Many Americans could soon see a pleasant surprise in their bank accounts due to retroactive tax changes under President Donald Trump’s “big beautiful bil.”
Millions of taxpayers are projected to receive larger refunds when they file their 2025 returns in early 2026. Analysts say the combination of new deductions, unchanged IRS withholding tables, and targeted tax relief could result in one of the most generous refund seasons in recent history.
Why bigger refunds are on the way
The legislation passed in July introduced several tax breaks for 2025, including an expanded standard deduction, a “bonus” deduction for seniors, and new relief on tipped income.
Because the IRS has not yet updated its 2025 tax withholding tables, many workers are still paying taxes at the same rate as before the bill’s passage, effectively overpaying throughout the year.
“As a result, many taxpayers will pay too much in tax this year and see larger tax refunds or smaller tax bills next year,” Nancy Vanden Houten, lead economist at Oxford Economics, wrote in an October report, as reported by CNBC.
Michael Ryan, founder of MichaelRyanMoney.com, told NewsWeek, “We are getting bigger refunds in 2026 because we’re overpaying in 2025. The IRS decided not to adjust withholding tables this year, even though OBBBA’s tax cuts are retroactive to January 1, 2025. So workers are paying 2024 tax rates on income that will be taxed at lower 2025 rates when they file next spring. It is political theater to make everyone feel better next April.”
Analysts expect this mismatch between withholding and new tax rates to drive a spike in refund amounts. A report from Piper Sandler predicts “a record tax refund season in 2026,” estimating $91 billion in tax relief between February and April, $59 billion from refunds and $32 billion from lower taxes owed.
Another analysis from J.P. Morgan Asset Management echoed the same outlook, attributing higher refunds to unchanged withholding tables. W-2 workers, who typically have little control over their pay cheque withholdings, are especially likely to benefit.
At the same time, many families are facing broader economic challenges, from an ongoing government shutdown to uncertainty over funding for the Supplemental Nutrition Assistance Program.
Surveys show that most taxpayers still plan to use refunds for essentials like rent, groceries, and credit card payments, while higher earners are expected to save or invest their refund windfalls.
Who will benefit the most?
The new tax law extends and expands several provisions from Trump’s 2017 tax cuts. While the overall structure of the tax code remains largely the same, targeted deductions and revised income caps have shifted the balance in favor of certain groups.
OBBBA, the One Big Beautiful Bill Act, updated withholding tables that will take effect in 2026, leading to higher refunds for many Americans.
The Congressional Budget Office projected $24 billion in tax cuts for fiscal year 2025, and Oxford Economics estimated as much as $50 billion in combined refund boosts and reduced tax bills.
“This usually occurs when we see a tax overhaul at the federal level. Many of the tax cuts and revisions in the One Big Beautiful Bill Act are not just for future tax years, but retroactive,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
“The issue with this for millions of taxpayers is that many employers and the services they used to pay their employees set withholding rates before the year begins, meaning many are technically getting over-taxed based on the new rates OBBBA has put into effect.
“The result could be a larger refund check for many taxpayers to reflect the change in rates. However, how much is added to your refund check will depend on your income, where that income is generated from, and changes made under OBBBA, so it will vary per taxpayer a great deal.”
The bill also raised the cap for state and local tax (SALT) deductions from $10,000 to $40,000, a major benefit for wealthier households. For the lowest earners, savings will be modest, starting around $150, while higher-income individuals could see tax reductions in the tens or even hundreds of thousands of dollars.
Retirees will also benefit, with the expanded senior deduction offering between $6,000 and $12,000 in additional write-offs for eligible taxpayers.
Kevin Thompson, CEO of 9i Capital Group, told Newsweek, “The OBBA expanded deductions for retirees and increased the standard deduction for nearly all income brackets. One of the biggest wins for business owners is the return of 100 percent bonus depreciation, which allows them to fully write off eligible business purchases, often creating paper losses that can offset other taxable income.”
The tax savings break down as follows:
Income of $0–$34,600: $150 in tax savings
Income of $34,601–$66,800: $750 in tax savings
Income of $66,801–$119,200: $1,780 in tax savings
Income of $119,201–$217,100: $3,460 in tax savings
Income of $217,101 and above: $12,540 in tax savings
Income of $1,149,000 and above: $75,410 in tax savings
Income of $5,184,900 and above: $286,440 in tax savings
While these refunds will feel like a bonus for many, Ryan clarified that they’re ultimately a correction for overpayment: “The real story here isn’t that refunds are bigger,” Ryan said. “It’s that the IRS essentially engineered an accidental stimulus check for 2026. And like most stimulus, the wealthy get the biggest checks.”
