The IRS gives the biggest refund, but the amount depends entirely on what you overpaid

There is no single entity that "gives the biggest tax refund"—the size of your refund is determined by how much tax you paid during the year versus what you actually owed. The IRS processes federal income tax refunds, most states process state income tax refunds, and some local jurisdictions process local tax refunds. The largest refund you can receive is the sum of all three if you overpaid on each one.

The average federal refund in recent years has ranged from $2,500 to $3,000, but this varies widely based on income, filing status, number of dependents, and how much was withheld from paychecks or paid in estimated taxes. A refund is not a gift or a benefit—it is your own money returned to you because you paid more tax than you owed.

Key Takeaways

  • Your federal refund comes from the IRS and is based on the difference between taxes withheld from your paychecks and your actual tax liability.
  • State refunds are processed by your state tax agency and follow different rules than federal refunds; some states have no income tax at all.
  • The size of your refund depends on your income, filing status, dependents, deductions, and credits—not on which agency processes it.
  • Refunds are typically issued within 21 days of the IRS accepting your return, though state refunds may take longer.

How federal refunds are calculated and who receives the largest ones

The IRS calculates your federal refund by comparing your total tax liability to the total amount withheld from your paychecks throughout the year. If you withheld more than you owed, the difference is your refund. Larger refunds typically go to people who had significant amounts withheld but had lower actual tax liability—often because of tax credits like the Earned Income Tax Credit (EITC) or the Child Tax Credit.

A person earning $35,000 with two children may receive a federal refund of $3,500 or more because the EITC can exceed the tax they owe. A person earning $150,000 with no dependents and standard withholding may receive a refund of $500 or less. The refund size is not tied to income level—it is tied to the gap between what was withheld and what was owed.

Self-employed people and those with investment income often have smaller refunds or owe money because they do not have automatic withholding. People who adjust their W-4 form to reduce withholding may receive no refund at all, even if they are may have access to to credits.

State tax refunds and how they differ from federal refunds

State income tax refunds are processed by your state's tax agency, not the IRS. Nine states have no income tax at all (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire for dividends and interest only), so residents of those states receive no state refund. The remaining 41 states process their own refunds based on state tax withholding and state tax liability.

State refunds are often smaller than federal refunds because state tax rates are lower. A state refund might be $200 to $800 for most filers, though it can be larger if you overpaid significantly or live in a state with higher tax rates like California or New York. Some states offer state-specific credits that can increase refunds—for example, some states have their own earned income credits or property tax credits.

State refunds typically take longer to process than federal refunds. While the IRS aims to issue federal refunds within 21 days, state agencies often take four to eight weeks. If you file before the state tax important date, your refund may arrive by mid-summer; if you file closer to the important date, it may not arrive until fall.

Local tax refunds in cities and counties that impose income tax

A smaller number of cities and counties impose local income taxes, primarily in Ohio, Pennsylvania, Kentucky, and a few other states. These local refunds are processed by the city or county tax agency, not the state or federal government. Local refunds are typically the smallest of the three—usually $50 to $300—because local tax rates are lower than state or federal rates.

If you live in a jurisdiction with local income tax, you will file a separate local return or include local tax information on your state return, depending on how that jurisdiction operates. Your local refund is calculated the same way as federal and state refunds: the difference between what was withheld and what you owed.

Why some people get large refunds and others get small ones

The largest refunds go to people with the biggest gap between withholding and actual liability. This happens most often when someone has:

  • Multiple children and claims the Child Tax Credit or EITC, which can be worth thousands of dollars per child.
  • Significant education expenses and claims the American Opportunity Credit or Lifetime Learning Credit.
  • Self-employment income or investment income that was not subject to withholding, but they paid estimated taxes that exceeded their liability.
  • A job change mid-year where too much was withheld before the change.
  • Deductible expenses like mortgage interest, charitable donations, or student loan interest that reduce taxable income.

The smallest refunds go to people whose withholding closely matches their actual liability, or who adjusted their W-4 to reduce withholding. Some people owe money instead of receiving a refund because they did not have enough withheld or paid in estimated taxes.

How to check the status of your refund

The IRS provides a tool called Where's My Refund? on IRS.gov that shows the status of your federal refund. You can check it within 24 hours of filing electronically or four weeks after filing by mail. The tool tells you whether the IRS has received your return, is processing it, or has issued your refund.

For state refunds, visit your state tax agency's website and look for a refund status tool. Most states have one, though the name and location vary. You will typically need your Social Security number, filing status, and the refund amount to check status.

If the IRS accepted your return but you have not received your refund within 21 days, check Where's My Refund? first. If the tool shows your refund was issued but you have not received it, contact the IRS at 1-800-829-1040. If your state refund is delayed beyond the expected timeframe, contact your state tax agency directly.

What happens if you disagree with your refund amount

If you believe your refund is incorrect, you have the right to file an amended return using Form 1040-X for federal taxes. You must file the amended return within three years of the original filing date to claim a refund for that year. An amended return can increase or decrease your refund depending on what you correct.

If the IRS made an error in calculating your refund, you can contact them to request a correction. The IRS will review your return and issue an additional refund if they agree an error occurred. This process typically takes several weeks to several months.

For state refunds, check your state tax agency's website for instructions on filing an amended return or disputing the refund amount. Most states follow similar rules to the federal government but may have different timeframes for filing amendments.

Frequently Asked Questions

Can I get a larger refund by changing my W-4?

No. Changing your W-4 only changes how much is withheld from each paycheck—it does not change your actual tax liability or the size of your refund. If you want a larger refund, you would need to increase withholding, which means less money in each paycheck. Most people should adjust their W-4 so that withholding matches their actual liability as closely as possible, rather than trying to engineer a large refund.

Do I have to claim all my tax credits to get the biggest refund?

You should claim all credits you are may have access to to, but not all credits increase your refund. Some credits are refundable, meaning they can result in a refund even if you owe no tax. The EITC and the Additional Child Tax Credit are refundable. Other credits are non-refundable, meaning they can only reduce your tax liability to zero—they cannot create a refund. The American Opportunity Credit is partially refundable.

Why is my state refund taking so long?

State tax agencies typically process refunds more slowly than the IRS because they have fewer resources and may process returns in batches rather than continuously. If you filed early in the tax season, your refund may take four to eight weeks. If you filed close to the important date, it may take longer. Check your state tax agency's website for current processing times.

Can I get a refund if I did not work the whole year?

Yes. If you had taxes withheld from paychecks during the months you worked, you may receive a refund even if your total income for the year was low. You may also be may have access to to the EITC if your income is below the limit, which can result in a refund larger than the taxes you paid.

What if I owe federal tax but am owed a state refund?

Your federal and state refunds are separate. If you owe federal tax, the IRS will not take your state refund to pay it—but some states will take your state refund to pay federal debt if the IRS requests it through the Treasury Offset Program. You will still receive your state refund unless this offset occurs. Check your state tax agency's website for information about offsets in your state.