Most Americans are likely to see noticeably bigger tax refunds in 2026, and for many people, that extra money could be close to $1,000 more than usual. This change is mainly coming from recent tax cuts that reduced how much people actually owe in taxes, even though they’ve been paying the old amounts all year.
According to estimates from the Tax Foundation, the average tax refund in 2026 could be about $1,000 higher than in previous years. Altogether, this could mean around $100 billion being sent back to workers across the country. For a lot of households, this extra cash could be a real relief at a time when everyday costs are still high.
The main reason for these larger refunds is the impact of President Donald Trump’s so-called “big, beautiful bill.” This law introduced several tax breaks and deductions that lowered people’s tax bills for 2025. However, most workers didn’t feel these changes immediately in their paychecks.
In the United States, taxes are usually paid as you earn money. Employers take tax directly out of workers’ wages and send it to the IRS. Self-employed people and business owners usually make estimated payments throughout the year. The problem is that these payments were based on the old tax rules, not the new ones created by the bill.
Because the IRS did not update its tax withholding tables to reflect the new law, employers kept taking out more tax than many workers actually owed. As a result, millions of people effectively overpaid their taxes during 2025. When they file their returns in 2026, that overpayment is expected to come back to them as a larger refund.
The Tax Foundation estimates that the new law reduced individual taxes by about $144 billion in 2025 alone. Since withholding wasn’t adjusted, much of that money is now set to be refunded rather than already being in workers’ pockets.
Not everyone will receive the same amount, but people who benefit from multiple parts of the new tax changes are more likely to see bigger refunds. Some of the key changes include a higher child tax credit, a larger standard deduction, and an increased deduction for state and local taxes. There are also new deductions, such as one for up to $10,000 in auto loan interest, another for up to $25,000 of income earned from tips, and one for up to $12,500 in overtime income.
Many of these deductions come with income limits, so not everyone will qualify. Using tax software or speaking with a tax professional can help people understand which benefits apply to them and how much they might get back.
If you do receive a larger refund, it can be a good opportunity to improve your financial situation. Some people may choose to pay down credit card balances or other debts, while others might add the money to an emergency fund to cover unexpected expenses. Investing the refund is another option, especially for those thinking long-term, as even $1,000 can grow over time if invested wisely.
For retirees or people approaching retirement, this refund could also help support future income. Many Americans are behind on retirement savings, and small financial decisions can make a big difference later in life. Understanding how tax refunds, savings strategies, and Social Security benefits work together can help people feel more secure about their financial future.
Overall, the expected boost in tax refunds for 2026 is mainly the result of tax cuts combined with outdated withholding rules. While it may feel like a bonus from the government, it’s really money that many workers already earned and paid in advance. How much you get back will depend on your income, family situation, and which tax breaks apply to you, but for many Americans, the refund could be a welcome and much-needed extra cushion.
