Tax-filing season has commenced and will continue until April 15, prompting millions of American taxpayers to prepare their federal income tax returns. While filing can be a hassle, a significant number of filers can expect to receive a refund shortly after submission. This year, some households may notice a considerable increase in their tax refunds compared to previous years, making this winter tax season a bit more rewarding.
According to IRS statistics, the average refund last year was $3,167 as of December 26, and projections suggest that this year’s refunds could increase by an average of $1,000 per household. This surge can be attributed to two main factors: new and expanded tax breaks that Congress enacted for tax year 2025, and most taxpayers not adjusting their withholding amounts on paychecks to align with the updates.
Tom O’Saben, director of tax content for the National Association of Tax Professionals, noted that for individuals whose income, filing status, and dependents remain largely unchanged, the increased refunds stem from combined benefits of expanded tax breaks and consistent withholding. Essentially, while the tax liability for 2025 has decreased due to legislative changes, the withholding amounts have not adjusted accordingly, leading to larger refunds instead of increased take-home pay.
Among the changes that could significantly impact this year’s tax refunds are several key tax breaks. First, the standard deduction has seen a notable hike: up by $750 to $15,750 for single filers, and by $1,500 to $31,500 for married couples filing jointly. This adjustment affects a vast majority of filers, translating to lower taxable income as even slight increases in the standard deduction can lead to larger refunds.
Additionally, the State and Local Tax (SALT) deduction has expanded significantly, allowing taxpayers in high-tax states to deduct up to $40,000 in state and local taxes, up from $10,000 last year. Although this deduction is only applicable for itemizers, the increased limit could motivate more taxpayers to itemize instead of taking the standard deduction, potentially resulting in larger refunds.
Moreover, a new deduction specifically for seniors has been introduced, aimed at those 65 and older. Eligible seniors can claim a special deduction of $6,000 ($12,000 for joint filers) on top of either their standard or itemized deductions, which can lead to a significant reduction in tax liability. The AARP estimates that over 30 million seniors could benefit from this favorable adjustment.
As taxpayers await their refunds, it’s essential to evaluate withholding strategies. A refund can be perceived in two ways: either as an interest-free loan to the government or as a forced savings strategy, where individuals receive a lump sum instead of smaller amounts throughout the year. For consistent savers, it may be more beneficial to adjust withholding, potentially allowing for interest accumulation or debt repayment throughout the year.
Taxpayers should be aware of changes in IRS income tax withholding tables for 2026, which have been modified to reflect adjustments in available tax breaks for this year. It’s advisable to consult with a tax adviser to ensure proper withholding amounts align with the new tax benefits. Those filing independently should approach adjustments cautiously to avoid underpayment issues.
Overall, the tax season this year may offer some unexpected financial benefits for many filers, providing both immediate returns and the opportunity for better financial management throughout the year.