Nearly 100 million households may get extra $1,000 in tax refunds — see if you qualify

Amidst rising prices that have forced people to live paycheck to paycheck, extra cash is always good news, and while Americans wait for the $2,000 that the Trump administration has been talking about, there are other payouts they are eligible for. As many as 100 million American households could benefit from a new tax credit that could increase the average tax refund by $1,000, according to a new update shared by the IRS. The credits under the Working Families Tax Cuts bring no tax on tips, overtime, Social Security, and most importantly, auto- loan interest paid on an American-made car. Thus, taxpayers are urged to check their eligibility for the refunds and take advantage of the increased cuts.

The One Big, Beautiful Bill Act (OBBA) approved a new tax credit that allows taxpayers to deduct a part of their auto loans paid on a car loan in 2025, but it applies only to new vehicles that underwent final assembly in the U.S. Under the new credit, taxpayers making $150,000 or less can claim the auto loan deduction for cars purchased in 2025 that meet the criteria. The borrowers must provide the Vehicle Identification Number when filing, and the deduction will be available for those who don't itemize it, Cherry Dale, vice president of financial education at Virginia Credit Union, told Knoe.

“Keep in mind it’s the interest, not the entire payment of that car,” Dale explained, adding that the deductions are capped at $10,000. She noted that most borrowers don't pay that much in loan interest, but every bit of deduction helps. According to the National Highway Traffic Safety Administration, last year, only 30% of the cars sold in the country underwent final assembly in the U.S. Moreover, to qualify for the deduction, all cars under the credit must have been purchased for personal use, and the loan must originate after December 31, 2024. Thus, while roughly 100 million Americans have car loans across the country, only a select few will be eligible for the refunds. Furthermore, the tax savings will depend on the marginal tax bracket of the borrower. People in the 10% bracket would save about $1,000, while those in the 22% bracket could save $2,000, according to calculations from Newsweek. 

Under OBBA, apart from the deduction on auto-loan interest, Americans can now take advantage of the new "no tax on tips, no tax on overtime, no tax on Social Security, the boosted child tax credit, doubled standard deduction, and $1,000 for children’s Trump accounts. Thus, due to these rules, the IRS refunds are set to increase by an average of $1,000 per household, the Treasury Department announced. These refunds will be issued to 100 million households, and in this, about 7.5 million families with two children will receive an average tax cut of $1,700 because of the enhanced child tax credit.

The Treasury Department had previously announced that the standard deduction had also been doubled, impacting nearly 90% of the taxpayers. Tax experts and analysts estimate that many filers could see bigger refunds under the new provisions. "Overall, we’re expecting these changes to increase refunds by 15% to 20% on average," Heather Berger, a U.S. economist with Morgan Stanley, told CNBC.

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