Record tax refunds projected as policy changes take effect, officials say

A surge in year-end tax refunds is projected to reach record levels next filing season, as officials and economists point to changes from the One Big Beautiful Bill that take effect in 2025 through 2028. National Economic Council Director Kevin Hassett, a leading contender for President Trump’s next Federal Reserve chair, told Fox Business that the refunds could be the largest in American history and that families are likely to receive sizable checks. President Trump has echoed the outlook, saying that under his tax policies families could save between $11,000 and $20,000 annually. The comments come as households prepare documents for the upcoming tax filing season amid mixed sentiment about the economy.

Wages have climbed in recent months, and inflation has shown signs of slowing, Hassett said, arguing that those dynamics support bigger refunds. "Wages for the typical worker were up 3.7 percent. So if you're running 3.7 percent wage increases at 1.6 percent core inflation, then real wages are growing at a rate of about 2 to 2.5 percent," he explained. "By our estimates right now, blue-collar workers have already seen an almost $2,000 raise this year after inflation." Hassett added that many changes from the One Big Beautiful Bill were not reflected in earlier filings, so filers should expect to see benefits in their wallets. The remarks come as discussions about the policy package and its timeline shape the outlook for consumer finances this filing season.

The Internal Revenue Service has issued guidance on several changes tied to the One Big Beautiful Bill that will affect tax years 2025 through 2028. Among the measures: qualifying seniors will be able to deduct an additional $6,000 from taxable income, though the benefit phases out for those earning over $75,000. Other provisions include no tax on tips, overtime, and car loan interest, which could significantly reduce taxable income for many workers. However, some jurisdictions, including Washington, D.C., have opted out of certain provisions, meaning residents there may not benefit from all changes. The IRS also warned taxpayers about common deduction mistakes that could trigger audits and urged careful reporting of overtime pay to avoid fines. Employers won’t face penalties for separate overtime or tip reporting in 2025 if standard requirements are met. About six million tipped workers are affected. The cap is $25,000 for single filers earning over $150,000 and joint filers over $300,000. The OBBB bill also allows no tax on overtime from 2025 to 2028. Eligible workers can deduct overtime pay above their regular rate, capped at $12,500 for single filers and $25,000 for joint filers at the same income thresholds.

Analysts caution that these projections hinge on the law passing and on how tax administration implements the changes. Actual refunds will vary by income level, filing status, withholding settings, and local rules, even as booster effects from the bill are expected to influence consumer spending and sentiment as the filing season unfolds. While the bills’ supporters argue the reforms will lift take-home pay and stimulate growth, critics note that benefits may be uneven and could be offset by other policy considerations. As households await their refunds, financial planners emphasize careful withholding decisions and thorough documentation to maximize legitimate deductions while avoiding errors that could trigger audits.