Why taxpayers are getting more and bigger refunds this tax season

If you are one of the millions of people who have not yet done their taxes, you have one month and one day left to file, and there may be something to look forward to.

Many who have already filed have gotten bigger refunds this year, especially those who are middle or upper-middle income. About two-thirds of people typically get a refund when they file their taxes.

According to IRS data, refunds are up over 10% on average so far this year. And Mark Steber, chief tax officer at Jackson Hewitt Tax Services, said refunds are up much more than that for lots of people.

”It's been a really good season, really good for taxpayers,” he said.

That’s in part because of changes Congress made to tax law when it passed that big budget bill last summer. Many people who earn overtime will no longer have to pay taxes on all of it, Steber said, and the same is true for tips.

“If you earn tips as part of your income — think that barista when you're buying your coffee, hospitality worker that you put a couple dollars in the bed for when you’re staying overnight in a hotel, bartender, for example — you now get a deduction up to $25,000, and that's a pretty big deduction that heretofore did not exist,” Steber said.

The bigger the deduction, the bigger the refund. This year, the standard deduction is higher for everyone, and there’s a new bonus deduction for many seniors over 65.

People who took out a loan to buy a car can also now deduct the interest, as long as that car was assembled in the U.S. And most parents will get an extra $200 per kid from the Child Tax Credit.

“So just like we would expect when there's a very large tax cut, we are seeing, on average, people are receiving higher refunds, and they're more likely to receive a refund,” said Elaine Maag, senior fellow at the Urban-Brookings Tax Policy Center.

When people get a refund, Maag said, they often spend it — especially if they’re low or middle income.

“We see people sometimes wait for big expenses to come until tax time, so more children will go to the doctor right after receiving a tax refund,” she said. “We see purchases in places like grocery stores increase.”

It’s also common for people to put their refund towards something bigger, Maag said, like a new fridge or car.

“And I think we'll just see a little bit more of that this year, mostly because people are feeling pressed with the higher prices they're seeing,” she said.

All of those purchases add up, Steber said.

“Each year, 100 million Americans get $300 billion — with a B — in tax refunds. Some of the early estimates say that's going to go up $100 billion,” he said.

And if consumers turn around, as they often do, and go spend a big chunk of that this spring, he said that’ll be a good thing for the economy.