Scott Bessent: Working Americans set for bigger tax refunds in 2026

Tax refunds can make or break a family's financial year. Some people treat them like found money — extra cash for a vacation or new television. Others see them as a chance to shore up emergency savings or pay down debt. For most Americans, a $1,000 to $2,000 refund feels substantial.Now imagine getting that boost twice.That's essentially what Treasury Secretary Scott Bessent is promising working Americans in early 2026. According to his recent comments, households should brace for what could be the largest tax refund season on record — a financial windfall that arrives just as households are recovering from holiday spending. But here's the twist: Once you spend or save that refund, the real money comes from somewhere else entirely.Where these giant tax refunds come fromThe One Big Beautiful Bill Act, which President Donald Trump signed into law in July, created the conditions for massive refunds starting this tax season. The legislation wasn't just about tweaking rates or tinkering with deductions. It included retroactive provisions that fundamentally changed what Americans owe on their 2025 earnings — the money they earned starting July 4, 2025.Here's the key problem: Most people didn't adjust their paycheck withholding after the law passed in July.When you start a job, you fill out a W-4 form that tells your employer how much federal tax to deduct from each paycheck. That number is supposed to match what you'll actually owe when you file your return. If the tax rules change mid-year, savvy taxpayers update their W-4 to avoid overpaying. But millions of Americans never got the memo — or didn't get around to the paperwork.As a result, they've been having too much withheld for the past six months. When they file their 2025 taxes in early 2026, boom: massive refund.More Personal Finance:Estate planning tips every blended family needs to knowDave Ramsey sounds nationwide Medicare alarmAfter Your Death, Who Takes Care of Your Dog?What Medicare Part B price hike means for your 2026 Social SecurityStudent loan forgiveness at risk for manyBessent told NBC10 Philadelphia that he expects to see "$100 billion to $150 billion of refunds, which could be between $1,000 and $2,000 per household." That projection is staggering. For comparison, the IRS paid out roughly $311 billion in total refunds during the entire 2025 tax filing season (covering all of 2024's taxes), with an average refund of about $3,052 per person, CNET reported.This time, Bessent's numbers suggest the Q1 refunds alone could rival several months of normal refund activity.What's new in the tax code that triggers these refundsThe provisions driving these refunds are tangible and worth understanding, because they're reshaping your take-home pay going forward.First: No tax on tips. Service industry workers — restaurant servers, bartenders, and hotel staff — are exempt from federal income tax on reported tips earned from July 4, 2025, onward. That's a direct income boost for millions. But it also means employers' payroll systems needed updating, and many workers didn't immediately adjust their withholding.Second: No tax on overtime. Factory workers, linemen, nurses, and others working overtime now have that premium pay exempt from federal tax. Again, the law is retroactive to July 4, so anyone working overtime since then has probably overpaid throughout the second half of 2025.Third: The standard deduction is higher. The legislation extended lower tax rates and higher standard deductions from the 2017 Trump tax cuts, which were set to expire at the end of this year. Without this bill, millions would've faced a tax increase in 2026. Instead, they get more deduction room against their income.​Fourth: State and local tax deductions increased. For certain income brackets, the cap on state and local tax deductions (SALT) rose from $10,000 to $40,000 in some scenarios.Individually, these are meaningful but not earth-shattering. Combined, they significantly reduce what you owe on 2025 income, which is why refunds are expected to balloon.What happens after you get the tax refundHere's where the story gets interesting: Bessent projects that once you receive your refund and adjust your W-4 for 2026, you'll see a "real increase" in your take-home wages throughout the year.In other words, the $1,000 to $2,000 refund is not really "found money." It's your own money, which was over-withheld, being returned to you. The real benefit comes later, when your paychecks get fatter every week because your employer is withholding less.Think of it this way: If you typically get a $3,000 refund every year, it means you gave the government an interest-free loan of $250 per month. You could've had that $250 in your paycheck instead. Once you update your W-4 after receiving this year's refund, that correction starts to compound.When these tax refunds will actually hitThe IRS typically begins accepting tax returns in late January, with the earliest refunds issued shortly afterward.

Treasury Secretary Bessent's comments specifically reference Q1 (January through March). A report from Financial Express predicts refunds arriving between late January and early April.The practical implication: If you're counting on a refund to pay rent, catch up on bills, or fund a major expense, plan accordingly. January and February could see money flowing in, but don't assume your refund will clear on a specific date.The bigger picture for your financesAs reported by Moneywise, President Trump and White House Press Secretary Karoline Leavitt have both emphasized that this refund season is "expected to be the largest ever." For families already stretched by inflation in groceries, housing, and health care, that injection of cash could provide meaningful relief.But here's the realist's take: If you count on refunds to fund your financial year, something is misaligned in your budget. Your monthly paychecks should cover your basic expenses, with refunds as a bonus, not a necessity.That said, if you're in a position to receive a $1,000 to $2,000 refund, consider possible financial priorities.Building emergency savings: A tax refund can jumpstart a three- to six-month emergency fund if you've been procrastinating.Paying down debt: Putting the refund toward high-interest credit card debt is almost always the smarter move than spending it.Investing: Markets reward discipline over time. A $1,500 refund invested in a low-cost index fund could grow meaningfully over 20 years, but only if you don't need the money sooner.What comes after refund seasonOnce the initial refund season settles, watch how Americans adjust their behavior. If millions of people don't update their W-4 withholding for 2026, they could either under-pay (triggering a tax bill next April) or over-pay again (landing another refund in 2027).Bessent's comments suggest the Treasury Department expects a smoother 2026 tax year with better withholding alignment. Time will tell whether people follow through on updating their paperwork.For now, mark early 2026 on your calendar. If you're a working American who benefited from the retroactive provisions of the tax bill, a check could be waiting. But remember: It's not a surprise gift from the government. It's your money, returned.Related: Popular holiday destination just launched hefty tax for arrivals by plane