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The Government Will Send The Average American an Extra $1,000 in 2026 - Here's Why

Recent tax law changes could boost refunds, giving many households more breathing room at filing time.

By Adam Palasciano

Edited by Kristy DeSmit

Updated Jan. 29, 2026

Tax season may not always result in a financial windfall, but 2026 may be different for many households. Thanks to recent tax law changes under the One Big Beautiful Bill Act (OBBBA), the average refund could be significantly larger than in prior years.

For filers looking to get ahead financially, that extra cash may provide some much-needed breathing room. Understanding why refunds may increase can help you plan before you file.

Here's what's driving the potential refund boost and how to make the most of it.

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Americans could see refunds up to $1,000 higher

New analysis from the Tax Foundation suggests recent tax changes could lead to noticeably larger refunds in 2026. In the recent 2023 and 2024 tax years, more than 100 million taxpayers received refunds averaging about $3,000 per year. However, private-sector estimates indicate the latest tax law changes could push average refunds higher by several hundred dollars, with some filers seeing increases approaching $1,000.

Overall, refunds in 2026 could total tens of billions of dollars more than in a typical year. Individual results will vary based on income, deductions, credits, and withholding choices.

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OBBBA provisions that may boost your tax refund

Several provisions from the One Big Beautiful Bill Act are expected to reduce tax bills for a wide range of households. These changes can show up as either lower balances due or larger refunds at filing time.

Standard deduction increase of $750 for single filers and $1,500 for joint filers
State and local tax deduction (SALT) cap increased to $40,000 for taxpayers earning under $500,000
A $200 increase in the maximum child tax credit
A new $6,000 additional deduction for seniors, with phaseouts starting at $75,000 ($150,000 if filing jointly)
A new deduction for up to $25,000 in tip income, phasing out above $150,000 ($300,000 if filing jointly)
A new deduction for up to $12,500 in overtime income ($25,000 if filing jointly), phasing out above $150,000 ($300,000 if filing jointly)
A new $10,000 auto loan interest deduction, phasing out above $100,000 ($200,000 if filing jointly)

The Tax Foundation estimates these provisions together reduce income taxes by roughly $129 billion in 2025, much of which may flow through 2025 tax refunds.

Ways to take advantage of a larger tax refund

A bigger refund creates an opportunity to strengthen your finances rather than simply spend the money. How you use the extra cash can influence your financial stability well beyond tax season. Even modest, intentional moves can compound over time.

Here are several practical ways to put an extra $1,000 to work.

Resolve $10,000 or more of your debt

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Pay down and eliminate high-interest debt

Using a refund to reduce credit card balances or personal loans can deliver an immediate return. High-interest debt often carries rates far higher than most investments reliably earn.

Paying down balances can free up monthly cash flow and reduce long-term interest costs. For many households, this is one of the most impactful uses of a refund.

Build an emergency savings account

An emergency fund helps protect against unexpected expenses like medical bills, car repairs, or temporary income disruptions. Even a few hundred dollars added to savings can improve financial resilience.

A larger refund can help you reach a short-term savings goal faster. This cushion can prevent future reliance on high-interest credit.

Start investing

For those without pressing debt or savings gaps, investing part of a refund can support long-term growth. Contributions to retirement accounts, brokerage accounts, or education savings plans can compound over time.

Starting small still matters, especially when contributions are made consistently. A refund can serve as a low-stress entry point into investing.

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Strengthen other financial goals

Some households may choose to apply a refund toward upcoming expenses or financial milestones. That might include funding a home maintenance reserve, covering insurance deductibles, or saving for education or training.

Allocating funds toward planned expenses can reduce reliance on credit later. Overall, thoughtful use of a refund can support broader financial stability.

Bottom line

Tax law changes under the One Big Beautiful Bill Act could quietly increase refunds for millions of Americans in 2026, with some filers receiving up to $1,000 more than in prior years. While refund sizes depend on individual circumstances, expanded deductions and credits are likely to benefit a wide range of households.

Using a larger refund intentionally — whether to reduce debt, strengthen savings, or invest — can help turn a one-time boost into lasting progress. When handled properly, an extra refund can support decisions that can help build your wealth over time.

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