2026 Tax Season: Anticipated Increase in Federal Tax Refunds
Next year's federal tax refunds are expected to increase by an average of $1,000 per filer, potentially reaching around $4,151 per person based on IRS data from the 2025 tax filing season. The boost in refunds is attributed to the new tax and spending law signed by President Trump in July, which introduced various tax breaks retroactive to 2025. These changes include eliminating taxes on certain types of income and raising the cap on the deduction for state and local taxes (SALT) from $10,000 to $40,000. As a result, many Americans are likely to receive larger refunds when they file their 2025 individual returns in early 2026.
According to a recent analysis by financial services company Piper Sandler, the total amount of tax refunds is expected to increase significantly, with an additional $90 billion in refunds compared to a typical year. The impact of the new tax law is projected to be substantial, potentially leading to one of the largest tax refund seasons ever. However, the benefits of these changes are expected to primarily benefit middle- and upper-middle-income households, with higher-income earners likely to see a larger relative boost from the new tax law compared to lower-income households.
While the new tax law introduces several tax breaks, not all households will benefit equally. Higher-income households, earning over $217,000 a year, are projected to receive a significant portion of the new tax breaks. On the other hand, lower-income households may not see as much benefit from certain provisions of the law, such as the increased SALT deduction cap, which only helps those whose state and local taxes exceed the standard deduction for 2025. Additionally, lower-income households may not be able to take advantage of the SALT deduction as they typically do not itemize their deductions.
Overall, the upcoming tax season is expected to bring larger refunds for many Americans due to the changes introduced by the new tax law. While middle- and upper-middle-income households are likely to benefit the most, lower-income households may not see as much of an impact from the new provisions. As taxpayers prepare to file their 2025 returns, they can anticipate potentially significant refunds, with the average payment set to increase by about $1,000 per filer.