Federal Tax Breaks on Tips and Overtime Help Lift 2026 Refunds, but Higher Gas Prices Offset Gains
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President Trump’s tax changes — enacted in the One Big Beautiful Bill Act and taking effect for some taxpayers in 2025–2026 — have clearly lifted average federal refunds this filing season, but the benefit is uneven and partly offset by higher living costs. IRS data show the average 2026 federal refund so far is $3,462, about an 11% increase (roughly $350) from 2025, a jump analysts largely attribute to the new federal exclusion of income taxes on tips and on overtime and to $106 billion in retroactive relief that reduced many people’s 2025 tax bills. Early projections that touted as much as a $1,000 average boost have been clarified as hypothetical maximums that assume every filer gets a refund; survey data indicate 14% of taxpayers report a “significantly” larger refund, while roughly one‑third had tipped income or overtime, and many intend to use refunds to pay down debt or save.