Will Your Tax Refund Be Smaller in 2023?

Quick Answer

According to early IRS data, the average tax refund will be about 11% smaller in 2023 versus 2022, largely due to the end of pandemic-related tax credits and deductions.

Man calculating his tax refund for the current tax season, sitting at a beautiful wood desk.

Will your tax refund be smaller in 2023? About halfway through the 2023 tax filing season (for 2022 taxes), the IRS reported the average refund was down 11.2%: $3,140 per taxpayer in 2023 compared with $3,241 in 2022.

Your refund may be smaller this year because of pandemic-related tax credits and deductions sunsetting, along with other factors that may play a role. Here's how your tax refund might change on your 2022 taxes.

Why Is Your Refund Smaller in 2023?

One reason your refund may be smaller this year is that pandemic-related tax credits and tax rule changes temporarily increased your tax refund last year. Among the key differences for 2022 taxes:

  • There are no more Economic Impact (stimulus) Payments. The federal government didn't issue any stimulus payments in 2022, so it's no longer possible to claim one on your 2022 taxes.
  • Child tax credits are back to normal. During COVID-19, parents claimed up to $3,600 per child in dollar-for-dollar tax child tax credits. In 2022, the child tax credit reverted to pre-pandemic levels: $2,000 per child.
  • Child and dependent care credits are lower. Under the American Rescue Plan this credit was as high as $8,000. Now, it's returned to its pre-COVID levels. Parents can receive a credit for up to 35% of up to $6,000 in qualifying care expenses for two or more children, or 35% of up to $3,000 for one child.
  • The earned income tax credit (EITC) drops if you don't have kids. During the pandemic, low-income taxpayers without children were eligible to receive a tax credit of up to $1,502. For 2022, this credit tops out at $560 for people without children.
  • Charitable contributions aren't deductible unless you itemize. In 2021, a special rule made it possible to deduct charity contributions even if you took the standard deduction. That rule no longer applies for the 2022 tax year.

Other Reasons Your Refund May Be Smaller

Changes to your income and withholding may also affect the size of your return. Although these factors aren't specific to the 2022 tax year, they may have an impact on this year's tax refund if they apply to you.

  • Reduced withholdings: If you reduced the amount of money withheld from your paychecks—maybe in response to tax changes in the prior year—you're likely to get less back at tax time.
  • Added a side gig: Income from a side hustle will increase your tax bill. If you didn't pay quarterly estimates throughout the year, or your estimates were low, you are likely to owe.
  • Sold investments: Capital gains on the profitable sale of investments, including real estate, are taxable.
  • No student loan interest deductions: If you paid off your student loans or no longer meet IRS income requirements for deducting interest, your student loan interest deduction may have changed.
  • Decreased retirement contributions: Contributing less to your employer's traditional 401(k) plan or a traditional IRA increases your adjusted gross income and raises your tax bill.
  • Changed filing status: Any change in your filing status—single, head of household, married filing separately or married filing jointly—can change the way your tax liability is calculated and the amount of tax you owe.

How to Prepare for Tax Season

Preparing for this—or any—tax season and getting the refund you're entitled to is a matter of following a few basic steps.

1. Get Your Records in Order

Gather up your W-2, 1099 forms and any other documents you'll need to prepare and file your taxes. Throughout the year, be sure to save receipts for deductible expenses and any correspondence you receive from the IRS or your state taxing authority.

2. Meet With a Tax Professional

Although tax preparation software (or your own individual know-how) can help you do your own taxes efficiently, meeting with a tax pro helps ensure that you're claiming all the deductions and credits you're entitled to claim. A tax advisor can also help you plan for the year to come.

3. Get Online Help at IRS.gov

The IRS offers a wealth of information and interactive help for taxpayers. Among the most useful:

  • Use Free File to file your IRS tax return. Guided online tax preparation is available to taxpayers with adjusted gross incomes of $73,000 or less; free fillable forms are available for anyone.
  • Set up an online account and use the IRS tool to verify your identity. From there, you can access a range of benefits:
    • Get a six-digit identity protection PIN that prevents other people from filing a tax return using your Social Security number or Individual Taxpayer Identification Number.
    • Request a copy of your tax record, including transcripts of past tax returns, tax account information, wage and income statements, and more.
  • Get answers to common tax questions about filing a tax return, claiming a dependent, eligibility to claim tax credits or deduct expenses, and more using the Interactive Tax Assistant.

4. Adjust Your Withholding and Pay Estimates

Once your taxes are done, make a plan for the year to come. Adjust your withholding, if necessary, to make sure your next tax bill will be covered. If you're self-employed and/or have outside income, consider calculating quarterly estimated taxes for the coming year so you'll owe less in the end.

The Bottom Line

While your tax refund may be a bit smaller in 2023 than it was last year, taking the time to file an accurate return and claim all of your eligible credits and deductions is still the best route to getting the maximum refund.