IRS Expects 'Gigantic' Tax Refunds for Americans

Over the next few months leading up to the April 15 deadline, people across the United States will be filing their federal income taxes. When they do, it sounds like many Americans could be in for a pleasant surprise.

Over the past few weeks, Treasury Secretary Scott Bessent, who also serves as the acting director of the Internal Revenue Service (IRS), has been sharing that many Americans should expect "gigantic" and "very large" refunds this year as a result of some significant rewrites to the tax law in the United States.

New Tax Changes

Back in July, the One, Big, Beautiful Bill Act (OBBB) was signed into law, bringing several high-profile changes to the tax code that offer tax relief across a broad range of categories. These changes are expected to impact nearly everyone who will file taxes this year.

The changes include several high-profile new tax deductions, including an increase in the standard deduction, no tax on tips, no tax on overtime, no tax on new car interest, and additional tax deductions for seniors.

These changes are expected to cut taxes for many individuals throughout the United States, particularly in the middle and upper-middle classes.

'Gigantic' Refunds

Following these tax changes, it sounds like Americans can expect significantly larger tax returns this year compared to previous years. Bessent has described the expected refunds as "gigantic" and "very large" on separate occasions.

Bessent expects that households throughout the United States could see "$1,000, $2,000 refunds" on average.

The White House has cited recent research from the financial services firm Piper Sandler indicating that the refund check could increase by $1,000 compared to the 2025 filing season.

Why Will Refunds Be So Big?

The reason for the inflated tax refunds, Bessent explains, is that the tax changes were retroactive, applying to all of 2025 even though the bill was not passed until July. As a result, the vast majority of working Americans did not update their tax withholding to account for this, leading to significant refunds.

"The bill was passed in July, working Americans didn't change their withholding, so they're going to be getting very large refunds in the first quarter," Bessent said, via Newsweek. "So I think we're going to see $100-$150 billion of refunds, which could be between $1,000, $2,000 per household. Then, they'll change their withholding, and they'll get a real increase in their wages."

Piper Sandler economist Don Schneider explained that adjusting tax withholding would have been quite difficult, considering the extra provisions like no tax on overtime or no tax on tips.

"People really aren't adjusting their withholding this year. It would be pretty difficult to do so—you don't even know how much of a tax cut you're going to get from overtime or tips or something," Schneider said on a podcast in October, via Newsweek. "When people go to file, I think they'll be surprised by really, really large refunds."

"In a typical year, we might have about $270 billion in individual income tax refunds, and that could be as high as that plus another $90 billion," he added. "So it could be one of the largest refund seasons ever."

Next year, it's likely that withholdings will be largely corrected for most workers to compensate for the tax changes, leading to smaller refunds. This year, however, it sounds like refunds will be some of the biggest ever.