Due to the provisions of President Trump’s “Big and Beautiful Bill” (OBBBA) passed in July and the double impact of the IRS not updating the withholding tax tables, some American taxpayers will receive higher tax refunds in 2026, especially the wealthy.
According to a report analyzed by Nancy Vanden Houten, Chief Economist of the Oxford Economic Research Institute, cited by Newsweek, the IRS was supposed to update the withholding tax tables to comply with the new law. However, due to administrative delays, they were unable to retroactively apply the new regulations to early 2025. This could lead to an additional $50 billion in total tax refunds for taxpayers in 2026.
The tax relief provisions of the new OBBBA law have retrospective effect, starting from January 1, 2025. Despite the passage of OBBBA in July, employers continued to calculate employee withholding taxes at the higher rates throughout 2025. This resulted in over-withholding federal income tax from employee salaries, leading to situations of “excess refund” when taxpayers file in 2026.
According to IRS data, if taxpayers see a $50 billion increase in refunds, it would represent an 11% rise from the $2.75 trillion federal refund total in 2024.
Individual refund amounts will vary based on their annual household income.
The Oxford Economic Report shows that the amount of tax refunds for Americans varies by income bracket. For instance, higher-income earners with annual incomes between $66,801 and $119,200 could see a refund of $1,780, while the top tier earning over $5.18 million could save $286,440.
For the lowest income bracket earning below $34,000 annually, the average refund amount is $150.
According to Newsweek, the “Big and Beautiful Bill” raises the cap on State And Local Taxes (SALT) deductions from $10,000 to $40,000, primarily benefiting wealthier Americans.
President Trump’s “Big and Beautiful Bill” not only extends the multitrillion-dollar tax cut policy from 2017 but also introduces new provisions for overtime pay, tip income, and deductions related to State And Local Taxes (SALT).