Residents of These 10 States Get the Highest Tax Refunds
Breathe a sigh of relief: tax season is over. Many Americans are now figuring out how to use their tax refunds if they haven’t spent them already. However, it’s not all sunshine and roses; a substantial refund means that Uncle Sam enjoyed an interest-free loan from you.
To find the states with the largest tax refunds, SmartAsset examined 2021 data from the IRS across all 50 states and the District of Columbia, focusing on two key data points:
- Total dollar amounts of federal tax refund
- Total dollar amounts of state and local tax refunds
They then divided the dollar amounts for each state to determine which ones had the highest tax refund.
1: Utah
Utah takes the top spot for the state with the most significant tax refund. In 2021, their average return was $1,812. SmartAsset reports that an average of 5.4 million tax refunds may have benefited from boosted tax credits for children. The average household size in Utah was higher than anywhere else in the country.
2: Wyoming
Home to two of the most popular National Parks in America, Wyoming is a beautiful state to reside. It’s the highest-ranking state on the list without a state income tax. In 2021, residents were issued an average federal tax refund of $1,802. Despite this, it had the fewest tax refunds issued out of all states.
3: Texas
Head to the Lone Star State to live in a relatively affordable state with no income tax. At a whopping $94 billion, Texas received the second-largest total refund amount in the country. Only California got more total refund dollars. Texans received an average federal tax refund of $1,783 in 2021.
4: North Dakota
Issuing nearly 1.4 million refunds in 2021, North Dakota has one of the country’s highest average federal tax refunds. Their average $1,750 return lands it in the fourth spot overall. Alternatively, the average state and local tax refund is less than half that, at $820.
5: Illinois
With an average refund of $1,739, Illinois made leaps and bounds up the list compared to previous years. In 2020, the state’s federal refund was the second-lowest in the country, at just $581. Good news for any long-term residents: you could have more cha-ching coming your way than you’re used to.
6: Alaska
Alaska is the largest state in the US and is known for its stunning nature views. Breathtaking scenery isn’t the only perk to being an Alaskan resident: they have no state income tax. The average resident received a refund of $1,734 in 2021.
7: Kansas
There’s no place like home in Kansas, where more than 5 million taxpayers were met with a hefty tax refund in 2021. It came right behind Alaska on the list, with an average federal tax refund of $1,728.
8: South Dakota
South Dakota has one of the largest tax refunds in the US, and it’s one of four states on the list without a state income tax. With an average refund of $1,721, they issued the fourth-fewest total tax refunds (1.6 million) in 2021.
9: Nebraska
Although it’s a bit more remote, living in Nebraska could reward you with a decent federal refund. It comes in ninth with an average return of $1,716 reported in 2021.
10: Oklahoma
Rounding out the top ten is Oklahoma, with an average federal refund of $1,715. Nestled in the heart of America’s plains, living in Oklahoma could give your wallet a nice boost come tax season. You’ll find similar returns in New York, Tennessee, and New Jersey, just $3 less on average.
Higher Paychecks
Out of the nine total US states without income tax, four ranked in the top ten: Wyoming, Texas, Alaska, and South Dakota. No state income tax offers residents a bigger paycheck, and the extra money can work for you if you play it right. “Especially in an environment of rising interest rates, it’s worth it for workers to consider adjusting their withholdings to reduce their tax refund amount and keep more money in their pockets throughout the year,” says Susannah Snider, certified financial planner at SmartAsset.
Crunching the Numbers
Between 2020 and 2021, SmartAsset found a national decrease of $417 in average federal tax refunds. This could be explained by the unique tax benefits put in place during the pandemic in 2020.
Don’t Fear Missing Out
It’s hard not to cheer when you get a boost to your bank account, but don’t fret if your refund comes up dry. “That money may have been working harder for you by gaining interest in a bank account, earning returns in an investment fund, or paying for living expenses,” Snider says.
Plan Ahead
Ready to tackle your taxes like a pro this season? SmartAsset recommends finding a trustworthy financial advisor to help you maximize your return. Plus, you can avoid under or over-paying taxes year-round by adjusting your withholdings on your employer’s W-4 form.
25 Most Expensive Cities
Do you live in or are considering moving to one of the most expensive cities in America? These are the top 25 cities that’ll do a (lower) number on your bank account.
25 Most Expensive Cities in the US
10 US Cities Where $100,000 Stretches the Furthest
$100,000 in annual income may sound like a lot to many Americans. But depending on where you live, that might as well be chump change. These are the cities where you can make the most of $100k.
