Jan 29, 2026
Your tax refund may get bigger this year thanks to the One Big Beautiful Bill Act (OBBBA).
President Donald Trump said in an address from the White House in December that this coming spring “is projected to be the largest tax refund season of all time” (1). Treasury Secretary Scott Bessent is predicting $100-$150 billion in refunds.
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As a result of the OBBBA, the average tax refund is expected to increase as much as $1,000, according to the Tax Foundation (2). The amount will differ depending on which provisions you qualify for and how much tax you paid in 2025 through installments and withholding.
This will come as good news to many Americans. But the reality is that your tax refund isn’t a windfall, nor is it government generosity — it represents taxes that you overpaid during the year that are now being returned to you as a lump sum after filing.
And big refunds can signal poor financial planning.
Changes to this year's tax landscape
While some Americans may get a bigger refund this year, cuts to other programs mean they might see their overall finances decline.
For households in the lowest decile of earners, reductions of in-kind transfers such as SNAP and Medicaid will reduce household resources by about $1,200, or 3.1%, of projected income, according to the Congressional Budget Office (CBO). Households in the top decile are expected to see an increase of resources of about $13,600, or 2.7% of their projected income. (2)
Some tax breaks could provide a bit of relief. For example, the maximum child tax credit will increase from $2,000 to $2,200. And a new seniors deduction of $6,000 ($12,000 for married couples filing jointly) will be available to those aged 65 and over (which will start phasing out for adjusted gross income over $75,000 or $150,000 for couples filing jointly).
Other tax breaks could provide substantial refunds. These include no tax on qualified tips up to $25,000, no tax on overtime up to $12,500 ($25,000 for joint filers) and no tax on car loan interest up to $10,000 on qualified U.S.-built vehicles. These tax breaks begin phasing out at relatively high income levels.
But tax breaks can make it harder to plan for tax withholdings, since employers base their calculations on gross income without accounting for tax-saving actions such as claiming eligible deductions and credits.
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The opportunity cost, and what you can do
One of the reasons people are set to receive such large refunds this year is because when the OBBBA was put into force, the withholding tables — which tell employers how much of your paycheck to withhold for taxes — weren’t updated, so employers have been withholding too much.
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Some people might not mind overpaying the government now because they will get the money back later, but there’s an opportunity cost to this practice: This is money that could have earned interest in a high-yield savings account, reduced credit card debt or grown in equities.
It’s possible to avoid this by adjusting the amount that your employer withholds by filing an IRS Form W-4 with your employer.
By updating your W-4 withholding using the IRS’s free calculator to increase take-home pay, your refund might be smaller but your paycheck will be bigger.
To do this, you’ll need all of your paystubs (and your spouse’s, if applicable), as well as other income amounts (such as from investments or self-employment) and your most recent tax return.
Use the IRS’s Tax Withholding Estimator to determine how much your employer should be withholding. Beware, it hasn’t yet been updated to include changes made by the OBBBA, but you can still otherwise use the tool to help get numbers to fill out the W-4. When completed, give the W-4 to your employer.
If you do receive a large refund, consider using it thoughtfully, like paying down debt, building an emergency fund or investing for the future.
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Vawn Himmelsbach is a veteran journalist who has been covering tech, business, finance and travel for the past three decades. Her work has been featured in publications such as The Globe and Mail, Toronto Star, National Post, Metro News, Canadian Geographic, Zoomer, CAA Magazine, Travelweek, Explore Magazine, Flare and Consumer Reports, to name a few.
