Why Tax Refunds May Be Bigger This Year

Many taxpayers are seeing larger-than-usual-refunds as they file 2025 returns due to the One Big Beautiful Bill Act (OBBBA). In addition to the bill’s changes, withholding tables weren’t updated midyear, so many high earners had more tax taken out of their paychecks than necessary—and that difference is coming back at filing.

Let’s run down how much bigger “bigger” could be and some of your options if you received or expect some extra cash back from the IRS.

What Changed?

For tax year 2025, the OBBBA broadened benefits in a few ways that especially help higher-income filers but could also benefit taxpayers with lower income:

• SALT deduction cap increased to $40,000. This is well above the prior $10,000 limit, which affects taxpayers in high‑tax states who itemize.
• Increased standard deduction and inflation adjustments. These changes may modestly reduce total tax liability for many households.
• Expanded deductions for tips and overtime income. These matter less than the high SALT cap for most high-salary professionals but could make a difference for a loved one.

How Big Is ‘Bigger’ and Who Benefits the Most?

Headlines vary because they measure different things. Some forecasts peg the average boost at roughly $700–$750 for a “typical” filer, lifting average refunds to around $3,800. But broader estimates that include the overwithholding effect suggest increases of about $1,000 per filer on average, which aligns with what many upper-income households may experience. Nationally, that translates to over $90 billion in additional refunds this season.

Affluent households, especially those in the top 10% or 5% of income (making more than $210,000 and $316,100, respectively), are projected to see increases measured in the thousands of dollars. It’s estimated refunds could increase by $3,100 to $3,700 for many upper-income filers, driven in part by the higher cap on the SALT deduction and other provisions.

What Should You Do With a Larger Refund?

Think of the refund as freed-up cash flow for your goals and lifestyle. Here are five actions to consider:

1. Fortify your cash buffer. Many high-earning families prefer a larger liquidity cushion to handle irregular expenses or opportunities. We can rightsize the amount for you.
2. Prefund near-term goals. Earmark dollars for big 2026 expenses, tuition payments, charitable gifts or planned travel.
3. Rebalance and top up tax-advantaged saving. If appropriate, use part of the refund to rebalance taxable accounts, fund education savings for a loved one or boost retirement or health savings accounts contributions if you haven’t already maxed them out.
4. Adjust your 2026 withholding. A larger refund is often a sign you paid in more than you needed to during the year. Fine‑tuning your W-4 can improve take-home pay and smooth next year’s outcome.
5. Do something fun. A surprise windfall could go toward something creative—you could poll your family on how to put that cash to use for a shared experience or an out-of-the-ordinary purchase. 

If you’re receiving a larger-than-expected refund and would like us to help you put it toward long-term goals, near-term expenses or setting up an account for a loved one, please let us know.