Tax season is upon us once again. The one universally liked item about income taxes are tax refunds – occurring when an individual has an excess of taxes withheld from their paychecks. The average income tax refund in 2018 was $2,727 according to the Internal Revenue Service. This year is different since most Americans filing their taxes will have already had less total income taxes withheld due to lower tax rates when compared to 2017.
Where a person lives, however, impacts the typical tax refund – at least in prior years. As usual, I invoke the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market or a National Economy. The same is true regarding income tax burdens, payments, deductions and refunds.
The following table from the HowMuch.net based on IRS tax refunds in 2018 shows the average refund by state. These ranged from a high in Texas at $3,206 per filer to a low of $2,336 in Maine. The data are sorted both alphabetically and by average refund.
Again, these refunds are likely to deviate greatly for the 2019 refunds. My logic is that states with comparably high state and local income taxes, property taxes and sales taxes (also know as SALT) will see a greater decline in their income tax refunds given the loss of the ability to deduct more than $10,000 of SALT per tax filing. A study by Motley Fool estimates that 10 percent of Americans will have an increased tax burden compared to 2017 while 90 percent will pay less.