Federal refunds are typically larger than state refunds, but it depends entirely on your income, deductions, and where you live.
The federal government collects more tax than any state does, so the average federal refund is larger. The IRS reported that the median federal refund for the 2023 tax year was around $2,750. State refunds vary widely: some states refund $500 to $1,000 on average, while others average $200 or less. A handful of states have no income tax at all, so residents get no state refund.
Your personal refund depends on how much you overpaid during the year, not on which refund is "bigger" in general. You might owe one government money while the other owes you, or you might get a large refund from one and a small one from the other. The two are calculated separately using different tax rates and rules.
Key Takeaways
- Federal refunds average higher than state refunds because the federal tax rate is higher and applies to more of your income.
- Nine states have no income tax, so residents receive no state refund at all.
- Your refund size depends on how much you withheld during the year, not on which government collects more tax overall.
- A large federal refund does not may provide a large state refund, because each uses different tax brackets and deductions.
- You can adjust your withholding on your W-4 or estimated tax payments to reduce overpayment to either government.
Why federal refunds tend to be larger
The federal tax system takes a larger percentage of most workers' income than state systems do. Federal tax rates range from 10% to 37% depending on your bracket. Most state income tax rates fall between 3% and 10%, with some states at the lower end. Because the federal government withholds more money upfront, it also tends to refund more when you file.
Federal tax brackets are also wider, meaning more of your income is taxed at lower rates before you hit a higher bracket. State brackets are often narrower, so you move into higher tax brackets faster. This structure means federal withholding is often higher in absolute dollars, even if the top state rate is close to the federal rate.
States with no income tax and what that means for your refund
Nine states do not tax income at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only dividends and interest, not wages). If you live in one of these states, you have no state income tax withheld and receive no state refund. You still file a federal return and receive a federal refund if you overpaid.
Some people move to these states partly for this reason, though the trade-off is usually higher property taxes or sales taxes. If you work in a state with income tax but live in a no-tax state, you typically owe tax to the state where you worked, not where you live.
How state refunds can be smaller even with high withholding
State tax codes differ from federal tax codes in ways that shrink your refund. Some states do not allow deductions the federal government does, or they cap deductions at a lower amount. For example, some states limit the deduction for state and local taxes (SALT) to $5,000 or $10,000, while the federal cap is $10,000. If you have high property taxes or state income tax, this can reduce your state refund significantly.
Other states tax retirement income differently, allow fewer dependent deductions, or phase out credits faster. A person with a $3,000 federal refund might receive only $400 from their state because of these differences. The state is not necessarily taking less tax during the year—it is just using different rules to calculate what you owe.
When your state refund might be bigger than your federal refund
This is uncommon but possible. It happens when you have income or credits that the state treats more generously than the federal government does. Some states offer refundable credits for child care, education, or energy efficiency that the federal government does not, or they offer them at higher amounts. If you have a large state credit and a smaller federal one, your state refund could exceed your federal refund.
It can also happen if you live in a state with a lower tax rate and you had a large deduction that reduced your state taxable income more than your federal taxable income. This is rare and usually involves specific circumstances like business losses or education credits.
How to find out what your state refund will be
Your state tax return shows your refund amount before you file. Most state tax software displays the estimated refund as you enter your information. You can also use your state's tax return worksheet or call your state tax department to estimate it. The state revenue office website usually has a phone number and a list of forms you can use to calculate it yourself.
Do not assume your state refund will be close to your federal refund. Calculate both separately using your state's rules and rates. If you use tax software that handles both returns, it will show you each refund amount before you submit either return.
Adjusting withholding to avoid large refunds from either government
If you consistently receive a large refund from the federal government, the IRS or your state is holding your money interest-free for months. You can adjust your W-4 form to reduce withholding and take home more pay each week instead. The same applies to state withholding: most states have a separate withholding form or allow you to adjust state withholding on your federal W-4.
To adjust federal withholding, fill out a new W-4 and give it to your employer's payroll department. To adjust state withholding, check your state tax department's website for the form—some states use a separate form, others let you adjust it on the federal W-4. If you are self-employed, you can adjust your estimated tax payments to either government quarterly.
Frequently Asked Questions
Can I get a refund from my state if I do not owe federal tax?
Yes. State and federal taxes are separate, so you can owe one and not the other. You file both returns independently. If you had state tax withheld and your state tax liability is lower than what was withheld, you receive a state refund even if you owe nothing to the federal government or receive a federal refund.
Why is my state refund so much smaller than my federal refund?
State tax rates are usually lower than federal rates, and state tax codes often allow fewer deductions or credits. Some states also have different rules for retirement income, capital gains, or dependent deductions. Calculate both refunds using each government's rules—they are not meant to match.
Do I have to file a state return if I live in a no-income-tax state?
No. If you live in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, or New Hampshire and earned only wages, you do not file a state return. If you had self-employment income or other business income, check your state's rules—some no-tax states still require a return for certain income types.
If I get a large federal refund, will my state refund be large too?
Not necessarily. A large federal refund means you overpaid federal tax, but your state withholding is based on state tax rates and rules, which are different. You could overpay federal tax significantly while underpaying state tax, or vice versa. Calculate each refund separately.
Can I adjust my state withholding the same way I adjust federal withholding?
Most states allow you to adjust withholding on a separate state form or through your employer's payroll system. Some states let you adjust it on the federal W-4 itself. Check your state tax department's website for the withholding form or instructions specific to your state.