What Taxes Do You Get Back at the End of the Year?

A tax refund is a reimbursement for overpaying taxes during the year. This overpayment occurs when the total income tax paid to the government, either through paycheck withholding or estimated tax payments, exceeds the actual amount of tax owed. When you file your annual tax return, the government returns this excess payment to you.

Factors That Determine Your Tax Liability

Your final tax bill, or tax liability, is based on your taxable income, not your total earnings. Taxable income is calculated by reducing your gross income through adjustments and deductions. The process begins by subtracting specific adjustments from your total income to arrive at your Adjusted Gross Income (AGI). These “above-the-line” deductions can include contributions to certain retirement accounts or interest paid on student loans.

After determining your AGI, you can further reduce your taxable income by taking either the standard deduction or by itemizing deductions. The standard deduction is a fixed dollar amount that the IRS allows you to subtract, with the amount varying based on your filing status. For 2025, the standard deduction for single filers is $15,350, and for married couples filing jointly, it is $30,700.

Alternatively, you can itemize deductions if the total of your specific deductible expenses exceeds your standard deduction amount. Common itemized deductions include mortgage interest, state and local taxes capped at $10,000 per household, and medical expenses that exceed a certain percentage of your AGI. Both adjustments and deductions lower your taxable income, which reduces the amount of tax you owe.

Tax Credits That Can Generate a Refund

Tax credits directly reduce your tax liability on a dollar-for-dollar basis. There are two types of credits: nonrefundable and refundable. Nonrefundable credits can lower the tax you owe to zero, but you forfeit any credit amount that exceeds your tax liability. For example, if you owe $500 in taxes and have a $1,000 nonrefundable credit, your tax bill is eliminated, but you do not receive the remaining $500.

Refundable credits, on the other hand, are paid out in full even if the credit amount is more than your total tax. If you have no tax liability, you receive the entire amount of the refundable credit as a tax refund because they are not limited by the amount of tax you owe.

Several common refundable credits can generate a refund. The Earned Income Tax Credit (EITC) assists low- to moderate-income working taxpayers, with the amount based on income, filing status, and the number of qualifying children. The Child Tax Credit (CTC) provides up to $2,000 per qualifying child, and a portion of it, the Additional Child Tax Credit (ACTC), is refundable up to $1,700 per child, allowing eligible taxpayers to receive money back even if they don’t owe any tax. For those pursuing higher education, the American Opportunity Tax Credit (AOTC) helps with expenses for the first four years of postsecondary education. The AOTC is partially refundable, as up to 40% of the credit, with a maximum of $1,000, can be received as a refund.

How Tax Withholding Leads to a Refund

The most common reason for a tax refund is over-withholding from paychecks. When you start a job, you fill out Form W-4, “Employee’s Withholding Certificate,” to instruct your employer on how much federal income tax to withhold. The information on your W-4, such as your filing status and dependents, helps your employer estimate your annual tax liability.

If the total amount withheld throughout the year is greater than your final tax liability, you will receive a refund for the difference. You can adjust your withholding at any time by submitting a new Form W-4 to your employer, and can even request extra withholding to increase the size of your refund.

Self-employed individuals or those with other income not subject to withholding make quarterly estimated tax payments. These payments serve the same purpose as withholding. If their total estimated payments exceed their final tax bill, they will also receive a refund.

Claiming and Tracking Your Refund

To receive a tax refund, you must file a federal income tax return using Form 1040. This form is where you report your income, claim deductions and credits, and calculate your final tax liability. The result determines if you are owed a refund.

When filing your return, you can choose to receive your money via direct deposit or a paper check. Direct deposit is faster, as the funds are electronically transferred to the bank account you provide on your Form 1040. A paper check is mailed to the address on your return and takes longer to arrive.

After filing, you can monitor your refund’s status using the IRS’s “Where’s My Refund?” tool on the IRS website or the IRS2Go mobile app. To use the tool, you will need your Social Security number or ITIN, your filing status, and the exact refund amount. The tool displays one of three statuses: “Return Received,” “Refund Approved,” or “Refund Sent.” You can start checking the status within 24 hours of e-filing or four weeks after mailing a paper return.