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Consumer Spending · Economic Policy · Tax Reform · Tax Refunds
President Donald Trump's "big beautiful bill," enacted in July 2025, will deliver larger tax refunds to millions of Americans in 2026, with the average individual refund already up to $3,167 as of December 26, 2025, from $3,138 in 2024, according to IRS data.
The legislation included several retroactive tax changes for 2025, but the IRS did not update withholding tables for employers, causing 2025 employee withholdings to be based on pre-cut tax rates. This over-withholding is expected to dramatically increase refunds, as stated by Garrett Watson, director of policy analysis at the Tax Foundation.
Key provisions impacting a significant portion of filers include an increased standard deduction to $15,750 for single filers and $31,500 for married couples, a higher child tax credit of $2,200, and a new $6,000 senior deduction for individuals aged 65 and up. Additionally, smaller groups of filers will see larger cuts from deductions on tip and overtime income, auto loan interest, and a raised State and Local Tax (SALT) deduction limit to $40,000, up from $10,000, as noted by Andrew Lautz of the Bipartisan Policy Center.
