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Why Millions of Taxpayers Could Get Bigger Refunds This Year
By Pete Grieve MONEY RESEARCH COLLECTIVE
Are you one of them?
When you get your refund from the IRS this year, you might be surprised to find it’s bigger than usual. Multiple groups of taxpayers are on track to receive larger refunds in 2026 due to tax policy changes in the One Big Beautiful Bill Act.
Several key changes in the GOP tax law, which the president signed in July, were retroactive and applied for the 2025 tax year. That means many taxpayers were likely overwithholding in the first half of last year — and beyond, unless they made adjustments.
The 940-page tax law included signature policies like “no tax on tips,” “no tax on overtime,” and the “senior bonus.” Those changes are effective for the 2025 to 2028 tax years: dates that align with President Donald Trump’s second term in office. The law also increased caps on the state and local tax (SALT) deduction, and it created a new car loan interest deduction.
All of these policies could result in higher refunds or lower tax bills for certain groups — to the tune of up to $50 billion total, according to Oxford Economics. Another forecast found that individual refunds could jump by between $300 to $1,000 this filing season.
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In theory, taxpayers could have reduced their withholding by submitting new W-4s after the law was passed to take advantage of the benefits immediately. Americans can also change their tax withholding from pension distributions, IRA distributions and other income streams. However, that process may simply have been too complicated for most people to do last year.
Nancy Vanden Houten, lead economist at Oxford Economics, said in a news release there was “no evidence” that a significant number of people made adjustments.
As a result, many taxpayers will get bigger refunds this spring. That’s partially by design: The Trump administration and the lawmakers who worked on the bill have celebrated the fact that it’ll put money into the pockets of American taxpayers this spring.
“Thanks to our tax cuts, millions of Americans will soon receive record setting tax refunds,” Trump said during a Jan. 29 cabinet meeting. “We’re going to be getting some pretty good refunds to a lot of people.”
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But from a personal finance angle, getting a bigger tax refund is not necessarily ideal.
While a check from the IRS can be a nice bonus, a large tax refund also indicates that a taxpayer withheld more than they needed to. Financial professionals often advise against withholding extra money, reminding consumers that a tax refund means you’ve essentially been giving an interest-free loan to the government.
The IRS has updated withholding tables for 2026, but affected taxpayers will likely need to file new W-4s if they want larger paychecks this year instead of a larger refund again in 2027.
Last filing season, the average tax refund was $3,167, according to the IRS, and the average refund was higher ($3,252) for the 2022 filing season. Exactly how much refunds will swell again this year remains to be seen.
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Pete Grieve is a New York-based reporter who covers personal finance news. At Money, Pete covers trending stories that affect Americans’ wallets on topics including car buying, insurance, housing, credit cards, retirement and taxes. He studied political science and photography at the University of Chicago, where he was editor-in-chief of The Chicago Maroon. Pete began his career as a professional journalist in 2019. Prior to joining Money, he was a health reporter for Spectrum News in Ohio, where he wrote digital stories and appeared on TV to provide coverage to a statewide audience. He has also written for the San Francisco Chronicle, the Chicago Sun-Times and CNN Politics. Pete received extensive journalism training through Report for America, a nonprofit organization that places reporters in newsrooms to cover underreported issues and communities, and he attended the annual Investigative Reporters and Editors conference in 2021. Pete has discussed his reporting in interviews with outlets including the Columbia Journalism Review and WBEZ (Chicago's NPR station). He’s been a panelist at the Chicago Headline Club’s FOIA Fest and he received the Institute on Political Journalism’s $2,500 Award for Excellence in Collegiate Reporting in 2017. An essay he wrote for Grey City magazine was published in a 2020 book, Remembering J. Z. Smith: A Career and its Consequence.