Tax Refunds 10.2% Higher Than Last Year, With An Average Refund Of $3,800
The latest IRS tax filing data shows that over 41 million returns have already been processed this year, with the average refund totaling $3,804, a 10.2% increase over the same week last year.
As of February 20, the IRS has issued over $109.33 billion in refunds, an increase of more than 6.9% from 2025. Much of this rise is linked to tax changes passed in July 2025 under the One Big Beautiful Bill Act, which introduced several new tax breaks. These include an additional deduction for seniors, deductions for overtime pay and tips, a deduction for interest paid on car loans, and a higher standard deduction.
Interest in filing taxes early has also grown. Visits to IRS.gov are up 46.3% compared to the same time last year. Taxpayers can check the status of their refund using the “Where’s My Refund?” tool on the IRS website. Typically, the IRS issues most refunds within 21 days of receiving an electronically filed return. However, if you file a paper return, the process can take a week or longer.
The IRS expects to process around 164 million individual tax returns for the 2025 tax year before the April 15 filing deadline.
4 Ways To Maximize Your Tax Refund
Even though 2025 has ended, you still have time to potentially increase your refund or reduce the taxes you owe before the April 15 deadline. Here are a few strategies to consider.
1. Increase Your IRA Contributions
You can still make prior-year contributions to a traditional IRA up until the 2026 tax filing deadline.
Adding money to a retirement account reduces your taxable income, which could increase your refund. If you didn’t contribute the maximum to your IRA last year, now may be a good opportunity.
For the 2025 tax year, contribution limits are:
- Under age 50: Up to $7,000
- Age 50 or older: Up to $8,000 (including a $1,000 catch-up contribution)
These limits apply to the combined total of all your IRAs, including both traditional and Roth accounts. Also note that you can’t contribute more than the income you earned.
2. Contribute to a Health Savings Account (HSA)
If you have a high-deductible health plan, contributing to a Health Savings Account (HSA) can also lower your taxable income.
Like IRA contributions, 2025 HSA contributions can be made until April 15, 2026.
For 2025, contribution limits are:
- Individuals under 55: Up to $4,300
- Age 55 or older: Up to $5,300 (including a $1,000 catch-up contribution)
- Families: Up to $8,550, or $9,550 if age 55+
One of the biggest advantages of an HSA is the ability to pay qualified medical expenses with pre-tax dollars. After age 65, withdrawals for non-medical expenses are allowed without penalty (though they are taxed as regular income), making HSAs a potential additional retirement savings tool.
3. Review Eligible Tax Deductions and Credits
Your tax situation may look different this year, especially with new changes introduced by the One Big Beautiful Bill Act. Some of the updates include:
- Deductions for tips and overtime income
- A larger child tax credit
- A higher cap on state and local tax deductions
- Expanded deductions for qualifying seniors
Remember:
- Tax deductions lower your taxable income
- Tax credits reduce your tax bill dollar-for-dollar
Reviewing all available deductions and credits can help ensure you maximize your refund.
4. Choose the Correct Filing Status
Your tax filing status affects your:
- Tax brackets
- Standard deduction
- Eligibility for certain tax credits
Major life changes in 2025, such as marriage, divorce, or having a child, could mean your filing status should change.
If you’re unsure which status is right for you, consulting a tax professional or tax software can help you choose the best option.
Source: yahoo!finance
