Average tax refund expected to be even higher in 2026, according to IRS data
Tax season is here, and new data from the Internal Revenue Service shows the average tax bill will be even higher this year.
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This year’s tax refunds should be huge, but some analysts said many Americans may feel like their refunds aren’t eligible.
At the start of tax season, the White House said 2026 will be the “largest tax refund season in history,” with the average tax refund expected to increase by more than $1,000 thanks to President Donald Trump’s signature bill passed last summer. New provisions such as a higher standard deduction, tax exemptions for tips, overtime pay, auto loan interest on certain cars, and a new senior citizen deduction were supposed to increase refunds.
Tax season isn’t over yet, so refunds could be even higher, but so far, average tax refunds have been much lower than expected. As of the week ending March 20, the average tax refund was $3,571, an increase of 10.9%, or just a few hundred dollars, from $3,221 at the same time last year, according to IRS data.
According to H&R Block’s tax blog, “If you’re wondering why your tax refund is so low, you’re not alone.” “Many taxpayers who filed their tax returns are wondering the same thing.”
Why is my tax refund not as large as I expected?
Although explanations vary, H&R Block suggests possible reasons for a lower-than-expected refund include:
- Gig workers were unaware that they owed estimated taxes on their income and either failed to do so or had to pay penalties for underpayment of taxes.
- You haven’t completed your W-4 and you’re either withholding tax on every job you work, or you’re getting a raise without increasing your withholding. Either of these could mean under-withholding and your refund could be reduced.
- Your refund may be reduced if your eligibility for tax credits or credits changes. For example, if your child turns 17 by the end of the year, your child’s credit may be a smaller dependent credit of up to $500 instead of a child tax credit worth up to $2,000.
- Foreclosure of unpaid debts such as child support.
Uneven tax benefits?
Another reason many Americans haven’t received the large tax refunds they expected is because the refunds are concentrated among a small group of filers, Corey Husak, director of tax policy at the Center for American Progress, said in a report earlier this year.
He estimated that less than half (48.8%) of U.S. households with incomes below $100,000 will receive an increased refund this year, while nearly all Americans (93.1%) with incomes above $100,000 will receive an increased refund.
But Eric Steffey, senior federal benefits expert and CEO of Federal Solutions Support, said the uneven refund amounts are partly due to how taxes are paid.
“It’s true that high-income earners often have greater tax savings in dollar terms, but that’s because they pay more taxes to begin with,” Steffey says. “Our tax system is designed so that low-income households are taxed at low rates (often around 12%) and high-income earners are taxed at significantly higher rates (more than 32% in some cases).”
Who will receive more of a refund?
The availability of larger tax refunds “depends largely on whether the taxpayer is part of a group that has preferential tax relief under the law,” Husak said.
He said most of the increased tax refunds (55%) will only go to those two groups of people: people who earn qualified overtime or pay large amounts of state and local taxes.
In 2025, the SALT (state and local tax) deduction limit increases from $10,000 to $40,000. To claim SALT, your total itemized deductions must exceed the standard deduction. Until now, “the ultra-wealthy had no tax benefits because the SALT cap was $10,000 and they couldn’t get the child tax credit because of the income phase-out,” said Richard Pong, a certified public accountant in San Francisco.
Anyone who works overtime can deduct overtime pay up to $12,500 for single filers and $25,000 for joint filers. The deduction begins to phase out once your modified adjusted gross income exceeds $150,000 for single filers and $300,000 for married joint filers, so you may need to calculate the amount yourself this year.
But that doesn’t mean millions of Americans aren’t benefiting from the new tax law, Steffey said.
“Taxpayers have been told to expect larger refunds, so if the refund amount is only a few hundred yen compared to last year’s refund amount, there will be a big discrepancy,” he said. “That’s because for some taxpayers, the tax relief shows up as an increase in their take-home pay because they have less tax withheld from their regular paycheck for the year. When withholdings are lower, the tax relief shows up in incremental increases in paychecks, rather than as a lump sum refund at final tax time.”
So a smaller-than-expected tax refund may actually be “just more tax relief being paid in advance, turning what was once a nice refund check into a steady increase in take-home pay,” he said.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
