Federal refunds are typically larger than state or local refunds, but the difference depends on how much you paid in taxes throughout the year

The Internal Revenue Service (IRS) handles federal income tax refunds, which are usually the biggest refund most people receive. The average federal refund for the 2023 tax year was around $3,000, though this varies widely based on your income, withholding, and deductions. State and local refunds, when they exist, tend to be smaller because state and local tax rates are lower than federal rates.

Your refund size is not determined by which government gives it—it is determined by how much you overpaid in taxes during the year. If you had $5,000 withheld from your paychecks but only owed $3,000 in federal taxes, the IRS refunds $2,000. The same logic applies to state and local taxes. The government that collected more from you during the year will refund more to you at tax time.

Key Takeaways

  • Federal refunds are usually larger than state or local refunds because federal tax rates are higher and more income is subject to federal withholding.
  • Your refund size depends on how much you overpaid in taxes throughout the year, not on which government administers the refund.
  • Some states have no income tax at all, so residents in those states receive only federal refunds.
  • Local income taxes exist in only a few states and cities, and refunds from those sources are typically the smallest of the three.

How federal, state, and local tax systems differ

The federal government collects income tax from nearly all workers in the United States. The federal tax rate ranges from 10% to 37% depending on your income bracket. Because the federal system applies to everyone and uses higher tax rates, most people pay more in federal taxes than in state or local taxes, which means federal refunds tend to be larger.

State income tax rates vary by state. Some states, including Texas, Florida, and Wyoming, have no state income tax at all—residents in those states receive no state refund because nothing was withheld. Other states have flat tax rates (like Illinois at 4.95%), while most use progressive systems similar to federal taxes. State refunds are generally smaller than federal refunds because the state tax rate is lower.

Local income taxes are rare. Only a handful of states allow cities or counties to collect income tax, and these are found mainly in Ohio, Pennsylvania, Kentucky, and a few other places. Local tax rates are typically between 1% and 3%, making local refunds the smallest of the three. Many people never receive a local refund because they do not live in a jurisdiction that collects local income tax.

When you might receive refunds from all three sources

If you live in a state with income tax and work in a city or county with local income tax, you could receive three separate refunds: one from the IRS (federal), one from your state, and one from your local government. Each processes its own refund on its own timeline. The federal refund typically arrives first, often within 21 days of the IRS accepting your return. State refunds usually follow within two to eight weeks, depending on the state. Local refunds can take several weeks to several months.

The total of all three refunds depends on how much you overpaid to each system. If you had $8,000 withheld in federal taxes, $1,200 in state taxes, and $300 in local taxes, but only owed $6,500 federal, $900 state, and $200 local, you would receive $1,500 federal, $300 state, and $100 local—totaling $1,900. The federal refund is largest because you overpaid the most to the federal system.

States with no income tax and what that means for your refund

Nine states collect no income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only dividends and interest, not wages). If you live and work in one of these states, you receive only a federal refund. You do not receive a state refund because the state did not withhold anything from your paycheck.

Some people who live in a no-income-tax state but work in a state that does collect income tax may owe taxes to the state where they work. In that case, you would file a return in both states and could receive a federal refund plus a refund from the state where you worked. The state refund would reflect only the overpayment to that particular state, not to your home state.

Why your federal refund might be smaller than you expect

A large federal refund is not always a sign that you did well financially—it means you let the government hold your money interest-free for a year. If you receive a refund of $3,000, that is $3,000 you could have had in your paycheck each month instead of waiting until tax time. Some people intentionally adjust their withholding to receive a smaller refund or even owe a small amount, so they can use that money throughout the year.

Your federal refund can also be smaller than expected if you had life changes during the year: a job loss, a second job, self-employment income, or a major deduction you did not claim. If you earned more than expected or had less withheld, your refund shrinks. The IRS does not give you a larger refund because you want one—it refunds only the amount you actually overpaid.

How to track your federal, state, and local refunds

To track your federal refund, use the IRS tool Where's My Refund? on IRS.gov. You need your Social Security number, filing status, and the exact refund amount. The tool updates once per day and shows whether the IRS has accepted your return, is processing it, or has issued the refund. Most refunds appear within 21 days of acceptance, though some take longer.

To track your state refund, visit your state's tax agency website. Each state maintains its own refund tracker. Search for "[your state] tax refund status" to find the right tool. You typically need your Social Security number and refund amount. Local refund tracking varies by city or county—contact your local tax office directly if you do not find a tracking tool online.

If you filed electronically and chose direct deposit, your refund goes to the bank account you listed on your return. If you chose a paper check, it arrives by mail and can take several weeks longer. Keep your tax return confirmation number handy when you track your refund—you may need it if something goes wrong.

What to do if one refund is much smaller than last year

A smaller refund than last year does not necessarily mean something is wrong. Your refund changes if your income changed, your withholding changed, your deductions changed, or you had a major life event like marriage, divorce, or a new job. Review your pay stub to see how much is being withheld. If you think too little is being withheld, you can adjust your W-4 form with your employer.

If you received a refund last year but owe taxes this year, check whether you had a significant income increase, took a second job, or had self-employment income. Each of these can flip you from a refund to a balance due. If you owe more than you expected, you can set up a payment plan with the IRS or your state tax agency—you do not have to pay it all at once.

Frequently Asked Questions

Can I get a larger federal refund by claiming more dependents?

No. Your refund is based on how much you actually overpaid in taxes, not on how many dependents you claim. Claiming dependents you do not have is tax fraud. If you have legitimate dependents, claiming them correctly may reduce your tax bill and increase your refund, but only if you actually have those dependents.

Why is my state refund so much smaller than my federal refund?

State tax rates are lower than federal rates, so you typically pay less in state taxes and overpay less. If your state has a flat tax or lower brackets, your state refund will naturally be smaller. Some states also have fewer deductions available, which can reduce the refund amount.

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

You may still receive a refund if taxes were withheld from the paychecks you did receive and you did not earn enough to owe taxes. For example, if you worked three months and had $800 withheld but earned only $6,000 total, you might owe no taxes and receive the $800 back as a refund.

What happens to my refund if I move to a different state?

Your federal refund goes to the address you listed on your return, regardless of where you move. Your state refund is based on where you lived and worked during the tax year, not where you live when you file. If you moved mid-year, you may need to file returns in both states.

Can I combine my federal and state refunds into one payment?

No. Federal and state refunds are separate and arrive on separate timelines. The IRS processes federal refunds, and your state tax agency processes state refunds. Each sends money directly to your bank account or by check independently.