Why are tax refunds expected to be “very large” in 2026?

Why are tax refunds expected to be “very large” in 2026, according to officials?

Thanks to a number of changes to the tax code under the “Big Beautiful Bill,” officials in the Trump administration expect Americans to receive the largest tax refunds ever in 2026.

House Ways and Means Committee Chairman Rep. Jason Smith (R-Missouri) said in a memo released in early December, citing an analysis by the financial services firm Piper Sandler, that 2026 is shaping up to be “the season of the largest tax refunds.”

“Because of the changes in the ‘Big Beautiful Bill,’ most taxpayers are expected to receive a larger refund in 2025, but how much they receive will really depend on the specifics of their tax situation,” Adam Brewer, a tax attorney at AB Tax Law, told Nexstar.

While many changes are scheduled to take effect in 2026—impacting returns filed the following year—there are notable changes for 2025, including: a higher standard deduction, a higher cap on state and local tax (SALT) deductions, an additional $6,000 deduction for seniors, no taxes on tips, no taxes on overtime pay, and no taxes on car loan interest, among other provisions.

“The administration and Congress have chosen winners and losers,” Brewer said. “As a result, not all income is taxed equally. If your income relies heavily on overtime or tips, you may pay significantly less income tax than a coworker who earns a fixed salary, even if you make roughly the same amount.”

When can Social Security beneficiaries expect their January 2026 payments?

Treasury Secretary Scott Bessent echoed Smith’s remarks in a recent interview with a local NBC station in Philadelphia, saying Americans will receive “very large refunds.”

“The law was passed in July. Working Americans didn’t change their tax withholdings, so they’ll get very large refunds in the first quarter,” Bessent said. “I think we’ll see refunds totaling between $100 billion and $150 billion, which could range from $1,000 to $2,000 per household.”

Bessent added that once withholding levels are adjusted, workers will see higher take-home pay. To clarify, receiving a larger tax refund does not mean taxpayers are earning more income; rather, the refund simply represents taxes that were over-withheld during the year and are now being returned to the taxpayer.

However, not all American taxpayers are expected to benefit from the Trump administration’s major bill.

According to multiple analyses by independent, nonpartisan think tanks, the legislation disproportionately benefits some of the nation’s highest earners and large corporations.

An analysis by the Congressional Budget Office found that the top 10% of earners would receive an additional $12,000, while the poorest 10% of Americans would lose $1,600 per year due to cuts to medical assistance and food aid programs.

“What I tell my clients is that if they receive a larger refund than in previous years, it will be a pleasant surprise,” Brewer said, “but they shouldn’t spend money now in anticipation of receiving a large refund.”