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IRS Expects 'Gigantic' Tax Refunds for Americans - Here's How Much You May Get

Major tax law changes could lead to some of the largest refund checks many households have seen in years.

By Adam Palasciano

Edited by Kristy DeSmit

Updated Feb. 19, 2026

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Many Americans may be surprised when they file their taxes this year and see unusually large refund amounts.

Recent changes to the tax code could help you keep more cash in your wallet, even if you didn't adjust your paycheck withholdings during the year. Government officials are already signaling that refunds could be significantly higher than normal. Understanding why this is happening can help taxpayers plan ahead.

Here's what's driving expectations of "gigantic" tax refunds.

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New tax law changes under the OBBBA

In July 2025, lawmakers passed the One Big Beautiful Bill Act (OBBBA), a sweeping tax package that introduced several high-profile changes to the federal tax code. These updates expanded deductions and created new tax breaks that apply across a wide range of income levels. Many of the provisions were designed to reduce taxable income rather than provide one-time credits.

The law includes a higher standard deduction, new exclusions for tips and overtime pay, and additional deductions aimed at seniors. It also introduced targeted relief tied to specific expenses, such as interest on qualifying new car loans. Together, these changes are expected to lower overall tax bills for millions of middle-income filers this year.

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'Gigantic' tax refunds could be on the way

Following the passage of the new tax law, officials have suggested that refunds could be much larger than in recent filing seasons. Treasury Secretary Scott Bessent has publicly described the expected refunds as "gigantic" and "very large," pointing to the cumulative impact of the changes. He estimates that many households could see refunds increase by $1,000 or even $2,000 compared with prior years.

Additionally, research cited by the White House indicates average refund checks may be around $1,000 than those issued during the 2025 filing season.

Why tax refunds might be so 'big' this year

One key reason refunds may spike is timing. Although the tax law was enacted in July, most of its provisions apply retroactively to the entire 2025 tax year. That means workers benefited from lower effective tax rates without changing their withholding during the year.

Because payroll withholding likely remained unchanged for most employees, too much tax was withheld relative to the new rules. So when returns are filed, the overpayment should result in a larger refund. It's estimated that this could result in $100 billion to $150 billion in total refunds issued during the upcoming filing season.

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Why larger tax refunds matter

A larger refund can provide a meaningful financial reset for households that have been stretched by inflation and rising living costs. For some taxpayers, the extra money may help offset higher prices for housing, food, or health care. While refunds are not free money, they can still provide short-term relief.

Understanding why refunds are larger can also help people adjust expectations for future years. Once withholding catches up to the new tax rules, refund sizes may return to more typical levels.

Ways to use a larger tax refund

Receiving a larger refund presents an opportunity to strengthen your finances rather than simply increase spending. Thoughtful planning can turn a one-time windfall into lasting financial progress. Here are a few smart strategies.

Pay off high-interest debt

Using a refund to pay down credit cards or other high-interest balances can deliver an immediate return. Interest rates on revolving debt often exceed what most investments earn. Reducing these balances can also improve cash flow by lowering required monthly payments.

Build an emergency fund

A larger refund can help jump-start or replenish an emergency savings account. It's advisable to set aside three to six months of essential expenses, more if you can. Having this cushion can reduce reliance on credit if unexpected costs arise.

Start investing

After addressing debt and emergency savings, investing part of a refund can support long-term goals. Contributions to retirement accounts or taxable investment portfolios can benefit from compound growth over time. Even modest investments can help build momentum toward financial security.

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Bottom line

Major tax law changes and retroactive rules are driving expectations of unusually large tax refunds this year. For many households, the increase could total $1,000 or more compared with last year's filing season.

Understanding why refunds are higher — and planning how to use them — can help taxpayers get ahead financially and make the most of this temporary boost in cash flow.

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