Tax refunds are expected to be larger than usual for many Americans during the 2026 filing season, which officially began on January 26. According to recent projections, taxpayers could see an average increase of approximately $1,000 in their federal tax refunds compared to recent years, potentially pushing the average refund above $4,000.
The increase stems primarily from changes introduced by the One Big Beautiful Bill Act, which took effect in July 2025. Despite these significant tax law changes, the IRS opted not to update withholding tables for 2025, meaning many workers had more tax withheld from their paychecks than necessary throughout the year.
Understanding the Tax Refund Increase
The One Big Beautiful Bill Act introduced several expanded tax breaks that will boost refunds for eligible taxpayers. These include an increased standard deduction, larger child tax credits, and new deductions for overtime and tip income. However, because the IRS did not adjust withholding tables to reflect these changes, many employees effectively overpaid their taxes during 2025.
This mismatch between what was withheld and what is actually owed creates the conditions for larger tax refunds. According to IRS filing season statistics for 2025, the average federal tax refund was $3,167, already higher than the $3,138 average in 2024. The 2026 filing season is expected to see an even more significant jump.
Who Benefits Most from Bigger Tax Refunds
The refund increase will not affect all taxpayers equally. Middle-income households, particularly those earning between $50,000 and $150,000, are expected to see the most noticeable boost. Additionally, families with children who benefit from larger dependent credits will likely receive substantially higher refunds.
Workers with tip or overtime income stand to gain from new deductions specifically designed for these earnings. Some older taxpayers who qualify for additional deductions may also see improved refunds. Meanwhile, lower-income filers who already owe little or no tax may not experience much change, and higher-income taxpayers may benefit less due to phase-outs on certain credits and deductions.
Tax Refund Basics Every Taxpayer Should Know
A federal tax refund represents the difference between what you paid during the year through withholding and estimated payments and your actual tax liability. When you overpay, the IRS returns the excess to you. According to IRS statistics, approximately 103.8 million taxpayers received refunds in 2025, representing 63% of all filers.
However, tax professionals often note that a large refund is not necessarily advantageous. A substantial refund typically means you had too much withheld from your paychecks during the year, essentially providing an interest-free loan to the government while reducing your take-home pay.
The Role of Deductions and Credits
Understanding how deductions and credits work is essential for managing expectations about your tax refund. Deductions reduce your taxable income but do not decrease your tax bill dollar for dollar. For example, if you earn $75,000 and claim $10,000 in deductions, you are taxed on $65,000 instead of the full amount.
Credits, in contrast, reduce your tax bill directly. Most credits cannot reduce your tax liability below zero, meaning they alone do not create refunds. Nevertheless, certain refundable tax credits, such as the Earned Income Tax Credit, can reduce your tax bill below zero, resulting in a refund even if you owed little or no tax initially.
The EITC is designed to support low- to moderate-income workers, especially those with children. For eligible families, this credit can be worth several thousand dollars, making it one of the most significant factors affecting tax refunds for qualifying taxpayers.
Protecting Yourself from Tax Refund Scams
As refund amounts increase, so does the risk of tax-related fraud. Scammers often impersonate the IRS via email, text, phone, or letter, claiming problems with refunds or demanding immediate payment. According to security experts, the IRS does not initiate contact through email, text, or social media and never threatens arrest or demands immediate payment.
Taxpayers should use strong passwords and two-factor authentication for tax software and verify the credentials of any tax preparer they hire. The IRS encourages filing early to reduce the risk of identity theft, as criminals cannot file fraudulent returns using your information if you file first.
Tax Refund Timing and Tracking
According to the IRS, most e-filed returns result in refunds paid by direct deposit within 21 days. The agency has largely discontinued paper checks, though instructions for applying for a waiver are available for taxpayers who cannot use direct deposit. Returns claiming the EITC or Additional Child Tax Credit face legally mandated delays until mid-February.
Taxpayers can check refund status through the IRS Where’s My Refund tool at irs.gov or via the IRS2Go mobile app. The tool requires your Social Security number or ITIN, filing status, and the exact refund amount shown on your return. Refund status typically appears within 24 hours for e-filed returns and about four weeks after mailing paper returns.
Looking ahead to 2027 and beyond, taxpayers should not expect the same significant refund bumps to continue indefinitely. While tax laws are not expected to change substantially in the near term, the IRS will eventually update withholding tables to reflect current law, meaning workers will see more money in their regular paychecks but smaller year-end refunds.
