Your federal income tax refund could jump by roughly $1,000 in 2026, thanks to a new slate of tax breaks that take effect for the 2025 tax year.
Wall Street Forecasts One Of Biggest Refund Seasons
An analysis by financial firm Piper Sandler projects the average refund will climb from about $3,151 for the 2025 filing season to roughly $4,151 when Americans file 2025 returns in early 2026, a gain of about one-third. That would mark one of the richest refund seasons on record, on top of recent years in which the IRS has already been sending checks that average more than $3,000.
Trump's New Law Fuels Retroactive 2025 Tax Cuts
The jump stems from the "One Big Beautiful Bill Act," President Donald Trump's tax-and-spending law signed in July, which retroactively cuts 2025 taxes. The law eliminates federal income tax on some overtime and tipped wages and raises the cap on the state and local tax (SALT) deduction from $10,000 to $40,000.
Since most workers haven't changed their paycheck withholding to reflect those midyear changes, they are effectively overpaying now and will see the difference as larger refunds next spring, Piper Sandler's Don Schneider said in a podcast in October. He estimates total refunds could swell from roughly $270 billion in a typical year to about $360 billion.
Middle Earners Gain Most While Edges See Less
Bipartisan budget analysts at the Committee for a Responsible Federal Budget (CRFB) say the structure of the new breaks means middle- and upper-middle-income households will reap most of the benefit. Similar SALT-cap relief proposals studied by the Committee for a Responsible Federal Budget and other nonpartisan groups show that raising the $10,000 limit primarily helps higher earners who itemize and pay large property and income taxes.
Households earning between about $60,000 and $400,000 are likely to see the biggest dollar gains, while very high earners lose some benefits to income phase-outs and many low-income filers gain little because they don't itemize or owe much income tax.
That distribution mirrors earlier Tax Policy Center findings that wealthier households capture a disproportionate share of broad income-tax cuts, even as lower-income families rely more on targeted credits like the Earned Income Tax Credit and Child Tax Credit.
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