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A tax sign is pictured on an H&R Block tax office in Los Angeles, California on April 26, 2017. Photo by Mike Blake/Reuters

Your tax refund probably wasn’t much different than last year’s. Here’s why.

Americans received on average about $2,725 from their federal tax refund this year, according to data released by the Internal Revenue Service. That marks a $55, or 2 percent, drop from the average refund last year — a relatively small change given fears that refunds would plummet as businesses and taxpayers figured out how much taxes they needed to withhold from their paychecks during the first full year of the new Republican tax law.

Individual taxpayers could still have seen a dramatic shift in their refund because of the new law or because of life changes, such as getting married or having a child. But Americans as a whole did not see major spikes or drops in their refunds.

“They didn’t have this refund catastrophe that some people predicted,” said Howard Gleckman, a senior fellow in the Urban-Brookings Tax Policy Center, a nonpartisan think tank based in Washington, D.C.

The tax overhaul was passed in December 2017, which meant businesses only had a few weeks to change their calculations for how much taxes to withhold from employees’ paychecks the following year. The new calculations had to account for a number of changes in the tax code, including lower income tax rates, a doubling of the standard deduction, and new caps on the mortgage interest and local tax deductions.

Surprisingly, Gleckman said, companies “got remarkably close” to withholding the correct amount.

About the same number of Americans received a tax refund in 2019 as in 2018. Of all the tax returns filed this year, 73.2 percent received a refund, compared to 73.1 percent last year.

Another surprise: Despite the added complexity of the new tax rules, 4.2 percent more people prepared their own tax filings instead of using a tax professional.

Tax refunds and the way they are filed fluctuate each year, so tax experts cautioned against attributing the decline in the average return to any one factor.

Here are some other factors to keep in mind:

Why you might want a lower refund

When you get a refund, it means you paid too much in taxes to the government over the course of the year, and have essentially given the government an interest-free loan. While it feels good to get a chunk of cash in the spring, keep in mind that you could have had that money earlier.

“This is where economists are separated from normal people,” Gleckman said. “Economists say what you really should be doing is owing money at the end of the year.”

Having money earlier in the year is better from an economic perspective, because money loses value over time with inflation. If that money were invested, it could be worth even more today than it did when you received it.

Still, many people like getting a tax refund. Some people don’t want to be targeted by the IRS for underpaying taxes. For some lower income people who do not have access to a bank account, the refund is a way to save money or have extra resources on hand to help pay bills. And by overpaying their taxes during the year and getting it back in one lump sum, they receive money they might have spent earlier on.

(No matter what your tax goals, there are ways to adjust your tax refund; if you were unhappy with the amount you received this year, you should adjust your W-4 form, which determines your tax withholding.)

You’re still probably paying less taxes

Overall, Americans are still paying less in taxes. The Tax Policy Center estimates that two-thirds of Americans got a tax cut from the 2017 overhaul.

There is no final data on how much Americans saved on average, but the Tax Policy Center estimates that the average American paid $1,260 less in taxes in 2018 than in 2017.

That amount fluctuates widely based on income. The bottom 20 percent of income earners likely got a tax cut of about $40; middle-income Americans received a tax cut of about $800; and the top 1 percent paid about $3,300 less on average, according to Tax Policy Center estimates.

The individual tax cuts are set to expire in 2025, unless Congress chooses to extend them so individuals might need to take that into account as well for their long-term financial planning.

Blue state v. red state

Households are expected on average to pay $25,000 less in taxes over their lifetimes because of the tax overhaul. But if you live in a blue state, you aren’t getting as big of a benefit as people who live in a red state.

States with high state and local property taxes, as well as high income and sales taxes — or “SALT” taxes — tend to vote Democratic. The 2017 tax overhaul limited the deduction for that local tax to $10,000.

As a result, people in blue states are likely to save about 0.3 percent less in taxes over their lifetimes than their red-state counterparts, according to a report published this month by the National Bureau of Economic Research.

The state that fares the best? Wyoming, where residents will see a 3.2 percent increase in tax savings over their lifetimes. The state that fares: Vermont, where residents will see only a 0.6 percent lifetime savings.

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