What Americans Should Know About Potentially Bigger Tax Refunds in 2026

According to a memo circulated in early December by House Ways and Means Committee Chairman Rep. Jason Smith (R-Missouri), an analysis by financial services firm Piper Sandler suggests that the 2026 tax season could become “the largest tax refund season” on record.

Tax professionals caution, however, that refund size will vary significantly depending on individual circumstances.

“Because of the changes within the bill, most taxpayers should expect to see a larger refund, but how much they receive will really depend on the specifics of their tax situation,” said Adam Brewer, a tax attorney with AB Tax Law, in comments to Nexstar Media.

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Key Tax Changes Affecting 2025 and Beyond

While many provisions will fully impact 2026 returns, several notable changes already apply to the 2025 tax year, including:

• An increased cap on state and local tax (SALT) deductions

• An additional $6,000 deduction for eligible seniors

• Elimination of federal income tax on tips

• No federal income tax on overtime earnings

• No federal tax on interest paid for certain car loans

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Brewer emphasized that these changes do not affect all taxpayers equally.

“The administration and Congress picked winners and losers,” he said. “Not all income is taxed the same. If your income is largely based on tips or overtime, you could end up paying significantly less federal income tax than a salaried employee earning a similar amount.”

Treasury Projects Billions in Refunds

U.S. Treasury Secretary Scott Bessent echoed expectations of large refunds during a recent interview with a Philadelphia NBC affiliate, pointing to a lag in withholding adjustments.

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“The bill was passed in July. Working Americans didn’t change their withholding, so they’re going to be getting very large refunds in the first quarter,” Bessent said. He estimated total refunds could range between $100 billion and $150 billion, translating to roughly $1,000 to $2,000 per household.

Bessent added that once withholding levels are recalibrated, workers may see higher take-home pay rather than large refunds.

Refunds Reflect Over-Withholding, Not Higher Income

Tax experts stress that a larger refund does not necessarily mean taxpayers earned more money. Instead, it typically indicates that more tax was withheld throughout the year than ultimately owed.

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“A refund is essentially your own money being returned,” Brewer noted. “If it’s larger than usual, that can be a pleasant surprise—but people shouldn’t spend in anticipation of it.”

Who May Not Benefit

Independent, nonpartisan analyses suggest that the benefits of the tax changes may be unevenly distributed.

A Congressional Budget Office review found that households in the top 10 percent of earners could see an average annual benefit of approximately $12,000, while those in the bottom 10 percent could experience losses averaging $1,600 per year, alongside reductions in Medicaid and food assistance programs.

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As a result, financial experts urge taxpayers to review their individual tax positions carefully and consult professionals before making financial decisions based on projected refunds.

Editorial Note By Adam Rizvi, Editor-in-Chief, The India Observer

Tax refunds often feel like a windfall, but they also highlight deeper questions about fairness, withholding accuracy, and long-term economic impact. As policymakers promote headline figures, it remains essential for families—especially working-class and vulnerable households—to understand not just what they may receive, but what they may also lose. Transparency and informed decision-making must remain at the center of tax policy discussions.

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Curated by Humra Kidwai