Many U.S. taxpayers could see larger refunds next year, thanks to retroactive tax benefits included in President Donald Trump’s recently enacted tax package — dubbed the “big beautiful bill.” The legislation, passed in July, expands tax breaks for 2025 filings, including a higher standard deduction, an additional deduction for older adults, and a new exemption for tipped income. These changes will apply to returns filed in early 2026.
However, because the IRS has not yet updated 2025 withholding tables, many workers continue to have the same amount taken from their paychecks as before. That means millions may overpay taxes this year, potentially boosting next year’s refunds. “Many taxpayers will pay too much in tax this year and see larger tax refunds or smaller tax bills next year,” wrote Nancy Vanden Houten, lead economist at Oxford Economics, in an October note.
Financial firms are already forecasting the impact. Piper Sandler expects a “record tax refund season in 2026,” estimating $91 billion in tax relief between February and April, including $59 billion in refunds and $32 billion from reduced tax bills — with middle- and high-income earners likely to benefit the most. J.P. Morgan previously signaled a similar trend tied to unchanged IRS withholding guidance.
The windfall may arrive at a time of heightened financial strain for many households, with ongoing economic uncertainty and federal support programs under pressure amid the prolonged government shutdown. Surveys show most Americans plan to use refunds for essentials like rent, groceries, and debt repayment — while higher-income filers are expected to save most of their refunds.
Recent IRS data shows the average refund for 2025 so far is $3,052, slightly higher than $3,004 the previous year, suggesting early signs of the trend already emerging.
