2026 Tax Refunds: Bigger or Smaller?
Discover how new tax laws under the OBBB Act are boosting refunds for millions—explore deductions, credits, and tips for your 2026 filing.
The 2026 tax filing season, which kicked off on January 26 and runs through April 15, is delivering noticeably larger refunds for many Americans compared to prior years. This surge stems primarily from provisions in the 2025 One Big Beautiful Bill Act (OBBB), which introduced retroactive tax cuts affecting 2025 income reported in 2026 filings. Early data shows average refunds reaching $3,623 through mid-March, with projections estimating total refunds climbing by $55-91 billion.
Why Refunds Are Growing This Year
Several key OBBB measures are driving higher refunds by reducing taxable income or expanding credits without immediate adjustments to paycheck withholding. These changes benefit tens of millions through modest cuts in the hundreds of dollars, while millions more see larger savings in the thousands. For instance, as of early March 2026, the Treasury reported processing 63.5 million returns with an average refund exceeding $3,700, and nearly 45% claiming at least one new tax cut.
Refunds increase when withholdings exceed final tax liability after deductions and credits. OBBB’s mid-year boosts weren’t reflected in 2025 paychecks, so filers capture the full benefit upon return submission.
Major Boosts to the Standard Deduction
The standard deduction, claimed by over 90% of filers (143 million returns in 2023), saw a permanent extension of TCJA enhancements plus further increases: $15,750 for singles (up from $15,000), $23,625 for heads of household (from $22,500), and $31,500 for joint filers (from $30,000). This yields tax savings of $75-$278 for singles and $150-$555 for couples, depending on brackets.
- Savings realized fully in refunds due to unchanged 2025 withholding.
- Applies to both itemizers and non-itemizers in some expanded cases.
Enhanced Child Tax Credit for Families
The Child Tax Credit (CTC) rose from $2,000 to $2,200 per child, delivering up to $200 extra per qualifying child for 46 million tax units. Full benefits phase out above $200,000 MAGI for singles or $400,000 for joint filers, and may be limited if no tax is owed.
Adoption credits also gained partial refundability up to $5,000 (inflation-adjusted), aiding families regardless of tax liability.
New Deductions Tailored for Seniors
Seniors aged 65+ qualify for an additional $6,000 deduction per person ($12,000 for couples), stacking with existing extra standard amounts ($2,000 single/HOH or $1,600 per spouse). Blind seniors double this to $4,000 individual/$3,200 per spouse.
Tax Policy Center projects 24 million claimants averaging $1,000 in savings; early filings show 9.2 million claims.
| Filer Status | Base Extra Deduction (65+) | Blind Double | OBBB Add-On |
|---|---|---|---|
| Single/HOH | $2,000 | $4,000 | $6,000 |
| Joint Spouse | $1,600 | $3,200 | $6,000 |
Overtime and Tips: Relief for Workers
No-tax provisions on overtime and tips are game-changers. About 17 million are expected to claim overtime deductions averaging $1,400; tips deductions projected for 5-10 million at similar averages. Filings confirm: 15.5 million overtime and 3.5 million tips claims so far.
Eligibility typically requires W-2 income from qualified overtime or tips; phaseouts apply at higher incomes.
SALT Cap Expansion and Other Itemizer Wins
The state and local tax (SALT) deduction cap rose to $40,000 (adjusted annually through 2029), benefiting 15 million itemizers with hundreds to thousands in savings. Vehicle interest deductions up to $10,000 also aid certain buyers (phaseout over $100,000 MAGI single/$200,000 joint).
Broader OBBB Impacts on Tax Code
OBBB made permanent several TCJA elements: lower rates/brackets, increased AMT exemptions, $750,000 mortgage interest limit, 20% QBI deduction, and higher estate tax thresholds. These stabilize planning but primarily fuel refunds via retroactive 2025 applications.
Morgan Stanley forecasts average refunds at $3,500 (20% up from 2025’s $2,940), totaling $350 billion.
Who Stands to Gain the Most?
- Middle-income families: CTC and standard deduction boosts.
- Seniors: Layered deductions averaging $1,000+.
- Service/hourly workers: Overtime/tips relief.
- High-tax state residents: SALT expansion.
Lower-income non-taxpayers may see limited gains if credits aren’t refundable enough.
Filing Tips to Maximize Your Refund
- Adjust withholding now: Use IRS tools to avoid over/under-withholding for 2026 income.
- Gather docs early: Track overtime/tips via employer forms.
- Choose wisely: Standard vs. itemized—run scenarios.
- E-file and direct deposit: Speeds refunds to 21 days.
- Check eligibility: New Schedule 1-A for OBBB claims.
Potential Pitfalls and Changes to Watch
Not all see bigger refunds—those with adjusted 2025 withholding or owing taxes may break even. Tariffs could indirectly raise costs, offsetting some gains (tracked via BPC Deficit Tracker). Permanent changes eliminate personal exemptions but enhance others.
FAQs
Will my 2026 refund be bigger than last year?
Yes, for most: OBBB cuts average 20% larger refunds, driven by unwithheld boosts.
Who qualifies for the overtime deduction?
W-2 workers with qualified overtime; ~17 million expected to benefit.
How much extra for seniors?
$6,000 per person atop existing extras, averaging $1,000 tax cut.
Is the CTC fully refundable?
Partially; up to $200/child extra, limited by tax owed and income.
When is the 2026 deadline?
April 15; extensions available but payments due.
References
- The 2026 Tax Filing Season: What to Know — Bipartisan Policy Center. 2026. https://bipartisanpolicy.org/issue-brief/the-2026-tax-filing-season-what-to-know/
- Take Advantage of These New Tax Changes for 2026 — AARP. 2026. https://www.aarp.org/money/taxes/2026-tax-changes/
- What’s Driving Higher Tax Refunds in 2026? — Bipartisan Policy Center. 2026. https://bipartisanpolicy.org/explainer/whats-driving-higher-tax-refunds-in-2026/
- What does the new tax reform mean for you? — H&R Block. 2026. https://www.hrblock.com/tax-reform-and-law-changes/
- One Big Beautiful Bill Act Tax Law Changes — TurboTax. 2026. https://turbotax.intuit.com/tax-tips/general/taxes-2021-7-upcoming-tax-law-changes/L3xFucBvV
- How 2026 Tax Refund Increases Could Boost Consumer Finance — Morgan Stanley. 2026. https://www.morganstanley.com/insights/articles/federal-tax-returns-increase-impact-2026
- President Trump’s Tax Cuts are Putting More Money Back — U.S. Treasury Department. 2026-03-08. https://home.treasury.gov/news/press-releases/sb0414
Similar Articles
Read full bio of Sneha Tete
