from 2025 were aggregated and averaged providing an overview of the year’s trend.
2. We gathered Individual income and tax data, by state and size of adjusted gross income from IRS Website from 2022 and crafted needed formulas to uncover desired insights
3. The comprehensive dataset was gathered from the IRS website and processed using MoneyBot5000.com’s advanced algorithms, allowing us to present the resulting insights to you clearly.