Why Tax Returns Could Be Big in 2026
Many groups of taxpayers stand to get a big refund in 2026 because of the midyear tax policy in the Big Behle Bill, according to a new study from Oxford Economics.
Several key tax changes in the GOP tax law, recently signed into law in July, are retroactive and apply to the 2025 tax year. That means many taxpayers may be getting by in the first half of the year – and beyond, unless they make changes.
The 940-page tax bill includes signature policies such as “No tax on tips,” “No tax on overtime,” and “high bonus.” Those tax changes are in effect for the years 2025 to 2028. The law also increased CAPS on State and Local tax (salt) reductions, and created new vehicle interest reductions.
All of these changes could result in large tax refunds or lower tax credits for certain groups – up to $50 billion, according to Oxford Economics.
The research panel found that taxpayers have not changed their withholding, which determines how much income tax is automatically paid.
Affected individuals include older Americans who are eligible for “senior high bonuses” of up to
In theory, taxpayers may be able to reduce their liability after the law is passed to take advantage of the benefits immediately. However, “There is no evidence that this is happening to some extent,” Nancy Vanden Houten, lead economist at Oxford Economics, said in a release.
The IRS is currently updating its publicly available tables to reflect changes in tax law. Because employers rely on these tables to calculate withholding, most have not been affected by the bill’s cuts.
The IRS website that bans Estimator, a tool for taxpayers, also includes a notice that the information is no longer valid. Elsewhere on the agency’s site, the IRS suggests “manually review or consult with a tax professional” if you meet any of the following conditions:
- You get tips or extra time to pay
- You bought a new car and paid the interest
- You paid more than $10,000 in state and local taxes
- You are 65 years of age or older
The IRS is working on “new guidance and updated forms” for 2026, according to a 7 news release. If you want to correct your withholding now, you may have the option of submitting a new W-4 to work. Americans can also change their tax withholding on pension distributions, IRA distributions and other income streams.
However, since taxpayers expect the IRS to update its forms and tools, that process can be overwhelming for many people.
As a result, many taxpayers will receive a large refund this spring. That’s partly by design: The Trump administration and lawmakers who worked on the bill are celebrating the fact that it will put money in the pockets of American taxpayers.
“We cut taxes at levels that nobody’s ever seen. I mean, no tax on tips, no tax on social security,” Trump said in overtime, “Trump said in overtime a month ago. “It’s been a good thing for a lot of people.”
But from a personal finance angle, getting a big tax refund is not good.
While a check from the IRS can be a nice bonus, a large refund indicates that the taxpayer withheld more than they needed to. Financial experts often advise against withholding more money, reminding consumers that a tax refund means that you have been given an attractive loan from the government.
Last filing period, the standard refund was $2,939, according to the IRS, and the maximum refund was higher ($3,252) for the 2022 filing period. Whether average returns will be realized next year remains to be seen.
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