Bigger refunds are coming
Many Americans may see larger tax refunds or smaller tax bills in 2026, and it’s all because of President Donald Trump’s new tax and spending package — plus an IRS delay in updating its withholding tables.
According to Nancy Vanden Houten, a lead economist at Oxford Economics, the total taxpayer savings could reach $50 billion. This is due to the IRS not yet adjusting paycheck withholding rates to reflect the new tax breaks, which were made retroactive to early 2025.
That means workers have been paying too much in taxes throughout 2025, and they’ll get the difference back in their refunds next year.
Read this later: 2025 capital gains tax brackets explained — and what’s new for 2026.
What’s behind the extra cash?
The new law includes several retroactive tax breaks:
- An additional deduction for seniors
- No taxes on tips or overtime
- A larger Child Tax Credit
Because the IRS hasn’t updated its tax tables yet, most employers are still using old rates, so workers aren’t seeing these benefits in their paychecks. Instead, they’ll receive the full benefit when they file their 2025 taxes in 2026.
A $50 billion boost
If Vanden Houten’s estimate is right, the total refund pool will rise by 17% compared to last year’s $275 billion.
The average refund in 2025 was about $2,939. A 17% boost would mean roughly $500 more per person — though not everyone will see that exact increase. Some taxpayers might instead owe less when they file.
Vanden Houten notes that “some taxpayers may reduce their tax liability when final payments are due in April, rather than wait for a refund.”
Read this later: Good news about Social Security benefits – These are the millions of Americans who will receive checks of up to $5,108 this October 22.
Who benefits the most?
Unfortunately, not everyone will feel this windfall equally. Experts say wealthy Americans will benefit the most from Trump’s new law.
That’s mainly because of the state and local tax (SALT) deduction changes. Trump’s plan raises the SALT cap to $40,000 for some households that itemize deductions, and it also lets certain business owners — such as those with partnerships or sole proprietorships — sidestep the cap altogether.
High-income households typically have much higher state and local tax bills, so this change offers them a bigger break.
Read thislater: Key things to consider during Medicare open enrollment.
What it means for everyone else
While upper-income families gain the most, middle-class Americans will still get some relief. Extra money at tax time can help cover everyday costs like groceries, gas, and medical bills — especially after several years of high inflation.
And many Americans don’t just save their refunds — they spend them quickly. A TaxSlayer survey found that nearly two-thirds of taxpayers planned to use their refunds immediately, which could give the economy a small boost.
Will bigger refunds help the economy?
Economists expect the extra $50 billion in tax savings to add a modest boost to the U.S. economy in early 2026.
Vanden Houten said some consumers may already be spending in anticipation of lower tax bills next year. However, she also pointed out that upper-income earners are less likely to spend their savings, since their tax cuts often show up as smaller bills — not refund checks.
Read this later: Good news for Social Security recipients as November payment arrives early.
Still, for millions of average Americans, a few hundred extra dollars could make a big difference in the new year.
