"First, the real value of the tax legislation is not in your refund. Because policymakers made seven substantive changes to individual income taxes that took effect in 2025, refunds will be larger this year. This includes a $200 increase in the maximum child tax credit, a larger standard deduction, and an increased itemized deduction for state and local taxes. The other four changes are the policies that reduce taxes for some seniors, tipped and overtime workers, and individuals who have auto loans."
"Tax Foundation expects these policies will increase average refunds by about $1,000. As those new policies continue into 2026, many middle-income households will benefit, and the overall tax burden will remain tilted to those with high incomes. In 2026, we expect 71% of taxes to be paid by the top 20% of earners. Source: Tax Foundation General Equilibrium Model, July 2025."
Major tax legislation enacted in 2025 will produce larger refunds for millions of taxpayers. Policymakers made seven substantive changes to individual income taxes that took effect in 2025, including a $200 increase in the maximum child tax credit, a larger standard deduction, and an increased itemized deduction for state and local taxes; four other changes reduce taxes for some seniors, tipped and overtime workers, and individuals with auto loans. The Tax Foundation projects average refunds will increase by about $1,000. Many middle-income households will benefit, but the top 20% of earners will still pay about 71% of taxes. The primary long-term benefit is improved work and business investment incentives that expand economic capacity more than short-term refunds.
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