Source: The College Investor
- Average Tax Refunds Increase: In 2022, tax refunds hit their highest point in years, reaching $4,440 per tax return, on average.
- Salary Growth: The average reported salary continued to rise, averaging over $75,000 per return.
- Standard Deduction Usage Surges: The increase with the Tax Cuts And Jobs Act has made 88% of filers opt for the standard deduction.
The IRS just released the latest data of personal income tax returns for the 2022 tax year (realize that people are still filing their 2023 returns). The data gives a full breakdown of all the returns filed and amounts claimed. This provides a great look into what Americans are actually earning and experiencing.
The landscape of U.S. tax returns has experienced significant shifts in recent years, with major tax reform due to the Tax Cuts and Jobs Act taking effect in 2018, massive spending and tax credits during the Covid-19 pandemic, and rising inflation the last several years.
The most recent data shows the impact of these changes, with rising salaries, but also rising tax liabilities and tax refunds.
Related: Best Tax Software In 2024
Growth In Taxes And Salaries
Average salaries have been steadily increasing across the U.S., with 2022 showing an average salary close to $75,856, driven by various factors including a tight labor market and inflationary pressures. Remember, this is per tax return – so that could be a married couple as well.
Data: IRS Publication 1304. Chart: The College Investor
However, with rising income and an expiration of Covid-era tax cuts, the average tax burden for most Americans has significantly increased as well. In 2022, the average tax return had a tax liability of $13,992.
Remember, this is average, not mean. Millions of low-income tax payers had no tax liability or were provided refundable tax credits.
Data: IRS Publication 1304. Chart: The College Investor
Record-Breaking Tax Refunds
Taxpayers in 2022 received an average tax refund of $4,440, marking a considerable increase over previous years. That’s a large amount of over-withholding that could be directly impacting American’s budgets each month.
That would break down to an extra $370 per month, or $170 per paycheck if paid bi-weekly. As Americans struggle to afford rising grocery and household prices, having a lot of extra money tied up that IRS each year is not helping.
Data: IRS Publication 1304. Chart: The College Investor
Related: When To Expect Your Tax Refund?
Increasing Adoption Of The Standard Deduction
One of the most noticeable changes over the years has been the increased use of the standard deduction, with 88% of taxpayers opting for it in 2022, compared to just 69% in 2017. This aligns with the implementation of the Tax Cuts and Jobs Act (or Trump Tax Cuts).
For many, the standard deduction simplifies the filing process, offering a straightforward way to lower taxable income without the need for extensive itemization.
Data: IRS Publication 1304. Chart: The College Investor
The data highlights a shifting approach to tax filings in America, where the emphasis has shifted toward simplified filing, higher refunds, and larger deductions.
These trends not only reflect recent tax code changes but also a broader economic landscape marked by rising incomes, higher inflation, and changes in personal finances.
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