The One Big Beautiful Bill Act (OBBBA) included a number of changes to the tax code, including a larger standard deduction, a boost to the Child Tax Credit and a new deduction for taxpayers 65 and older.
That means most Americans can expect larger refunds this year. In addition, many filers didn't adjust withholding on their paychecks to account for the changes, so they're getting more money back from the IRS.
The result? The White House is forecasting the average 2026 refund will increase by $1,000 or more over last year. The Center for American Progress, a left-leaning policy institute, questioned those figures and pointed to analyses predicting a more modest $331 to $748 increase.
Considering how many Americans rely on their refund to cover basics like housing and credit card bills, any increase is welcome news.
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How to claim the new tax breaks
If you still need to file, the top tax-prep software can process all the new deductions and credits.TurboTax's easy-to-use platform guides you through the filing process from start to finish, with a library of explainers, videos and tip sheets. If you find a larger refund somewhere else, TaxAct will refund the cost of your filing and pay you the difference.
TurboTax
Free version
If you have a simple Form 1040 return only (no forms or schedules except as needed to claim the Earned Income Tax Credit, Child Tax Credit, student loan interest, and Schedule 1-A), you can file for free yourself with TurboTax Free Edition, or you can file with TurboTax Expert Assist Basic at the listed price. Roughly 37% of taxpayers are eligible.
Guarantee
Guarantees 100% accuracy and maximum refund
Live support
Expert Assist plan includes unlimited assistance and final review. Expert Full Service includes a dedicated expert to complete and file your return.
Tax refund advance loan
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Read our review of TurboTax tax software.
TaxAct
Online plans
Free, Deluxe, Premier, Self-Employed
Free version
Federal returns (Form 1040 and limited credits only)
Guarantee
Maximum refund guarantee and $100,000 accuracy guarantee
Live support
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Where to put your super-sized tax refund
If you are getting a refund this year, remember it's just your hard-earned income going back into your pocket, not "free money."
If you don't need it for day-to-day expenses, here's how to use it to move your financial life forward.
1. Pay off your credit cards
More than a third (37%) of taxpayers use their refund to pay down credit card debt, according to a 2026 MoneyLion survey, especially to cover large holiday purchases. With refunds averaging $3,700 and household card debt averaging close to $6,000, you may not be able to climb back into the black. But even lowering your balances could save you hundreds in interest and fees.
According to the avalanche method, you should use the refund to pay off as much as you can of the card with the highest APR first. In the months ahead, pay off any other cards, moving from highest to lowest APR. The snowball method is better suited for people who need an early win to gather momentum. Pay off the card with the smallest balance first, then move to the next smallest, and so on. You'll still have high APR credit card bills, but the feeling of accomplishment when a card balance hits zero can be a real motivator.
2. Replenish your emergency fund
Almost 40% of Americans have $250 or less in savings, according to a 2025 GOBankingRates survey. So, if you've paid off your debts, the next most important money move is to put three to six months' worth of living expenses in an emergency fund.
The money should earn interest but still be accessible, so a high-yield savings account or money market account will fit the bill nicely. Lending Club LevelUp Savings and the UFB Portfolio Savings both earn an above-average APY and don't charge monthly maintenance fees.
LendingClub LevelUp Savings Account
Annual Percentage Yield (APY)
4.00% (with monthly deposits of $250 or more), or 3.00%
Minimum balance
None
Monthly fee
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Maximum transactions
Excessive transactions fee
None
Overdraft fees
N/A
Offer checking account?
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Offer ATM card?
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3. Pay off student loans
The Trump administration is turning the screws on student loan borrowers, ending several income-driven repayment plans and resuming wage garnishing for defaulted loans.
Using your tax refund to make an oversized loan payment can get you back on track and bring you closer to a life without student loan debt.
Servicers can't repossess your education, but they can notify credit agencies about a delinquent account. Your credit score could drop by up to 200 points if you default.
4. Make a down payment on a house
The average tax refund in 2026 is close to $3,700. That's a far cry from the $40,000 you'll need to make the median down payment. That doesn't mean it can't help make homeownership a reality for you.
ONE+ loans by Rocket Mortgage require only 1% down. You could also put your refund toward an FHA mortgage, which only requires 3.5% down, or use to cover closing costs, movers and other homebuying expenses.
The money can also go toward closing costs, earnest money, insurance and property taxes, moving and home renovation projects.
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5. Save for your children's education
A 529 college savings plan helps parents save for their children's education by allowing earnings to grow tax-free. Withdrawals used for qualified educational expenses are also tax-free.
ScholarShare 529 and Invest529 are two of our top picks for 529 plans, with returns that are higher than what you'd get with a deposit account, even a HYSA.
Invest529 (Virginia)
Minimum opening balance
$10
Maximum overall contribution
$550,000
Portfolio options
Options include target enrollment portfolios (also known as age-based portfolios), index portfolios, target risk portfolios, principal protected portfolios and specialty portfolios
Underlying funds
Investors can choose funds from Vanguard, Invesco, Blackstone, UBS and more
Fees and expenses
Total asset-based expense ratio: 0.0% to 0.569%
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Pros
- Available to residents of any state
- Offers low fees
- Diverse investment options
- Tax benefits for residents
Cons
- Minimum opening balance, but it's low
- Expense ratios may be higher compared to other providers on our list
- Doesn't offer online gifting portal for easy sharing
Why is my tax refund bigger this year?
As of February 2026, tax refunds are averaging 10.9% higher than in 2025. OBBBA made many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) permanent, but it also introduced several new tax breaks.
1. A bigger standard deduction
The TCJA practically doubled the standard deduction in 2018, eliminating the need for many Americans to itemize their returns to shrink their taxable income. Scheduled to expire in 2025, the expanded deduction has now been extended to at least 2028.
In 2025, the standard deduction increased by another $750 for individual filers and by $1,500 for married couples filing jointly.
| Standard deduction for tax year 2025 (Filing in 2026) | Standard deduction for tax year 2026 (Filing in 2027) | |
|---|---|---|
| Single | $15,750 | $16,100 |
| Married filing jointly | $31,500 | $32,200 |
| Married filing separately | $15,750 | $16,100 |
| Heads of household | $23,625 | $24,150 |
2. The bonus standard deduction for seniors
Seniors and the visually impaired have long been able to claim the Extra Standard Deduction, which is currently is $2,000 for individual filers and $1,600 for married couples filing separately.
Starting this year, though, taxpayers 65 and older can claim an additional $6,000 without itemizing. The Enhanced Deduction for Seniors can be stacked on top of the Extra Standard Deduction and is per individual, so married couples filing jointly can claim up to $12,000. (The enhanced deduction is not available to married couples filing separately.)
For individuals, the deduction is gradually reduced if your modified adjusted gross income (MAGI) exceeds $75,000 and is completely phased out at $175,000. For couples filing jointly, the deduction begins to be phased out at $150,000 and disappears at $250,000.
3. New deductions for tips and overtime
Touted as "no tax on tips," OBBBA actually introduced a deduction of up to $25,000 for "qualified" tips. To be eligible, you must be in a profession where gratuities are customary — like a server, bartender, driver, or hairstylist —and you can only declare voluntary tips from patrons.
A portion of qualified overtime pay is also deductible under OBBBA. It's capped at $12,500 in eligible overtime, which is defined by the Federal Labor Standards Act as anything beyond a 40-hour workweek (paid at time-and-a-half).
If you're claiming either of these tax breaks, the full deduction is only available if you have a MAGI of less than $150,000 ($300,000 for joint filers). You'll also need to attach a Schedule 1-A.
4. Car loan interest deduction
Up to $10,000 of interest paid on a car loan is now deductible, provided it's a new U.S.-assembled vehicle purchased between 2025 and 2028 and not being used for business purposes.
You don't need to itemize to take this tax break, but it's not available for interest on auto leases and it phases out for taxpayers with a MAGI above $100,000 ($200,000 for married filing jointly).
5. The expanded SALT deduction
Residents in some states could get a big break on their income and property taxes, thanks to a temporary increase in the federal deduction for state and local taxes (SALT).
Starting this year, the SALT deduction limit has been supercharged to $40,000. It will increase by 1% annually through 2029, then revert to the pre-OBBBA cap of $10,000.
The $40,000 SALT deduction limit starts to phase out if your MAGI exceeds $500,000 and reverts to $10,000 after you pass $600,000. You'll need to itemize your return to claim the SALT deduction.
FAQs
How long does it take to get a tax refund?
If you filed online and set up direct deposit, the IRS says you can expect a refund within 21 days. If you mailed a printed return, it could take up to eight weeks.
Where is my tax refund?
To check your refund status, you can use the IRS's Where's My Refund? tool, which is updated once a day. You'll need to input your Social Security number, filing status and the refund amount listed on your return.
Can I go to jail for not paying taxes?
Hiding or misrepresenting income, or falsifying dependents or deductions, is a criminal offense that can result in prison time. Simply not paying your tax bill on time won't, but fees and penalties will begin to accrue immediately.
Depending on how much you owe and for how long, the IRS can put a lien on your home, repossess your car or even invalidate your passport.
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