Did your federal tax refund shrink this year? You’re not alone.

Tax time concept, pen on 1040 US individual income tax filling form with US dollar bill, calculate from yearly revenue to pay the government. Tax time concept, pen on 1040 US individual income tax filling form with US dollar bill, calculate from yearly revenue to pay the government. Image:

In a Nutshell

While many early filers have qualified for federal tax refunds so far this year, the median refund size is shrinking, a study of Credit Karma Tax® members indicates. And early filers in the lowest income brackets have seen the steepest decline in their expected federal refund amounts.

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The 2019 filing season is the first in which American taxpayers will experience the effects of tax reform changes. An analysis of Credit Karma Tax members found there’s both good news and bad news when it comes to federal refunds.

The good news: 96% of members who filed their 2018 federal income tax returns early using Credit Karma Tax® qualified for a refund.

The bad: The median federal refund size among those early filers was 5.5% smaller than the median last year during the same time period — January 29 (when the IRS began accepting 2017 returns) and February 10. (Learn more about our methodology.)

We’re still early into the 2019 tax season, so no one knows for sure how 2018 federal refunds will shake out until the majority of taxpayers have filed. And historically, that doesn’t happen until much closer to April 15. But here’s what we know so far.

Key findings: Changes from 2017 to 2018

The median federal refund amount fell 5.5% year-over-year among early filers with Credit Karma Tax.
The median federal refund amount for filers with adjusted gross income of $30,000 or less dropped 10.6% — the most of any income group.
Higher earners (with an adjusted gross income of more than $175,000) are the big winners so far, with the smallest decline in median federal refund (1.9%) and the second greatest decline (8.3%) in federal tax bills among those who owed.
Among early filers who owed the IRS, those with an AGI of $30,000 or less saw a year-over-year increase of 9.2% in their median federal tax bill. 

 


An early look at federal refunds

It’s important to keep in mind that it’s still very early in the filing season. The IRS began accepting individual 2018 federal income tax returns on Jan. 28, 2019, and the due date for most individual filers will be April 15 this year. However, many taxpayers don’t file their taxes early. In fact, many people who filed their 2017 taxes with Credit Karma Tax waited until after mid-February 2018 to do so.

That said, the early picture for Credit Karma Tax filers appears to be mirroring preliminary IRS data for the 2019 filing season, with median refunds down across the board.

But when broken down by income bracket, the overall decline in federal refunds is affecting individuals in different ways.

  • Filers at the lowest end of the income spectrum (an AGI of $30,000 or less) are seeing the largest year-over-year decline in median refund size — at nearly 11% less than the 2017 median.
  • The median refund for filers with an AGI of $30,001 to $50,000 decreased by 9.7% year-over-year.
  • Those with AGIs of $75,001 to $100,000 and those earning over $175,000 saw the smallest declines in median refund size — 2.5% and 1.9%, respectively.

Here’s the complete year-over-year comparison of median federal refund amounts for those who filed early in 2017 and 2018 with Credit Karma Tax.

Adjusted Gross Income Median Federal Refund Amount Percent Change
2017 2018  
$30,000 or less $1,191 $1,065 -10.6%
$30,001–$50,000 $1,515 $1,368 -9.7%
$50,001–$75,000 $2,023 $1,939 -4.2%
$75,001–$100,000 $2,275 $2,218 -2.5%
$100,001–$125,000 $2,763 $2,613 -5.4%
$125,001–$150,000 $2,960 $2,767 -6.5%
$150,001–$175,000 $3,435 $3,135 -8.7%
More than $175,000 $4,232 $4,152 -1.9%

An early look at federal tax bills

While many of those who filed their federal tax returns early with Credit Karma Tax will likely receive a refund (barring any changes the IRS makes to their returns), some did end up owing money to the IRS for the 2018 tax season.

Higher earners were more likely than other income brackets to owe the IRS: 19% of filers with AGIs of more than $175,000 owed tax for 2018, along with 15% of those earning $150,001 to $175,000.

However, these higher-income brackets also experienced steep declines in the median amount that they owed. Filers with AGIs of more than $175,000 saw their federal tax bills decline 8.3% year-over-year, while those earning $150,001 to $175,000 saw a 6.7% decrease. In other words, more people in these brackets have ended up owing the IRS so far — but they owed less overall than before tax reform’s impact.

And while lower earners (those making $30,001 to $50,000) were less likely than others to end up owing money to the IRS (just 4% of early filers), those who did owe saw a whopping increase of 9.6% in their median tax bill.


Bottom line

The tax season is still young, and a majority of Americans have yet to file their 2018 federal income tax returns. Many variables are in play. People expecting a refund may be more likely to file earlier in the season, while those who think they’ll owe may be inclined to wait until the last minute.

The only way to know what your 2018 federal tax obligation will look like and what, if any, refund to expect, is to prepare and file your federal income tax return.


Methodology

To determine how federal refunds and tax bills changed year-over-year, Credit Karma Tax analyzed members who filed their 2018 federal taxes with Credit Karma Tax between January 28 and February 10, 2019, compared to those who filed their 2017 federal taxes with Credit Karma Tax between January 29 and February 11, 2018.

The data reflect anticipated federal refunds barring any changes by the IRS. These findings are subject to change as more people file their 2018 federal returns.