The Tax Foundation estimates refunds will be $748 more per household, on average, compared to last year.
 

Tax Refunds and the One Big Beautiful Bill Act

The Tax Foundation comments on Tax Refunds and the One Big Beautiful Bill Act

Overall, we estimate the major tax changes for 2025 will lead to an average tax cut of $611, or a 0.8 percent increase in after-tax income. Middle and upper-middle income groups will see the largest share of filers with a tax cut. Lower-income filers with little to no tax liability do not benefit, while the very highest-income taxpayers are ineligible to benefit from most of the new tax cuts due to income limits.

Key Points

• Refunds will be larger than typical in the upcoming filing season because of the One Big Beautiful Bill Act’s (OBBBA) tax cuts for 2025.
• Tax Foundation estimates the OBBBA reduced individual taxes by $129 billion for 2025, and outside estimates suggest up to $100 billion of that could be received as higher refunds this filing season, pushing average refunds up by up to $1,000.
• Refunds will undoubtedly rise for millions of taxpayers under the OBBBA, reflecting the law’s reduction in individual tax burdens, but simply putting more cash into people’s pockets is not why the tax law is expected to boost long-run economic growth.

Seven Major OBBBA Provisions

• Maximum child tax credit increase of $200
• Standard deduction increase of $750 for single filers and $1,500 for joint filers
• State and local tax (SALT) deduction cap increase to $40,000 for taxpayers earning under $500,000
• New $6,000 additional deduction for seniors that starts phasing out when taxpayers make more than $75,000 ($150,000 joint)
• New $10,000 auto loan interest deduction that starts phasing out when taxpayers make more than $100,000 ($200,000 joint)
• New deduction for up to $25,000 in tip income that starts phasing out when taxpayers earn more than $150,000 ($300,000 joint)
• New deduction for up to $12,500 in overtime income ($25,000 for joint filers) that starts phasing out when taxpayers earn more than $150,000 ($300,000 joint)

Blue Salt

State and Local Tax (SALT) changes go heavily to blue states. The top beneficiaries are NY, CA, NJ, CT, IL, MD.

Those states are so heavily gerrymandered that Republicans will not benefit from this at ll.

I don’t know how to proportion the rest, other than it will be more spread out. But yes, there will be a sugar high.

There is both a short-term inflationary stimulus and a long-term inflationary aspect due to a huge increase in deficit and long-term debt.

The Total Impact

The Census Bureau reports there are 134,790 households.

If the average increase in refunds is $748, that’s a boost of $100.8 billion dollars. Let’s Call it $100 billion for the following calculations.

The early filers are generally those who do not itemize.

Timing the Impact

• February: ~10–20% $10 Billion Boost. This covers early filers (January/early February submissions). Refunds start mid-to-late February, but it’s the smallest share since filing just opened (Jan 26, 2026 this year). EITC/ACTC claims are often delayed until late Feb/early March.
• March: ~30–40% $40 Billion Boost. One of the heaviest months. Many February filers get processed here, plus a big wave of mid-season e-filers. By late March, historical data often shows 40–60% of total refunds cumulatively issued (e.g., in 2022, ~58 million refunds worth $189B by late March, out of eventual ~96M/$292B total).
• April: ~25–35% $30 Billion Boost The peak volume month due to the April 15 deadline rush. Late March/early April filers (procrastinators) dominate, with refunds arriving late April into early May. This month captures a large chunk of the remaining early-to-mid filers.
• May: ~10–20% $15 Billion Boost Tapering off, but still meaningful for late filers, any extensions (to Oct 15), delayed processing, or post-deadline submissions. By mid-to-late May, 80–95%+ of the season’s refunds are typically issued (e.g., end-of-May stats often show near-final totals before the summer tail).
• June and later: ~5% or less (tail end) $5 Billion Boost Mostly stragglers, amended returns, or complex cases.

Personal Income and Real Personal Income
 

In March, expect to see a huge jump in disposable (after tax) personal income (DPI) of perhaps 2 percent or more month-over-month.

By June, as the refunds trickle in, the year-over-year cumulative annualized jump in DPI rates to be stunning.

I expect nominal disposable after tax income (DPI) top rise from 22.764 trillion annualized to something like 24.467 trillion.

That would be a year-over year increase in DPI of about 7.5 percent. Since productivity is not going to jump 7.5 percent this rates to be inflationary.

These numbers will be much higher if the $748 per household average increase is higher. And other estimates are as much as $1,000 on average.

Trump Wants a Hot Economy

Trump wants a hot economy and he just may get it, regardless of what happens to jobs.

By November, the sugar high of the refunds may turn to anger over more inflation. Alternately, job losses will keep demand in check.

While refunds are nice, anyone who loses their job will not exactly like the tradeoff.

Other Forces

Medical care is going to be a huge negative factor. Sticker shock has already happened.

For many people, medical care premiums are going to wipe out any tax rebate.

The whole setup has a rather stagflationary feel to it.

Related Posts

January 27, 2026: Trump Cheers a Plunge of the US Dollar “I Think It’s Great”

“Look at all the business we are doing,” says Trump.

Trump’s position is amazingly short-sighted, inflationary, and wrong.

January 20, 2026: Might the Next Interest Rate Move by the Fed Be a Hike?

It’s time to discuss the real possibility of a renewed surge in inflation.

In that post, I did not even address the inflationary aspect of tax refunds.

January 31, 2026: Competing Claims, How Much Labor Market Weakness Is There?

Some see “No Signs of Labor Market Weakness”. Others strongly disagree.

February 2, 2026: The Fed Has Two Huge Problems Starting Now, Acyclical Inflation and Jobs

The Fed is not in a good spot.

For a look at what health care will do to the PCE price index, please see Expect a Big Divergence This Year Between CPI and PCE Inflation

Rent and Healthcare go different ways in 2026. Plus there are huge timing issues.

This is one sick economy led by AI, upper-end spending, and deficits.

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