According to the latest analysis by financial services firm Piper Sandler, federal tax refunds are often the largest single payment many households receive each year and next year, refunds could be even larger, with the average filer potentially receiving an extra $1,000.
According to IRS data, the average refund for the 2025 tax season is $3,151, and it is expected to rise to about $4,151 in 2026. Americans will file their 2025 personal income tax returns in early 2026, and most will receive refunds within 21 days of filing.
The key driver of the refund increase comes from the “big and beautiful” tax and spending bill signed by President Donald Trump in July, which applies several tax benefits retroactively to 2025. These include exemptions on certain overtime and tip income taxes and raising the state and local tax (SALT) deduction cap from $10,000 to $40,000.
Don Schneider, U.S. Policy Deputy Director at Piper Sandler, said on a podcast: “Next year, people will be surprised by the size of their refunds.” He noted that in a typical year, total refunds amount to about $270 billion, and next year could add another $90 billion on top of that.
Since most Americans have not yet adjusted withholding to reflect the retroactive tax cuts, Schneider expects early 2026 refunds to be about one-third higher than usual, roughly $1,000 more per filer. He added: “This could be one of the largest refund seasons in history.”
Middle- and upper-income households to see biggest tax refund boost in 2026
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Piper Sandler notes that the benefits are primarily concentrated among middle- and upper-middle-income households earning between $60,000 and $400,000 annually. Consistent with other tax analyses, high-income earners generally see relatively larger benefits.
According to a July report by the Tax Policy Center, individuals with annual incomes over $217,000 are expected to receive 60 percent of the benefits from the new tax provisions.
However, to prevent high-income earners from capturing the full advantage, the new SALT deduction cap gradually phases out for incomes above $500,000. Low-income households gain little from this benefit because SALT deductions apply only to itemized deductions, which most low-income families cannot claim.
Schneider summarized: “This policy is not for the very bottom, nor the very top.”
One of the most notable changes is the increase in the SALT deduction cap, which reduces overall tax burdens and boosts refund amounts. Residents of high-tax states will particularly feel the effect.
Larger refunds mean more disposable income. The $90 billion could flow into consumption, services, and investment, helping drive GDP growth and local business activity. For families, bigger refunds also aid debt repayment and savings.
The law also adjusts tax brackets, increases the child tax credit, and introduces new federal credits to encourage donations to specific scholarship programs. Together, these measures contribute to higher refund amounts.
