Larger tax refunds in 2026 expected, thanks to Trump tax law and IRS delay: Economist

Core Insights - Americans, especially affluent individuals, are expected to receive larger tax refunds or smaller tax bills in 2026 due to President Trump's tax and spending package passed in July, with total taxpayer savings potentially reaching an additional $50 billion [1][5][10] Taxpayer Benefits - The retroactive provisions in 2025, such as the additional senior deduction and higher child tax credit, can only benefit taxpayers by reducing their withholding or estimated tax payments, but employers are still using higher rates for calculations [2][4] - The benefits of the new tax cuts are skewed towards the top income quintile, with high-income households receiving the most significant advantages [3][4] Financial Impact - A $50 billion increase in tax refunds would represent a 17% increase from the previous year's total of approximately $275 billion, which is notable given that the increase from 2024 to 2025 was only 2% [5] - The average refund in 2025 is projected to be $2,939, with a 17% increase translating to nearly $500 more [5] Economic Implications - Any economic boost from larger tax savings is expected in the first half of 2026, but the impact may be modest as consumer spending does not appear to be negatively affected by the delay in tax payment adjustments [9][10] - Upper-income households are likely to benefit more from lower tax bills rather than refunds, and they are expected to spend only about 20% of their tax savings, while other Americans may spend 25%-40% of their incremental refunds [10]