Refund Definition Bankrate.com Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content

Refund

Refund is a money term you need to understand. Here’s what it means.

What is a refund

A refund is the payment the federal or state government makes to a taxpayer who pays an excess amount of taxes during the previous year. This payment comes in the form of a check, direct deposit or savings bond.

Deeper definition

There are two primary views on refunds. One side sees tax refunds as evidence of an interest-free loan given to the government. The other considers them as forced savings, since the taxpayers do not have access to the money until after they receive the refund. Those who want to reduce or eliminate their tax refund need to increase the number of exemptions they claim, and those who want to increase their refunds should decrease their claimed exemptions. People who want to make these adjustments should talk to a tax professional about their options. Some taxpayers receive a refund even if they don’t pay any taxes to the government. Designed to benefit low- to moderate-income households, the earned income tax credit reduces the amount of taxes the taxpayers owe. This reduced tax bill can lead to a tax refund.

Refund example

Each year when you complete your tax return, you list your income for the year and subtract from that amount available deductions to determine your adjusted gross income. This is the figure the IRS uses to calculate the amount of tax you owe. If you have a job, your employer deducts taxes from your paycheck and sends the money to the IRS. When the total amount of taxes you paid out of your paycheck is greater than what you actually owe, the government returns the overage to you, and that is your refund for the year. Are you wondering if you qualify for earned income tax credit to increase the amount of your refund? Use Bankrate’s earned to see how it can help you and your family.

More From Bankrate

An LLC can simplify tax filing and reduce the legal liability of its members. How to lessen the tax liability, so you can keep as much profit in your pocket as possible. If you haven’t filed your taxes yet, don’t panic — but act fast. Typically, taxpayers have two options: Take the itemized deductions or take the standard deduction. Regardless of what may cause a person to miss the tax-filing deadline, there are potential consequences. Applying for more time to file your taxes is easy. Just don’t put off paying your tax bill. The fast-approaching deadline for filing your 2021 taxes is April 18, 2022. There are seven tax brackets for most ordinary income: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The credit was confusing even before Congress revamped it for 2021.