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)
| Provision | 2025 Revenue Effect, in Billions |
|---|---|
| Child Tax Credit Increase | -$8.9 |
| Standard Deduction Increase | -$18.3 |
| SALT Cap Increase | -$32.2 |
| New $6,000 Additional Deduction for Seniors | -$16.8 |
| New Deduction for Auto Loan Interest | -$6.8 |
| New Deduction for Tips | -$7.0 |
| New Deduction for Overtime Income | -$38.7 |
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.
Submitted return via Turbo Tax last Wednesday. Approved and refund to come this Friday. 10 days. Yep, they couldnt care less about revenue or tax return accuracy or anything else. They are on their way to borrowing $5 trillion which will be someone else’s problem to pay back, and they get to throw money at any thing Don’s little heart desires for the next 3 years. Cant say Im surprised.
No refund check here😕
Me either. Kids left home. Don’t buy with debt. Not 65 yet.
800 bucks wont go far. I would think the higher the income the less likely it will go straight back into the economy. More likely invested.
“800 bucks wont go far. I would think the higher the income the less likely it will go straight back into the economy. More likely invested.”
It’s possible this is the correct view. This is not a three-shotgun blast like we saw in Covid.
But I do expect a mini-blast.
None of the money went to the bottom 40% or so.
None of it went to the top 10% or so.
Will the middle class go on a buying spree?
That’s what they usually do, provided they have a job.
Keep in mind that COVID happened with massive supply disruptions. Folks went on a spending spree with producers unable to keep up. It may be different this time. But with tariffs and a monopolistic control of many markets, who knows?
the sugar high took place with the Covid shut down FREE money to all— fraud to all— 2020 giant inflation in housing and the 100 ships from China backed up on the West coast to unload. That was the sugar high we are still dealing with–Thanks to the Washington gang
Covid was a catch 22. If the gov did not do anything people would be complaining about that
Oh boy, an extra $800. Better stock up on toilet paper now before the shelves are bare.
You should also report on consumer debt. People have been spending like crazy anyway. If the average American owes $104,755 do you think another $800 coming in is going to fuel explosive inflation?
Average American debt reached $104,755 in June 2025, according to Experian data. Here’s how Americans’ average debt breaks out by generation:
Generation Z: $34,328
Millennials: $132,280
Generation X: $158,105
Baby boomers: $92,619
Silent Generation: $38,460
https://www.experian.com/blogs/ask-experian/average-american-debt-by-age/
Hey Mish, long time reader. I remember in many of your earlier articles you defined inflation as primarily having to do with money supply. In terms of our current inflationary spiral this seems to make sense after all the debt was created to deal with the covid pandemic. The money supply has almost doubled since 2015
It would seem less relevant that people are receiving a few hundred (thousand?) dollars more in refunds.
Mish Blog post from 20 years ago detailing what inflation is.
The quick and dirty..
“…Inflation is best described as a net expansion of money supply and credit….” With credit marked to market.
https://mishtalk.com/uncategorized/inflation-what-the-heck-is-it/
That’s one view, among a few, about inflation, from the supply side. It fails to explain the inflation in health care, from the demand side, that Mish rightfully harp about often. It’s complex.
Yes, Mish talks/writes (at least somewhat) differently now regarding inflation.
Money supply manipulation can be very important for inflation outcomes (Fed has been focusing on inflation and unemployment rates for decades now).
But money supply is not the only inflation causes. See Congress’ reaction to COVID. Flooding citizens and business with Congressionally approved tax breaks and checks certainly made inflation increase as well.
So now, Mish, is also concerned about Congressional tax refunds (over just a month or two) causing inflation.
I was thinking the same thing, as I always remember his quote as being (paraphrasing) ‘inflation is the expansion of money and credit, when credit is marked to market’ (aka FASB 157 for 2009). It was genius.
i am thinking the change in viewpoint has more to do with his political views towards the current administration than actual inflation.
For a better view of inflation perhaps look at truflation, or the direction of the housing market market.
I discussed this years ago
The fact is, in 2009, the Fed suspended mark-to-market
There is no measure of marked-to-market-credit
And I have reported many times, truflation is just another idiotic measure
It is fatally flawed on rent and does not factor in property taxes or homeowners’ insurance
Not a damn thing to do with politics
Mish I think most of that small bump for the average joe is going to go towards paying down their credit card or other loan balances.
Very modestly however will be dwarfed by governmental overspending & money printing.
Welcome to the taco economy.
– 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.
> While the refunds will be larger in many cases, I don’t think the increase will offset the increases in Electricity, Healthcare, Food, etc. This money will be used to pay CC debt down, so they can use them once again, pay back some of the money used for Christmas spending, a night out as a treat for this new money that has arrived. Then it will be gone, debt will still exist and prices stay elevated or rise even further. No way this even helps a little bit. Only a steady increase in revenue can shift things like you suggest. Some big bonuses can do so as well, as big chunks can pay off big debts, but none of this is nearly enough to pull off long-run Growth imo.
You forgot a few zeros for the number of households, 3 to be exact.
Could you date the Recommended Articles?
Inflation will not end with the dollar being debased. dollar debasing is inflation and it will continue as long as the government spends more than revenue. As Mish posted recently, Trump wants a weaker dollar and more debt service by artificially fixed low interest rates, exactly the wrong prescription for what ails us as a debt problem is not repaired by adding more debt.
We need a President Kennedy leadership moment where we ask not what our country can do for us, but what we can do for our country. In our times, that would be refusing bribes for our vote. Not likely, but patriot leaders, not our current crop of grifters, would balance the budget and start paying down the debt.
We should always look at what they do rather than what they say. JFK was quite the swordsman (sleeping with a commie spy) but his legacy in office is somewhat tainted. We had the bay of pigs fiasco, the dressing down by Khruschev, the huge increase in advisers in Vietnam, probably preparing for a second administration invasion and the assassination of Diem (did he meet his karma). What did JFK do that was important other than run his mouth about spreading democracy?
Really, whataboutism here? Pathetic
Out of context whataboutism indicates it was posted by a bot or a moron.
Unfortunately we have a lot of morons here, so it’s really hard to tell.
What if Teddy Kennedy was driving a VW Beetle that fateful night?
1.8 trillion deficit last year. Won’t be long now.
My guess is a couple months of sugar high followed by persistent inflation. The politicians love to create excess demand. Both political parties are demand side neo-Keynesians. Although Keynes never recommended anything like this.
In order to have a higher refund, one must have paid taxes, which many don’t make enough for. In order to pay taxes, one must have income, which many don’t have. Trumponomics for ya.
ADP employment came in at 22k vs 45k est. so not sure that a sugar high will do much of anything with the job famine. There’s over $1 trillion in credit card and student loan debt that needs to be paid back.
Tax refunds go to student loans now if I’m not mistaken.
I thought the refunds were disproportionately benefiting the wealthiest. This isn’t going to create inflation on Main Street but inflation on Wall Street.
Not quite – the low end does get nothing though.
Easy peasy. Just come up with an excuse to slow down the velocity of money, like 6 years ago.
Mid term election is getting closer.
NOPE. Most of it is owed, already spent.
Of course, gouging and inflation will continue anyway……