Why ‘Very Large’ Tax Refunds Are Expected in 2026, According to Officials
As Americans prepare to file their 2025 tax returns next year, many are being told to expect notably large tax refunds in 2026. Officials and tax experts attribute this unprecedented refund season to significant changes made under the recently enacted One Big Beautiful Bill, a major piece of tax legislation passed during the Trump administration.
Record-Breaking Refunds Projected
Rep. Jason Smith (R-MO), Chairman of the House Ways and Means Committee, highlighted in a December memo that based on an analysis from financial services firm Piper Sandler, 2026 is shaping up to be “the largest tax refund season” ever. Treasury Secretary Scott Bessent reinforced this outlook in an interview with a Philadelphia NBC affiliate, forecasting refunds totaling between $100 billion and $150 billion nationwide. This translates to an estimated $1,000 to $2,000 per household.
“The bill was passed in July. Working Americans didn’t change their withholding, so they’re going to be getting very large refunds in the first quarter,” Bessent explained, adding that once employers adjust withholding rates, taxpayers will see increased take-home pay instead of large lump-sum refunds.
What’s Driving the Larger Refunds?
The One Big Beautiful Bill introduces several notable changes that influence tax returns for the 2025 tax year, to be filed in 2026. Some of the key provisions include:
- Increased Standard Deduction: The newly raised standard deduction reduces taxable income for many taxpayers, potentially increasing refunds.
- Higher Cap on State and Local Tax (SALT) Deductions: Taxpayers can deduct more from their federal taxes for state and local taxes paid.
- Additional $6,000 Deduction for Seniors: This new deduction specifically benefits older Americans on a fixed income.
- No Tax on Tips and Overtime Pay: Income earned from tips and overtime hours will no longer be subject to federal income tax.
- No Tax on Car Loan Interest: Interest paid on car loans is exempt from federal income tax.
Tax attorney Adam Brewer of AB Tax Law noted the uneven nature of these modifications: “The administration and Congress picked winners and losers. As a result, not all income is taxed equally. If your income is based largely on overtime or tips, then you could be paying much less income tax than your co-worker who is a salaried employee even if you earn roughly the same amount.”
Not Everyone Benefits Equally
Despite the promise of increased refunds for many households, the legislation has come under criticism for its uneven impact across income groups. Independent, nonpartisan analyses suggest the bill disproportionately favors high earners and corporations.
For example, a Congressional Budget Office report found that individuals in the top 10 percent of income earners could receive an average tax break of about $12,000 annually. Conversely, the poorest 10 percent could lose around $1,600 per year, a disparity compounded by simultaneous cuts to Medicaid and food assistance programs.
In light of this, Brewer advises caution: “If you receive a larger refund than prior years, then it will be a pleasant surprise, but don’t spend in anticipation of a large refund just yet.”
What Taxpayers Should Know
It’s important for taxpayers to understand that a larger refund does not equate to increased overall income. Rather, it generally means that more money was withheld during the year than necessary, and the excess is now being returned. Moving forward, withholding amounts will likely adjust, potentially increasing take-home pay instead of generating large refunds.
As the 2026 tax season approaches, individuals are encouraged to review their withholding status to avoid surprises and to stay informed about how legislative changes may affect their personal tax situations.
This article is based on reporting by NBC4 WCMH-TV and analysis by financial experts. For personalized tax advice, consult a qualified tax professional.