Don’t Be Surprised if Your Tax Refund Feels Smaller This Year

Filing your taxes can be a bit of a pain, but the reward is supposed to be a refund, at least for most people. This year, that refund was expected to increase, in part because of President Trump's One Beautiful Bill Act, which cut a wide range of taxes that might have affected your refund.

For many, though, their tax refunds are smaller than expected, and it turns out that that's part of a much broader trend. Here's what we know about the state of tax refunds.

For individual filers, a tax refund could be smaller than you expected because of taxes that the IRS or your state took out of your refund that you owed them. Your refund could be smaller because of federal agency nontax debts, unpaid child support, state income tax obligations, or unemployment compensation debts.

More broadly, though, tax refunds are smaller than expected across the board this year, even if they have risen by a significant amount.

When Congress passed the One Beautiful Bill Act, they promised that it would mean an increase of about $1,000 in the average tax return. So far, that increase has been much smaller than expected, amounting to just $350 on average. The average tax refund sits at $3,462, which is more than 11% higher than last year, but not enough of a bump that it has led many people to notice.

According to a survey from the Bipartisan Policy Center, 62% of respondents either thought the tax changes harmed them or made no difference, and even 35% of Republicans said they didn't see a benefit from the tax changes.

So, while refunds have jumped, it doesn't seem like the jump has been substantial enough for most people to take notice or feel like the increase materially improved their lives.

The increase in refunds does not factor in whether Americans who owed taxes during this tax season had to pay less than they had in previous years, and that's where the OBBA might have offered its greatest savings.

"The evidence is stronger that more tax relief is relatively flowing to those who otherwise would owe when they file," said Don Schneider, deputy head of U.S. policy at the investment bank Piper Sandler, told NPR.

Of course, if you owe taxes at the end of the year, you might feel annoyed even if the amount is smaller than it had been in previous years. Ultimately, then, the changes to the tax law don't seem to have resulted in many people feeling like their economic situation has meaningfully improved as a result, at least among average Americans.

So tax refunds might be less than expected this year, but that doesn't mean they weren't higher than they had been in the past. What it means instead is that some in Congress might have been overpromising how much OBBA would really do.