Federal income tax refunds in the United States are expected to rise sharply next year as enhanced tax breaks under President Donald Trump's One Big Beautiful Bill Act take effect, giving households an average boost of hundreds of dollars at a time when many are struggling with higher living costs and growing consumer debt. Analysts from Principal Asset Management, TurboTax and Piper Sandler expect widespread increases across tax brackets, with forecasts suggesting average refunds could reach nearly $3,800.
Christian Floro of Principal Asset Management said tax refunds could increase by roughly $675, lifting the average to "nearly $3,800" per household. TurboTax estimates that some filers may see increases of up to $1,000 on their 2026 refunds, reflecting a combination of new deductions and expanded credits. Nearly half of respondents surveyed by TurboTax last year indicated that their refunds would be used to pay household bills, and tax expert Lisa Greene-Lewis expects that share to grow.
Forecasts from Piper Sandler show a much broader national impact. The brokerage projects that U.S. taxpayers will collectively receive more than $90 billion in additional refunds on their 2025 filings, translating to "around $1,000 more per refund," with totals "substantially more for some filers." The estimates suggest that expanded deductions, higher child tax credits and new provisions-such as no tax on worker tips and senior bonuses-will lift refund size across income categories.
Principal Asset Management estimates that the higher standard deduction accounts for about $116 of the projected $675 increase. Analysts say the broader set of incentives will be especially important for lower-income households that rely on annual refunds to cover essential expenses or reduce debt.
The seasonal role of refunds is well established. Consumer debt typically rises in the fourth quarter due to holiday spending and then declines in the first quarter following IRS disbursements. U.S. credit card balances climbed to $1.21 trillion in Q4 2024 before falling to $1.18 trillion in Q1 2025. Analysts note that this predictable easing is particularly important now that credit card and auto loan delinquencies have held at their highest levels since the aftermath of the financial crisis.
Matthew Martin of Oxford Economics said refunds may carry even more weight in 2026 as economic conditions deteriorate. The firm expects the IRS to issue roughly $50 billion in additional refunds in the upcoming season, potentially adding an extra $300 per person for more than 160 million taxpayers. "If the labour market is weakening, households are more dependent on the entirety of their refund to get them over the hump and allow them to continue their spending patterns," Martin said.
Stronger refunds also have the potential to bolster consumption in service sectors facing slowing demand. Economists note that a surge in early-year cash flow could help stabilize employment in industries sensitive to small fluctuations in household spending.
