Federal refunds are typically larger because the federal government withholds more from your paycheck
Your federal refund will almost always be bigger than your state refund, if you get a state refund at all. The reason is straightforward: the federal government withholds more money from each paycheck than your state does. When you file taxes, both the IRS and your state calculate what you actually owe, then send back the difference between what was withheld and what you owe. Since federal withholding is higher, the gap is usually larger.
The size of each refund depends on three things: how much your employer withheld, what you actually owed, and what deductions and credits you could claim. The federal government has more tax brackets, more credits (like the Earned Income Tax Credit), and more complex rules, which means the calculation is more involved. Your state's calculation is simpler, and many states have lower tax rates or no income tax at all, so there is less money to refund.
Not every state even has an income tax. Nine states—Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only dividends and interest)—do not tax wages at all. If you live in one of these states, you will have no state refund, only a federal one.
Key Takeaways
- Federal withholding is higher than state withholding, so the refund gap is usually larger on the federal side.
- Nine states have no income tax on wages, so residents in those states receive only federal refunds.
- The size of your refund depends on how much your employer withheld, not on how much you earned.
- You can adjust your withholding on Form W-4 (federal) or your state equivalent to change the size of future refunds.
How withholding amounts differ between federal and state
When you fill out a W-4 form at a new job, you are telling your employer how much federal tax to withhold. You answer questions about dependents, other income, and whether you have a second job. Your employer uses that information to calculate a federal withholding amount. That same employer then uses a separate state form (or no form, depending on your state) to calculate state withholding.
Federal withholding rates are set by the IRS and change each year based on inflation. State withholding rates vary widely. Some states withhold a flat percentage; others use brackets similar to the federal system but with lower rates. A few states withhold very little because their tax rates are low. This means two people earning the same salary might have very different state withholding amounts depending on where they live.
The federal government also allows more credits that reduce your final tax bill. The Child Tax Credit, the Earned Income Tax Credit, and education credits are all federal. Many states have their own versions of these credits, but they are often smaller or have stricter income limits. That means more of your federal withholding comes back as a refund.
When your state refund might be larger
State refunds are rarely larger than federal refunds, but it can happen. This usually occurs when you have a state-specific credit that the federal government does not offer, or when your state has a very generous version of a credit you also claim federally. Some states offer credits for property taxes paid, state income taxes paid (if you live in a high-tax state), or specific life events like adoption or energy-efficient home improvements.
Another scenario is if you under-withheld federally but over-withheld on state taxes. This might happen if you changed jobs mid-year, had a major life change you reported on your W-4, or claimed too many exemptions. If you corrected your federal withholding but not your state withholding, your state refund could temporarily be larger. This is not common and usually corrects itself the following year.
A third situation is if you live in a state with no income tax but worked in a state that does. Some states tax non-residents who work within their borders. If you live in Florida (no income tax) but worked in New York, you might owe New York state tax and receive a refund from them, while receiving nothing from Florida.
What affects the size of your refund
The size of your refund—federal or state—is determined by the gap between what was withheld and what you owe. If you want a larger refund, you need to increase withholding. If you want a smaller refund (or no refund), you need to decrease withholding. You control this by updating your W-4 form.
Life changes affect refund size too. Getting married, having a child, buying a home, or starting a side business all change what you owe in taxes. If you do not update your W-4 after these events, your withholding will no longer match your actual tax bill, and your refund will be larger or smaller than expected. The IRS recommends updating your W-4 whenever your life changes significantly.
Deductions also matter. If you itemize deductions instead of taking the standard deduction, your taxable income drops, and your refund may increase. The standard deduction changes each year and varies by age and filing status. For 2024, the federal standard deduction ranges from $14,600 to $23,500 depending on your situation. State standard deductions are usually lower.
How to adjust withholding to change your refund
If you received a large federal refund and do not want to wait for that money, you can reduce your federal withholding by updating your W-4. You can do this anytime—you do not have to wait until the new year. read Form W-4 from the IRS website, fill it out, and give it to your employer's payroll department. The change usually takes effect within one or two pay periods.
To reduce your refund, you typically increase the number of dependents you claim or claim additional income adjustments. The W-4 includes a worksheet to help you calculate the right number. If you want a larger refund, you do the opposite: claim fewer dependents or add extra withholding. Some people add a flat dollar amount per paycheck if they want to be conservative.
For state withholding, the process is similar but the form varies by state. Some states use a form similar to the W-4; others use a different document. Contact your state's tax authority or ask your payroll department which form to use. Adjusting state withholding separately from federal withholding is possible and sometimes necessary if your state tax situation is different from your federal one.
Timing: when you receive each refund
Federal refunds typically arrive within 21 days of the IRS accepting your return, though the IRS aims to process most returns faster. If you file electronically and choose direct deposit, you will receive your money sooner than if you request a paper check. State refunds follow a similar timeline but vary by state. Some states process refunds in two to three weeks; others take longer.
If you file both federal and state returns at the same time, you will likely receive both refunds within a few weeks of each other. However, if your state return is flagged for review or if you made an error, the state refund may arrive later. Some states also hold refunds if you owe back child support or student loans, so the timing can be unpredictable.
You can check the status of your federal refund using the IRS "Where's My Refund?" tool on the IRS website. Most states have a similar tool on their tax authority website. These tools update every 24 hours, so checking multiple times a day will not speed up your refund.
Frequently Asked Questions
Can I get a bigger state refund than federal refund?
It is possible but uncommon. This happens when you have a state-specific tax credit, when you over-withheld on state taxes but under-withheld federally, or when you live in a state with no income tax but worked in a state that taxes non-residents. For most people, the federal refund is larger.
Why did I get no state refund but a large federal refund?
Your state may have withheld less than your federal government, or your state tax bill may have been smaller. Some states also explore refunds to the next year's taxes automatically if you owe back taxes or child support. Check your state tax authority's website or contact them directly to see where your refund went.
If I increase my federal withholding, will my state withholding increase too?
No. Federal and state withholding are calculated separately. Increasing your federal withholding on your W-4 does not change your state withholding. You must update your state form separately if you want to change state withholding.
What if I live in a state with no income tax—do I still file a state return?
No. If you live in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, or New Hampshire (for wage income), you do not file a state income tax return. You only file a federal return. However, if you worked in a different state during the year, you may need to file a return in that state.
How do I know if my withholding is correct?
Use the IRS W-4 calculator on the IRS website. It asks about your income, dependents, and other factors, then tells you what to enter on your W-4 to get close to zero refund. Most people aim for a refund of a few hundred dollars rather than zero, as a buffer against owing money at tax time.