According to an analysis by Oxford Economics, millions of Americans could receive larger tax refunds in 2026. This is due to the entry into force of new tax changes approved by Donald Trump and his One Big Beautiful Bill, which amends the Tax Cuts and Jobs Act of 2027. One of these amendments involves the extension of taxes on hours, overtime, and tip income, and increases the deduction limit for state and local taxes (SALT). According to experts, these amendments benefit those with higher incomes. The increase in tax refunds is expected to be $50 billion, representing an 18% increase, as explained by economist Nancy Vanden Houten.
The main problem is that the Internal Revenue Service has not yet revised the withholding tables, which specify the amount of federal taxes to be withheld from workers. This has meant that taxpayers have continued to pay normal withholdings, and that will be the windfall through refunds or lower tax bills for 2026, as they will receive the excess federal income tax paid. Another conclusion of the Oxford report coincides with previous conclusions by the Max Policy Center, namely that although most taxpayers will experience a slight improvement in their lives, it is high-income earners who will really benefit from this change.
Tax changes for 2026
With the enactment of the One Big Beautiful Bill signed into law by Donald Trump, Americans are expected to receive larger refunds, according to an analysis by Oxford Economics. Nancy Vanden Houten, the lead economist on the analysis, explains that total taxpayer savings could reach $50 billion. Compared to this year’s refunds, which totaled $275 billion, the new figures represent an 18% increase. The new law enacted by Donald Trump not only modifies provisions of the Tax Cuts and Jobs Act of 2017, but also further widens some existing loopholes. The new changes include tax exemptions on overtime and tip income, and the legislation also increases the deduction limit for state and local taxes (SALT) from $10,000 to $40,000.
What impact do these changes have?
According to economists, these changes mainly benefit people with higher incomes. These provisions are expected to be retroactive to the beginning of the year, but the problem lies with the Internal Revenue Service (IRS), which has not yet revised the withholding tables. For this reason, most taxpayers have continued to pay normal withholdings, as they did not have tables to guide them on the federal taxes they should withhold from their paychecks. According to Vanden Houten, “taxpayers will pay too much in taxes this year. And they will see larger tax refunds or lower tax bills next year than would otherwise be the case.”
SALT cap
The Oxford report also explains and delves into the SALT cap. It explains that it will be the wealthiest taxpayers who will benefit from these changes, which are expected to provide them with around $5,100 in additional tax savings. The conclusions of the Oxford analysis coincide with those of the Tax Policy Center, which had been made previously. According to their calculations, $6 of every $10 in new tax breaks provided for in the legislation will go to the top 20% of wage earners, or those earning more than $217,000 per year.
Who will benefit from this change?
Although this change will provide a modest benefit to most taxpayers, as Vanden Houten explains, the truth is that the savings will continue to be directed toward higher-income groups.