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Which US states have the biggest average tax refund in 2023?

The IRS has been sending out tax refunds for the last month with the average amount paid varying between different states.

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The US tax system allows taxpayers to receive tax refunds if they have overpaid their taxes during the year. The size of the refund depends on various factors, including the amount of taxes paid, the amount of income earned, and the amount of deductions and credits claimed. Each state has different taxation laws, meaning the size of refunds will vary wildly.

Statistics released by the IRS on 3 March show the average refund for people filing taxes this year is $3,028, around 11% lower than it was at this stage last year. However, this average vary wildly depending on state. By looking at tax refund data from 2020, the last year with full data, we can see which states are more generous in refunds and why that is.

The US states with the largest tax refunds

The average refund for the 2020 tax year was $3,745.

  1. Wyoming - $4,877
  2. District of Columbia - $4,462
  3. Florida - $4,337
  4. Texas - $4,317
  5. Connecticut - $4,280
  6. New York - $4,189
  7. Massachusetts - $4,119
  8. Nevada - $4,099
  9. Washington - $4,049
  10. California - $4,030

Why is the data so varied?

Each state has its own tax rates, which can affect the amount of taxes owed and the amount of the refund. States with higher tax rates may result in larger refunds for taxpayers who overpaid during the year.

States may offer tax credits and deductions that are not available at the federal level. For example, the covid-19 pandemic led to many states organising different support structures outside of the federal level. In two cases, California organised the Middle Class Tax Refund to help its residents while Pennsylvania organised property tax rebates. This tax support is reflected in the data.

It’s important to note that while a large tax refund may seem like a good thing, it actually means that the taxpayer has overpaid their taxes throughout the year.