Enhanced tax breaks under US President Donald Trump's One Big Beautiful Bill Act are expected to boost federal income tax refunds next year by hundreds of dollars, according to tax experts.
Christian Floro from Principal Asset Management stated that tax refunds could increase by approximately $675 (£505), raising the average refund to nearly $3,800 (£2,846) annually. Meanwhile, TurboTax predicts that taxpayers could receive up to $1,000 (£749) more per refund in 2026.
Nearly 50% of Americans surveyed by TurboTax last year said they would use their tax refunds to pay household bills. Tax expert Lisa Greene-Lewis anticipates even more people will rely on their tax refunds to cover essentials in 2026.
Elsewhere, Piper Sandler has said that US taxpayers will collectively receive over $90 billion (£67.4 billion) in additional tax refunds on their 2025 taxes, implying around $1,000 more per refund. However, refunds could be 'substantially more for some filers,' according to the brokerage.
While forecasts for tax refund increases vary, analysts generally expect a significant rise, which could help households amid rising living costs, debt, and a weakening US labour market.
The latest projections for tax refunds in 2026 are largely due to new tax breaks, such as no tax on worker tips and senior bonuses. Taxpayers who are not claiming or eligible for these breaks can still receive higher refunds as standard deductions and child tax credits increase.
Principal Asset Management estimates that the increased standard deduction alone accounts for about $116 (£86.9) of the projected $675 average increase in refunds.
Refunds Have a Big Impact on Consumer Debt
Credit card debt generally rises in Q4 as consumers spend during the holiday season, but balances tend to fall in Q1. Experts say that tax refunds play a crucial role in helping consumers reduce credit card debts accumulated in Q4.
For example, US credit card debt stood at $1.21 trillion (£906.4 billion) in Q4 2024 but declined to $1.18 trillion (£883.9 billion) in Q1 2025.
For over a year, credit card and auto loan delinquency rates have remained at levels last seen after the Global Financial Crisis.
Matthew Martin from Oxford Economics notes that tax refunds may be even more important this year in supporting Americans to pay down their debts. The organisation expects the IRS to process around $50 billion (£37.4 billion) in additional refunds during the upcoming tax season, which could mean an extra $300 (£224) per person for over 160 million taxpayers.
Higher tax refunds could also boost consumer spending, which may help people retain jobs in sectors that depend on that demand, supporting the struggling labour market and the overall economy.
'If the labour market is weakening, households are more dependent on the entirety of their refund to get them over the hump and allow them to continue their spending patterns,' Martin said.
Plan Your Returns Early to Maximise Refunds
The TurboTax survey also revealed that 66% of respondents plan to start their 2025 tax planning next year, but Greene-Lewis warns this may be too late.
Workers who receive tips or overtime should keep detailed records of their cash inflows to claim all applicable deductions. Meanwhile, those saving for retirement can boost their refunds by increasing 401(k) contributions before year-end. In short, early planning is key to maximising your tax return.
