2025 Tax Refunds: Why Fewer Americans Got Checks — But the Average Payout Grew

2025 Tax Refunds: Why Fewer Americans Received Checks — But the Average Payment Increased

As the 2025 tax filing season comes to a close, one of the most striking trends is the seemingly contradictory news on refunds: Fewer Americans are getting refunds from the Internal Revenue Service (IRS), but those who receive them are getting bigger checks. Here's what is going on, why it is happening, and what it means to taxpayers.

The Big Picture: Fewer Refunds, Bigger Checks

Most recent figures indicate that for the 2025 filing season:

The number of refund checks written is slightly lower than last year. One source reported that as of October 17, the IRS had distributed approximately 102.1 million refunds, 1% fewer than at the same point in 2024.

Meanwhile, the average amount of refund has risen. For example, one estimate put the average refund at $3,052 for 2025, a 1.6% increase from the year before ($3,004).

Other statistics report strong increases for middle- and lower-income families' average refunds: one study reported refunds up almost 4% year-over-year among lower-income households and up about 7% among middle- and higher-income families up to a certain point.

So, fewer individuals are being issued refunds — but those who are tend to receive more sizable ones. Why?

Key Drivers of the Trend

A variety of factors are coming together to create this fewer‐but‐bigger Refund trend.

1. More Accurate Withholding & Fewer Overpayments

One large reason is enhanced tax withholding — taxpayers are more in line throughout the year, so they overpay less, and as a result, there is less "excess" to refund. Some report the fewer number of refunds as due to increased alignment of payroll withholding, and the phasing out of some pandemic‐related tax credits that were causing bigger refunds in the past.

That is, in previous years, numerous taxpayers essentially "borrowed" interest-free funds from the government through overwithholding, and subsequently received it back through refund. That effect diminishes nowadays. 

2. Lapse of One-Time or Temporary Tax Credits

In the time of the pandemic and its aftermath, there were expanded tax credits (like the expanded child tax credit in some years) that ballooned refund amounts for many people. Since those have since expired or been rolled back, the number of refunds has fallen.

3. Timing & Composition of Filings

Early in the tax filing season, the simpler returns — usually by lower‐income taxpayers whose refunds are generally smaller — are prepared first. That biases early average refund numbers downward. When more complicated returns (with greater credits, deductions, etc.) are entered later, the average increases. The IRS itself warned that early season statistics do not necessarily represent final averages.

4. Inflation & Bracket Adjustments

Since inflation is continuous, tax brackets, standard deductions, and other tax bases rise. Consequently, some taxpayers will experience greater withholdings or payments of taxes, resulting in greater refunds when more tax is paid than owed. Further, some credit/benefit phases will change. One source reported that the typical middle‐ and upper‐income household refund increased by roughly 7% year-over-year through February. 

What This Means for Taxpayers

This shift has several implications — both for how you think about your refund, and how you might plan.

Adjust Your Expectations

If you relied on a refund as a guaranteed "bonus," you might have to rethink that. Fewer individuals are receiving refunds, and the ones that are being given out aren't significantly greater — so don't expect to get one (or one of the same magnitude as years previous).

Think About Withholding Strategy

Because less is being refunded, and because withholding aims to capture it "just right" (neither too high, nor too low), it might be worthwhile to check your payroll withholding or quarterly estimated payments. Overwithholding amounts to making the government an interest-free loan; underwithholding can result in your owing money (or penalties).

Use Refunds Wisely

For those who do get refunds, evidence indicates many taxpayers are spending the money as significant—possibly necessary—instead of a surplus. A survey revealed 61 % of taxpayers indicated their refund is an important consideration in their 2025 budget, an increase from 52 % the previous year.

Common uses:

Home/rent payment (58 %)

Groceries/food (48 %)

Credit card/debt payment (29 %)

Home repair (13 %)

So if you do receive a refund, worth spending it to buttress priorities and not treating it as discretionary.

Filing & Payment Method Changes

One ancillary shift: the IRS is eliminating paper refund checks. Starting September 30, 2025, most individual refund checks by mail will be discontinued; rather, nearly all refunds will be sent through direct deposit (or other electronic methods) to enhance speed and security.

If you already bank by paper checks (say, because you're unbanked or like to receive mail), you'll need to change: leave bank account information or consider other electronic options.

Why the "Fewer" Piece Matters

It's not merely that fewer refunds are being paid — why they're being paid speaks to tax and economic realities more generally:

More break even or owe: As withholding gets better, more filers should approach zero refund or owe a minimal amount.

Gig economy / non-wage income: With an increased number of taxpayers receiving income not subject to payroll withholding (gig workers, contractors, investment income), the complexity level rises and the likelihood of owing increases. (This was highlighted in previous IRS estimates.)

Slow filing by individual taxpayers: Some taxpayers with more intricate forms (business income, investments, etc.) wait to file — i.e., they might not be included early in the refund total, making early figures biased.

All of this adds up to the seen "fewer refunds" figure — it is not so much a reflection of tax system failure, but more one of mechanics and population shift.

Ahead: What to Watch

Last refund-issuance figures: Early season average refund statistics are deceptive. The entire season average might be different after receiving all returns. The IRS itself explains the early average is lower because the easiest returns are filed first.

Policy reforms & tax legislation: Any new tax law, credits, or changes to tax law (federal or state) might shift the landscape of refunds even more — i.e., new or additional refundable credits might increase average refunds, or more restrictive rules might decrease them.

Impact on low-income / vulnerable taxpayers: Since the paper-check phase-out is most burdensome on families lacking access to banking, this adjustment may impose undue difficulty on some. Furthermore, since refunds can serve as a vital source of income support or budgeting rebasing for lower-income families, shifts in refund patterns have tangible impacts.

Taxpayer response: As people become more aware that refunds are not as big (or as predictable), more will change withholding, file sooner, or seek tax professionals. Ahead-of-time tax planning might be more important than ever.

Bottom Line

In 2025, the tale of tax refunds is one of accuracy, not windfalls. Fewer Americans are getting refunds, but those who do are getting modestly bigger refunds. The change is driven by better withholding calibration, fewer transient credits, inflation adjustments, and taxpayer profile shifts.

For taxpayers, the takeaway points are: don't assume a big refund is a certainty; check your withholding and tax adjustments; use any refund you receive as significant; and remain vigilant for payment method changes (such as the shift away from paper checks).

In short: the era of the big "surprise refund check" may be on the decline, but a carefully managed refund is an important financial event — perhaps more than ever.