Many Americans may receive bigger tax refunds in 2026 due to changes from President Donald Trump's tax legislation, which was enacted in July 2025.
This legislation includes retroactive tax changes for 2025 that will impact returns filed in 2026. National Economic Council Director Kevin Hassett stated that this could lead to the biggest tax refund season ever.
According to the IRS, the average refund for individual returns during the 2025 filing season was $3,167, which is slightly higher than the $3,138 average in 2024.
However, the amount of your refund or taxes owed will depend on the new provisions that affect you and how much was withheld or estimated in 2025.
Trump's tax legislation increased the standard deduction for 2025 to $15,750 for single filers and $31,500 for married couples filing jointly, up from $15,000 and $30,000, respectively.
This change will positively impact most filers. Additionally, the maximum child tax credit for 2025 increased to $2,200 from $2,000 for families eligible to claim the full value.
A new $6,000 senior deduction is available for individuals aged 65 and older, effective from 2025 through 2028.
This deduction is available to those with a modified adjusted gross income up to $75,000 ($150,000 for married couples filing jointly), potentially benefiting many older Americans.
Some aspects of Trump's legislation introduced temporary tax breaks for smaller groups of filers, which could lead to larger tax cuts. These include deductions on tip and overtime income, a tax break on auto loan interest, and an increased limit for the deduction for state and local taxes (SALT).
The SALT deduction limit was raised to $40,000 for the 2025 tax year, up from $10,000 in 2024. However, about 90% of filers do not itemize their deductions, which may limit the benefits of this change.
Overall, millions of Americans could see larger tax refunds or smaller tax bills in 2026 due to these changes. The increased standard deduction, higher child tax credit, and new senior deduction are likely to positively affect many taxpayers.
However, those who do not itemize their deductions may not fully benefit from the SALT changes. As tax season approaches, it will be essential for individuals to understand how these adjustments impact their personal tax situations.