Filing your 2025 tax return this year, expect to receive a big tax refund. Because of new deductions and employers withholding money from employees’ paychecks, tax refund amounts have risen by an average of 10% to $3,676. Many people are filing to claim refunds they expect due to the new tax laws passed.
This information will explain why people receive refunds in the first place, offer tips on receiving the money optimally, and show how to spend it intelligently.
Why Are Tax Refunds Bigger in 2026?
Due to new laws that were enacted in July of 2025, people will receive larger tax refunds. Many people will receive new deductions for the 2025 tax year. Tax deductions for tips, overtime, interest on car loans, and senior citizens are new deductions that people will be eligible for in tax year 2025.
The IRS could not provide updated withholding tables in light of recent mid-year changes. Consequently, taxes were withheld from paychecks at the old, higher rates all year, but the actual tax owed dropped due to the new deductions. The gap between what was withheld and what is actually owed is resulting in a larger refund.
How Big Is the Average Tax Refund in 2026?
The 2026 average refund is $3,676, which is roughly 10.9% higher than 2025’s $3,221 average refund. The White House has stated that many families will receive refunds of $1,000 or more than last year.
Historically, about two-thirds of all filers receive refunds, and this share is expected to grow in 2026 due to more available credits and deductions.
New Tax Deductions That Could Increase Your Refund
The One Big Beautiful Bill introduced four new major deductions that will affect 2025 returns filed this season.
| Deduction | Maximum Amount | Income Phaseout Begins |
| No tax on tips | $25,000 | $150,000 single / $300,000 joint |
| No tax on overtime | $12,500 (single/HOH), $25,000 (joint) | $150,000 single / $300,000 joint |
| Car loan interest | $10,000 (U.S.-assembled vehicles only) | Varies |
| Senior deduction (age 65+) | $6,000 | $75,000 single / $150,000 joint |
Schedule 1-A is the new form that needs to be filled out for this to be complete. If you do not include the form and you have any of these situations, you are likely to be leaving money on the table.
For 2025, the standard deduction has also increased by about $1,500 for families compared with 2024, benefiting almost every non-itemizer.
Tax Credits That Lead to a Big Tax Refund
Because credits reduce your tax due one dollar at a time, they are far more powerful than deductions. Primary credits available for the 2025 tax year include the now $2,200 Child Tax Credit per qualifying child. The Earned Income Tax Credit is still one of the largest available. For families with three or more qualifying children, it is worth $8,046. The Additional Child Tax Credit is refundable, meaning it can result in a tax refund even if you owe no tax.
Do not forget the retirement contribution Saver’s Credit, Child and Dependent Care Credit, the American Opportunity Credit, and other education credits.
Standard Deduction vs. Itemized Deductions: Which Gets You a Bigger Refund?
The majority of filers will find the standard deduction more beneficial, especially with the 2025 adjustment to about $15,350 for single and $30,700 for married filing jointly. However, in instances where your total itemized deductions are higher than those amounts, you will find it to your benefit to itemize, as it will further reduce your taxable income and therefore the refund will be a greater amount.
Usual itemized deductions include mortgage interest, your state and local taxes (particularly now with the new law and higher SALT cap), charitable giving, and your medical bills that are 7.5% or more of your adjusted gross income. Before choosing one or the other, it is always a smart idea to do both calculations.
How Your Filing Status Affects Your Tax Refund
The tax refund you receive is determined by your tax bracket, which is determined by your standard deduction amount and filing status. Selecting the correct status can have a significant impact. For example, filing as Head of Household can qualify you for a higher standard deduction and a lower tax rate as opposed to filing as Single. However, you do have to follow certain rules, such as maintaining a home for your dependent.
Additionally, married couples have to consider whether to file separately or jointly. In most situations, filing jointly can mean a lower tax bill when the two are combined, as well as a larger refund. However, when one spouse has significant medical expenses or student loans on income-based repayment plans, this can be the exception.
W-4 Withholding: The Hidden Factor Behind a Big Tax Refund
Tax withholding through a W-4 is a major contributor to tax refunds. This is because your W-4 specifies how much tax your employer withholds from your paycheck each pay period. If you get married, have a baby, or even get a second job and do not update your W-4, you will likely receive a tax refund due to over-withholding. Although receiving a large check from the government is a good thing, you have effectively given the government a loan without interest for a whole year.
The IRS Tax Withholding Estimator is great for determining the right amount of tax owed to find a balance between your take-home pay and anticipated refund. It is a good idea to review your W-4 once a year in case it needs updating.
How Self-Employed Filers Can Get a Bigger Refund
Self-employed people can take additional tax deductions that people with W-2 jobs cannot. They can take deductions for home office space, business travel, health insurance, retirement plans through a SEP-IRA or Solo 401(k), and the qualified business income deduction under Section 199A.
To take deductions, the self-employed individual needs to track all business expenses during the year. If you are self-employed and paid more in quarterly taxes than you owe for the year, you will receive a tax refund.
Retirement and HSA Contributions That Boost Your Refund
Deducting retirement plan contributions can help you get a larger tax refund. If you are under 50, you can deduct traditional IRA contributions up to $7,000. If you are 50 or over, the limit is $8,000. If you are self-employed, you can take a deduction for contributions to a SEP-IRA of up to $69,000.
Also, you can take a deduction for your HSA account. This is a good plan to have because you can make tax-free withdrawals for medical expenses, take a deduction for your contributions to the account, and let the account grow tax-free. The maximum contributions you can make to your HSA account in 2025 are $4,300 for an individual and $8,550 for a family. You have until April 15, 2026, to make contributions that will count toward 2025.
Common Mistakes That Shrink Your Tax Refund
Every year, people make errors that can cost a lot of money, and one common mistake is not receiving the full tax refund. The most common mistakes are entering the wrong Social Security number, choosing the wrong filing status, not claiming a credit you are entitled to, not reporting your income correctly, and missing tax deductions such as student loan interest or educator expenses. Electronic filing is the way to go to avoid mistakes.
How to Track Your Refund After Filing
The IRS issues most refunds within 21 days of accepting an e-filed return. You can check your status using the Where’s My Refund tool on IRS.gov, the IRS2Go mobile app, or your IRS Online Account. Refunds for returns claiming the EITC or ACTC are typically available by early March for those who filed at the start of the season.
Direct deposit is the fastest delivery method. The IRS has been phasing out paper refund checks, so providing your bank routing and account numbers is now essential.
Smart Ways to Use a Big Tax Refund in 2026
The goal of the tax refund is to strengthen your finances. Here are a few ways to spend it:
- Build or replenish your emergency fund covering three to six months of expenses
- Pay down high-interest credit card debt
- Contribute to a retirement account or HSA
- Make a down payment on a house
- Invest in a taxable brokerage account
The IRS allows splitting the refund across up to three accounts using Form 8888. It is suggested to have a plan before the money is in the account.
Should You Aim for a Big Tax Refund or Adjust Your Withholding?
How tax refunds are perceived can be a matter of differing opinions and sometimes a personal decision. A big tax refund is seen as money overpaid throughout the year, which some view as forced savings. Others really prefer to change their withholding so they get more in each paycheck and spend the extra money the way they believe is best, by investing.
There is no penalty for receiving a refund, but if you get refunds of over $3,000 several times, it might make sense to adjust your W-4 so you can have more of your pay each year instead of getting a big refund.
If you are a non-resident business owner or LLC holder and need help with U.S. tax compliance, EasyFiling provides comprehensive assistance, including ITIN applications and registered agent offerings
FAQs About Getting a Big Tax Refund
Why is my tax refund bigger in 2026?
New deductions from the One Big Beautiful Bill Act, combined with unchanged withholding rates, are resulting in larger refunds for most filers this year.
What is the average tax refund in 2026?
As of mid-March 2026, the average refund is approximately $3,676, up about 10.9% from the same period last year.
How can I get a bigger refund?
Claim all eligible deductions and credits, choose the correct filing status, contribute to retirement and HSA accounts, and file using Schedule 1-A if the new deductions apply to you.
When will I receive my refund?
Most e-filed returns with direct deposit receive refunds within 21 days. EITC and ACTC refunds are typically available by early March.
Is a big refund a good thing?
It depends on your financial goals. A refund means you overpaid taxes during the year. Some filers prefer this as forced savings, while others would rather keep more money in each paycheck.
Oscar James S