According to recent IRS data, this year’s average tax refund for Americans has surged by over 10 percent compared to the same period last year.
By February 27, the average refund amount reached $3,742, an increase from the previous year’s $3,382.
This translates to an approximate rise of $360 in the typical refund amount.
Overall, the IRS has distributed $136.6 billion in refunds so far this tax season, marking a 9.4 percent increase from the $124.8 billion disbursed by this time last year.
Over 36.5 million refunds have been processed and issued.
With retroactive tax breaks on overtime and tipping, the tax reforms implemented by the Trump administration set to take full effect in 2025 promise substantial refunds for taxpayers.
But a separate rule change could mean not everyone sees their money quickly. Under a law signed last year, the US Treasury has largely stopped issuing paper checks as part of a broader push to modernize payments and reduce fraud.
The government is moving toward fully electronic payments to and from the IRS – including tax refunds.
With the US tax season in full swing, the promise of bumper refunds continue to strengthen
That means returns filed without valid direct deposit information may still be processed, but the refund itself can be frozen until correct banking details are provided.
The IRS says nearly 37 million refunds have been sent via direct deposit so far this year – slightly more than at the same point in 2025.
While paper checks are still technically available, opting for one may significantly slow down payment, a shift expected to hit unbanked Americans hardest.
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Treasury Secretary and acting IRS Commissioner Scott Bessent recently told CNBC that the average tax refund has is up by 22 percent, though he did not specify the data underlying that estimate.
Meanwhile, Andrew Lautz, director of tax policy at the Bipartisan Policy Center, cautioned that early-season figures can be ‘misleading’.
He said in recent years average refunds have started out lower, surged in mid-February – once the IRS is allowed to use certain credits – and then fallen back slightly.
Much of the anticipated increase in refunds stems from President Donald Trump’s ‘One Big Beautiful Bill Act’ (OBBBA), signed into law in July 2025.
The law cut taxes for the 2025 tax year and expanded the standard deduction. It also introduced new deductions for tip income and overtime pay. But the IRS did not adjust the tax amounts taken out of workers’ paychecks during 2025 to reflect those changes.
Much of the anticipated increase in refunds stems from President Donald Trump’s ‘One Big Beautiful Bill Act’ (OBBBA), signed into law in July 2025
A tax refund represents money overpaid to the IRS throughout the year.
With each paycheck, employers withhold federal income taxes, as well as contributions for Medicare and Social Security, based on earnings and withholding elections.
Because the revised tax provisions were not reflected in withholding calculations, many workers may have paid more tax than necessary during 2025 – resulting in larger refunds, or smaller tax bills, when they file in 2026.
‘As a result, many taxpayers will pay too much in tax this year and see larger tax refunds or smaller tax bills next year,’ Nancy Vanden Houten, lead economist at Oxford Economics, wrote in an October 2025 report.
The IRS has also issued guidance on additional provisions in the OBBBA affecting tax years 2025 through 2028.
Qualifying seniors may deduct an additional $6,000 from taxable income, though the benefit phases out for individuals earning more than $75,000.
Other measures include exemptions on taxes for tips, overtime pay, and certain car loan interest, potentially reducing taxable income for millions of workers.
Some jurisdictions, including Washington, DC, have opted out of selected provisions, meaning residents may not benefit fully from the federal changes.
Treasury Secretary and acting IRS Commissioner Scott Bessent told CNBC’s Squawk Box that the average tax refund has risen by 22 percent
Treasury Secretary and acting IRS Commissioner Scott Bessent told CNBC’s Squawk Box that the average tax refund has, in fact, risen by 22 percent, though he did not specify the data underlying that estimate
The IRS has urged taxpayers to exercise care when claiming deductions, warning that common reporting errors – particularly related to overtime and tip income – could trigger audits or penalties.
At the same time, the agency indicated that employers will not face penalties in 2025 for separately reporting overtime or tips, provided standard requirements are met.
Under the new law, workers with qualified tips may claim deductions from 2025 through 2028.
Approximately six million tipped employees are expected to benefit.
