Refunds could be unusually large in upcoming US tax season

Officials say millions of Americans may receive unusually large tax refunds in early 2026 after a retroactive tax cut left payroll withholding unchanged; estimates put as much as $100 billion in higher refunds and an average refund rise near $1,000.

Tax season is weeks away and senior officials have signalled unusually large refunds for many Americans in early 2026. The change follows a retroactive cut in President Trump's One Big Beautiful Bill Act that took effect at the start of the year while payroll withholding tables were not updated. Officials including Treasury Secretary Scott Bessent and Kevin Hassett have described the upcoming filing season in unusually large terms. Economists and tax groups have offered differing views on the size, use and broader effects of the refunds. Known details: - The law known as the One Big Beautiful Bill Act was signed in July and cut individual taxes retroactively to the start of the year, while the IRS did not update paycheck withholding tables. - Officials have said millions of workers overpaid during 2025 and will receive refunds when they file in 2026; Treasury Secretary Scott Bessent used the word "gigantic" to describe the refunds and Kevin Hassett predicted a very large refund cycle. - The Tax Foundation estimated the law cut individual taxes by about $144 billion for 2025, with up to $100 billion potentially appearing as higher refunds; Piper Sandler projected the average refund could rise by roughly $1,000. - For comparison, the article notes the average refund this year was $3,052 and that forecasts could push that figure toward about $4,000 in 2026. - The tax changes listed include a larger standard deduction, a boosted child tax credit, a new $6,000 break for seniors, a higher cap on state and local tax deductions, and pledged exclusions for tips, overtime and some Social Security income. - Analysts differ on how refunds will be used and their effects: Piper Sandler estimates differing spending shares by income, a National Retail Federation survey found many taxpayers plan to pay down debt or save, and some economists warned the one-off payments could be inflationary while administration officials have downplayed that risk. Summary: Larger refunds are reported to raise household cash balances for many taxpayers and could give a short-term lift to consumer spending, while some economists warn of possible temporary inflationary effects. Undetermined at this time.