Why Is My Tax Refund Larger This Year?

If you’ve filed your taxes already, you may have noticed a larger refund this year. That’s due to changes Congress made with the One Big Beautiful Bill Act (OBBBA) last year that retroactively cut taxes for 2025.

The OBBBA Cut Income Taxes

Congress passed major tax reform last year in the OBBBA. The law made many of the expiring provisions of the 2017 Tax Cuts and Jobs Act (TCJA) permanent, including lower ordinary individual income rates and wider tax brackets, a larger standard deduction and child tax credit (CTC), and limits on itemized deductions, such as the home mortgage interest deduction and the state and local tax deduction (SALT).

If Congress hadn’t done this, 62 percent of taxpayers would have seen a tax hike in 2026 after the TCJA provisions expired.

Additionally, the OBBBA made seven major individual income tax cuts that took effect in 2025. These range from a $200 increase in the CTC maximum, a $750 increase to the standard deduction for single filers (or a $1,500 increase for joint filers), and a $30,000 increase to the SALT deduction cap to new temporary deductions for seniors, auto loan interest, tip income, and overtime income.

All told, taxpayers from across the income spectrum benefited from the OBBBA’s tax cuts, raising after-tax incomes by 1.6 percent on average in 2025.

But What About the Refunds?

The OBBBA cut taxes last year, but it is showing up in this year’s tax refunds because of tax withholding. After the OBBBA passed, the IRS didn’t change withholding tables for 2025. Employers use these tables to determine how much income tax to withhold from an employee’s paycheck, and by using the original 2025 withholding tables, many workers will find they over-withheld taxes.

In other words, your larger-than-ordinary tax refund is because Congress cut taxes for 2025 and withholding continued without adjustments, meaning many taxpayers ended up withholding too much.

Collectively, the Tax Foundation estimates the OBBBA’s tax cuts for 2025 reduced individual income taxes by $129 billion, and that will show up as a mix of larger tax refunds and lower tax liability due at filing. Outside estimates suggest the OBBBA will result in up to $100 billion in higher refunds in 2026, with average refunds increasing between $300 to $1,000 compared to a typical year. However, refund size may vary considerably depending on taxpayers’ unique circumstances, such as their level of income, marital status, whether they claim any dependents, and which new OBBBA deductions they claim.

Sometimes taxpayers conflate their tax liability and refund amounts. Though refunds will be higher this year because of tax cuts, in typical years, a change in the size of a tax refund does not necessarily indicate a change in a person’s overall tax burden. To understand your true tax burden, you need to look at how much total income tax you paid compared to how much income you earned.

In most years, a tax refund doesn’t tell you much about your tax burden. This year, because Congress cut taxes for 2025 and the IRS didn’t update withholding tables, many taxpayers will see their refunds increase. Going forward, the IRS has updated withholding tables to reflect the new tax law, so less tax will be withheld and take-home pay will rise.

The OBBBA delivered tax relief to taxpayers, preventing taxes from increasing and providing certainty with permanent cuts in marginal tax rates. Many taxpayers can also expect to receive a larger-than-normal tax refund this year.