Anticipating Larger Tax Refunds in 2024 Amidst New IRS Adjustments and Challenges

As the 2024 tax filing season kicks off, Americans are preparing for a potentially contrasting experience from the previous year, with experts forecasting larger tax refunds. After a dip in 2023, attributed in part to the expiration of pandemic-era federal benefits, there’s optimism that some individuals may see refunds increase by up to 10%. This expectation follows a year where the average tax refund dropped by nearly 3%, prompting concerns about the financial well-being of households heavily reliant on this annual injection of cash.

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Fluctuating Trends in Tax Refunds

The 2023 tax season marked a downturn, with the average tax refund totaling $3,167, a nearly 3% decline from the prior year. However, 2022 witnessed a substantial 15.5% surge, reaching almost $3,300, largely fueled by expanded tax credits, particularly the Child Tax Credit. This fluctuation, coupled with the economic impact of high inflation, underscores the financial significance of tax refunds for many Americans, often exceeding their typical annual income.

Paradoxically, the current inflationary environment may contribute to larger refunds in 2024. The IRS responded to inflation in 2023 by adjusting the standard deduction and increasing tax brackets by 7.1%. Mark Steber of Jackson Hewitt predicts potential refunds to grow by up to 10%, particularly benefiting middle- and lower-income workers who may not have kept pace with inflation.

To help taxpayers navigate these potential changes, various tax preparation companies and financial websites offer tools like the 2024 tax refund calculator. This enables individuals to estimate their refunds, acknowledging the uncertainty surrounding the upcoming tax season.

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Navigating Challenges and Opportunities

Despite the optimistic outlook, not all taxpayers are expected to enjoy larger refunds. Those who took on additional income sources to offset rising costs may find themselves owing taxes this year. However, certain groups, including homeowners utilizing expanded home energy tax credits and low-income families benefiting from the expanded Earned Income Tax Credit, may see an increase in refunds.

As the IRS initiates the tax filing season on January 29, individuals should be prepared for both the possibility of increased refunds and the challenges presented by the evolving tax landscape in 2024. With a deadline of April 15 for most taxpayers (with the option to request an extension until mid-October), the upcoming months will unfold the dynamics of this year’s tax season.

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