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Tax Refunds: Factors that Affect the Amount You’ll Receive

Matthew Levy Updated: July 2, 2023 • 4 min read
doing tax returns

The amount of money the IRS repays you depends on a variety of factors, including your income, your deductions, and even the state you live in.
According to the IRS, about 74% of filers get a return from the IRS. The average refund in 2020 was $2,549, slightly down from the average 2019 amount of $2,870. The biggest tax refunds are found in Wyoming, where residents received an average of $5,027, while the lowest amount is found in Maine, at $2,572.

Many Americans are unaware that the size of your tax return and how your taxes are affected are really determined by several factors, ranging from the income you made throughout the year, your filing status, deductions you may be able to claim, tax credits, and the amount of withholding throughout the year.

Lets explore the factors that affect the amount of your tax refund.

income tax amount determined


One of the biggest factors affecting how much you pay in taxes and the size of your tax refund is your income.  The US uses a progressive income tax system. Meaning, the more money you make, the more income tax you typically owe. The good news is that, as your income increases, you may also be eligible for more deductions and credits on assets like real estate and investments, which can help reduce your taxable income and increase your tax return.

Filing Status

Your filing status can also impact the size of your tax return. The five filing statuses are single, married filing jointly, married filing separately, head of household, and qualifying widow(er). Each status has its own tax bracket and set of deductions and credits, so it's essential to choose the right one for your situation. For example, married couples typically receive a larger tax return when filing jointly compared to filing separately.

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Deductions can also play a role in the size of your tax return. Deductions reduce your taxable income, meaning that you'll owe less in taxes and receive a larger tax return. There are two types of deductions: standard deductions and itemized deductions. The standard deduction is a set amount based on your filing status, and most people opt for this option. Itemized deductions are specific expenses you incurred during the year, such as mortgage interest, state and local taxes, medical expenses, and charitable contributions. If your itemized deductions exceed the standard deduction, you may benefit from itemizing your deductions.


Like deductions, credits also reduce your taxable income, increasing your tax return. Many different tax credits are available, including the Child Tax Credit (for those with children under the age of 17), Education Credits (for example, if you're currently paying college tuition), Earned Income Tax Credit (for low earning families), and others. These credits are mainly designed to help lower-income taxpayers and those with children, so it's important to research which credits you may be eligible for and claim them on your tax return.

tax credits eligible for


Withholding refers to the amount of money taken out of each of your paychecks to go towards taxes, and a significant amount is usually accredited to something referred to as "FITW." What is FITW? FITW stands for Federal Income Tax Withholding. The amount of FITW is based on the information you provide on your W-4 form, the tax form your employer provides you typically when you first start working. When you fill out your W-4, you indicate your filing status, number of exemptions, and additional withholding amount.

The purpose of FITW is to help ensure that you pay the appropriate amount of taxes throughout the year, rather than owing a large amount at tax return time, which can be a strain on your finances. That being said, it's important to review your withholding throughout the year, as life changes such as a new job or a new baby can impact how much you owe in taxes. If too much money is withheld, you may receive a larger tax return, but you'll also have less money in each paycheck throughout the year. If too little is withheld, you may owe taxes at the end of the year and not receive a tax return at all.

Remember that this is not necessarily bad – if you receive no money back after filing your tax return, that simply means you paid the exact right amount of taxes throughout the year.

In Summary

Whether or not you receive a large tax return can be attributed to many factors, including your income, filing status, deductions, credits, and withholding amount, as noted above. If you understand these factors, take advantage of deductions and credits available, you're in line to maximize your tax return and ensure the optimal outcome for your finances. Of course, if you have any questions or think you might be beyond your skill level in figuring out your own taxes, it is always best to consult a tax professional or utilize trusted tax software to ensure that you are paying the least amount of taxes possible.

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Written by Matthew Levy

Matthew is a freelance financial copywriter with 14+ years in financial services. He holds a Bachelor of Science degree in Economics with business and finance options and is a CFA Charterholder. He is from Vancouver, Canada, but writes from all over the world.