A financial expert has explained that some families may receive more gains due to inflation rates. Refunds generally occur if a taxpayer overpaid during the previous year or had too much money withheld. Last year, the average refund for U.S. families remained relatively high at $3,176. But it was down about three percent from 2022.
In 2024, Steber predicts the average should shoot up about 10%. That’s roughly a $300 to $400 increase for many taxpayers. Rampant inflation rates from 2023 may have helped U.S. residents crucially this tax season.
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So how does this work? The IRS adjusts the federal income tax bracket and standard deduction each year. And when inflation is high, the bracket increases. Those increases were significant for this tax season, about 7.1%. That means it was higher than the 5.5% earnings increase for the average American in 2023, according to Fox Business. The bracket increases are intended to mitigate what is known as “bracket creep” due to inflation.
TAX REFUND IN 2024
It occurs when certain taxpayers are pushed to a higher income level but still have the same “purchasing power” despite price increases for goods and services.
Steber asserted that bracket creep protection is crucial.
“For any taxpayer who didn’t make more money and didn’t beat inflation, without this adjustment, they have even less money, but now they’re paying even more taxes without these inflationary adjustments that the IRS is making,” he said.
With the expected 10% increase, Steber added that low- to moderate-income families could especially benefit since “there wasn’t a lot of good news” for them with the rise in inflation last year.
“There’s not a lot of good news for low- and moderate-income people who didn’t keep pace with inflation, and that’s a lot of people,” he told Fox Business.
“This is not an outlier group. Those people should see a little better situation on their taxes this year.”
The IRS has estimated about 128.7 million returns this year.
The deadline for most taxpayers to file is April 15, 2024.
It is also critical that those who expect to get a refund within 21 days file their taxes electronically.
Taxpayers should make sure their returns are accurate and complete, seeking expert help as needed.
Still, the IRS cautioned that some filings may require “additional review” with errors or suspected theft or fraud .