The US State With The Highest Average Tax Refunds

Tax season is officially on the horizon and, for many, that can mean expecting a much-needed tax refund. As a quick refresher, your annual tax return (also known as IRS Form 1040), can help you determine not just how much money you earned in a given tax year, but also how much you paid in taxes. For those who determine they exceeded their obligated tax amount, the federal government issues tax refund checks for the amount you overpaid. These lump sums can be a welcomed financial boon after the additional financial expenses generally associated with the holiday season.

While not all taxpayers will receive a refund, 75% of filers reported expecting a refund, according to a 2024 Intuit Credit Karma survey. This money can be especially significant for consumers in light of ever rising costs and stubborn inflation. In fact, 37% of respondents reported that they would be using some or all of their refund amount in order to pay for necessities. According to IRS data, 120.9 million refunds were issued for the 2023 tax year, amounting to more than $461.2 billion. While there is a lot to know about the upcoming 2025 tax refund process, you might be surprised to learn that tax refund amounts are not equal across the country. In fact residents in certain states might be able to expect more (or less) refund amounts than other states. According to a 2024 report from LendingTree looking at average tax refunds, Wyoming was the state with the highest average tax refund.

According to a LendingTree tax analysis of the latest available full-year data (which is 2021), Wyoming residents enjoyed the largest tax refund average in the country for the fourth year in a row. Wyoming filers had an average refund of $5,914, which was a 21% increase compared to 2020 refund numbers. However, Wyoming taxpayers also experienced the largest tax bills by those who ended up owing money, with an average of $10,551 owed. It's worth mentioning that tax refund amounts were up across the country. In fact, the average refund amount for tax year 2021 in the U.S. was up 14% compared to 2020.

However, 2020 and 2021 data, in particular, can be difficult to single out given the impact of the COVID-19 pandemic. As Matt Schulz, a LendingTree chief credit analyst explained on the site, "COVID-19 turned everything upside down, and with all that upheaval came pandemic-era tax breaks that led to more people having bigger returns." Not to mention the other economic factors during those years that further impacted refund amounts. Schulz added, "Also, it's possible that high unemployment during that period led to people falling into lower tax brackets, changing their tax liability overall." While subsequent years might not experience the same spike in refund amounts, any increase at all could be significant for the millions of Americans financially struggling in the wake of inflation and increasing costs. This is especially true for the 40% of survey respondents who reported relying on their refund amount in 2024 and the 44% who reported needing their refund amount to pay off debt.

If you find yourself wondering why certain states have higher average tax refunds than others, the answer is largely tied to income. States with higher average incomes are more likely to receive larger tax refunds because those earning more generally have higher withholding amounts throughout the year. On the flip side, lower-income states like Maine, Oregon, and Vermont tend to have lower average refund amounts since they generally have less money to send to the IRS throughout the year. As LendingTree analyst, Matt Schulz, explained to CBS News, "One of the things that you notice [...] is that you do tend to see higher income states and lower income states kind of glued together in a lot of ways."

With that in mind, some IRS-level changes are also partially behind the overall increase in refund amounts. According to CNBC, the average federal income tax refund in 2024 was $2,850, which represented an increase of 3.5% compared to 2023. However, the IRS raised both their standard deduction amount and their tax brackets by 7% in 2023 in order to adjust for inflation. This change placed some filers into lower tax brackets than before while also allowing other filers to deduct more of their income when not itemizing. These bracket changes occur every year, as the IRS attempts to account for inflation rates in order to not unfairly penalize taxpayers that might be pushed into higher tax brackets due to the impact of cost-of-living adjustments.