Why Your 2026 Tax Refund Could Be a Blockbuster

If you’ve been feeling the pinch of inflation lately, I have some news that might make your spring a lot brighter.

Treasury Secretary Scott Bessent has been signaling that the upcoming tax filing season could result in the largest tax refunds in American history.

We aren’t talking about pocket change; in recent interviews, Bessent predicted that total refunds could jump to between $100 billion and $150 billion in the first quarter of 2026. For the average household, that could mean an extra $1,000 to $2,000 landing in your bank account.

The “Bessent bump” is the result of a massive new law called the One Big Beautiful Bill Act (OBBBA). While the media spent months debating the political implications, the meat of the bill is found in several retroactive tax cuts for individuals that apply to the money you earned all through 2025.

How the ‘withholding trap’ works in your favor

The reason so much money is coming back in one lump sum is largely due to timing. The OBBBA was signed into law on July 4, 2025 — halfway through the year — and the IRS opted not to update its withholding tables for 2025. (Those tables directly affect how much of a worker’s paycheck an employer withholds for federal income taxes.)

This means that throughout 2025, taxes were withheld from workers’ paychecks at the higher 2024 rates.

When you file your 2025 return in early 2026, the IRS has to “settle the tab.” Any amount you overpaid in withheld taxes because of those unadjusted withholding tables gets sent back to you as a refund.

The Tax Foundation estimates that these individual tax cuts reduced the total tax burden by $144 billion for 2025, and a huge chunk of that is expected to show up as higher-than-normal refunds this spring.

The standard deduction just got a boost

If you are like the 90% of Americans who don’t itemize, the biggest boost to your refund comes from the standard deduction.

The OBBBA raised these amounts. According to the IRS, the standard deduction for 2025 is $15,750 for single filers (whereas it would have been $15,000 had the law not passed) and $31,500 for married couples filing jointly (instead of $30,000).

For seniors, the news is even better. Another provision in the law created a new deduction worth up to $6,000 for taxpayers aged 65 and older. This is on top of the standard deduction and additional standard deduction for seniors.

If you and your spouse are both over 65, you could see your deductions reach as high as $46,700 when combining the standard deduction, the existing additional standard deduction for seniors, and this new senior deduction. For some retirees, this could shield nearly all of their Social Security income from federal taxes.

Other credits and deductions were expanded

The maximum value of the child tax credit was increased from $2,000 to $2,200 per eligible child for 2025. More importantly, the “refundable” portion of that credit—the part you get back even if you don’t owe any taxes—was raised to $1,700.

Other new deductions are set to make an impact:

1. The overtime deduction: Workers in certain professions can now deduct the “premium” portion of their overtime pay (the extra half in time-and-a-half) — up to $12,500 for individuals or $25,000 for joint filers.

2. The car loan interest deduction: You can deduct up to $10,000 in interest paid on a loan for a new, American-made personal vehicle purchased in 2025.