Tax refunds in 2026 might be a lot bigger than people expect. According to a recent analysis by the financial firm Piper Sandler, the average federal tax refund could go up by about $1,000. When people file their 2025 income taxes in early 2026, the average refund will increase from about $3,151 (for the 2025 filing season) to about $4,151.
President Trump signed a large tax and spending bill in July (One Big Beautiful Bill), which is linked to these larger refunds. The law changes how some types of income are taxed, and it allows certain deductions, which can lower how much tax you owe. When that happens, your refund usually goes up. “When people go to file, they’ll be surprised by really, really large refunds,” said Don Schneider, one of the authors of the Piper Sandler report.
Why refunds could jump in 2026
The law is adding new tax breaks and making them apply retroactively to 2025. Which means that the law still has an impact on your income and taxes for the full year even though it was passed later.
Some of the biggest changes are that some taxes on tipped and overtime earnings will be eliminated; for people who rely on tips or work a lot of extra hours, this can make a huge difference in how much of their paycheck they keep.
Additionally, the law increases the state and local tax deduction (SALT) cap from $10,000 to $40,000. This deduction allows individuals to deduct their state and local tax payments from their federal taxable income.
In a typical year, refunds across the country add up to around $270 billion. The IRS is still expected to send most refunds within about 21 days of filing, so the impact will be felt fairly quickly after people submit their returns in 2026.
Who stands to benefit the most?
Not everyone will experience the adjustment in the same way, even if an increase in the average refund is expected. The Piper Sandler analysis revealed that households making between around $60,000 and $400,000 a year are likely to benefit the most.
That aligns up with a separate estimate from the Tax Policy Center, which showed that Americans earning more than $217,000 will receive $6 of every $10 in new tax reductions established by the law.
However, the very highest earnings will not automatically obtain the biggest rewards. Certain parts of the bill, like the new $40,000 SALT deduction, start to taper off for households making more than $500,000 a year. That means the excess deduction reduces or even disappears after income passes certain levels.
People with lower incomes might not get that much out of the prolonged SALT deduction either: The standard deduction—$15,750 for individuals and $31,500 for married couples filing together in 2025—is a better fit in this case, because it’s typically not exceeded by their state and local tax payments.
What this could mean for your tax planning
For a lot of Americans, a higher refund will feel like a bonus—money that can be used to pay down debt, create savings, or cover major bills. But it’s also helpful to recall what a refund actually is: the government handing you back money you payed over the year. A bigger refund usually says more money was deducted from your paycheck than was technically necessary.
As Schneider put it, “When people go to file, they’ll be surprised by really, really large refunds.” That surprise could be good, but it’s also a warning that tax regulations can move quickly — and those shifts don’t affect everyone equally. It might be helpful for anyone trying to make plans to think about not only the amount of the refund but also who is benefiting the most from the new tax environment and why.