You Could Get a Bigger Tax Refund This Year — Here’s Why and What To Do With It

Core Insights - Taxpayers can anticipate larger-than-usual refunds for the 2025 tax year due to provisions in the One Big Beautiful Bill Act (OBBBA) [2] Tax Cuts Under OBBBA - Maximum child tax credit increased by $200 [7] - Standard deduction raised by $750 for single filers and $1,500 for joint filers [7] - State and local tax (SALT) deduction cap increased to $40,000 for taxpayers earning less than $500,000 annually [7] - New $6,000 additional deduction for seniors, phasing out for incomes over $75,000 (or $150,000 for joint filers) [7] - New $10,000 auto loan interest deduction, phasing out for incomes over $100,000 (or $200,000 for joint filers) [7] - New deduction for up to $25,000 in tip income, phasing out for incomes over $150,000 ($300,000 joint) [7] - New deduction for up to $12,500 in overtime income ($25,000 for joint filers), phasing out for incomes over $150,000 ($300,000 joint) [7] Financial Recommendations for Tax Refunds - Paying down debt, especially high-interest credit card debt, is recommended as the best use of tax refunds [3][5] - The average credit card balance in the U.S. was $5,595 per cardholder as of Q2 2025, while the average federal tax refund last year was $3,116, indicating that refunds can significantly reduce debt [4] - Building up an emergency fund is advised, ideally covering three to six months of essential expenses [6]