2025 Tax Refunds: Why You'll Get $1,000 More This Year

The Treasury Department is projecting that tax refunds will increase by an average of $1,000 per household. This welcome boost comes from recent tax law changes and how withholding was handled last year.

Let's break down why your refund might be bigger and what you can do to make the most of this tax season.

The main reason for the larger refunds is the "One Big Beautiful Bill Act" that was signed into law in summer 2025. This legislation made several tax changes that benefit many taxpayers. However, after these changes were enacted, the IRS didn't update the withholding tables that employers use to calculate how much tax to take from your paycheck.

This means that throughout 2025, you likely had taxes withheld at the old, higher rates. Now when you file your return, you'll get back that extra money you paid in. Treasury Secretary Scott Bessent explained that refunds could be between $1,000 and $2,000 larger per household because of this timing issue.

House Ways and Means Committee Chairman Jason Smith stated that American taxpayers are projected to receive an additional $91 billion in tax refunds this year, bringing the total to a record-setting $370 billion refund season.

Several specific tax changes are contributing to the larger refunds this year:

The standard deduction increased to $15,750 for single filers (up from $15,000) and $31,500 for married couples filing jointly (up from $30,000). Since about 85-90% of taxpayers claim the standard deduction, this change alone will result in larger refunds for most people.

Taxpayers age 65 and older can now claim a new $6,000 "bonus" deduction ($12,000 for married couples). This is available to seniors with incomes up to $75,000 ($150,000 for married couples filing jointly).

The state and local tax (SALT) deduction limit increased from $10,000 to $40,000. This benefits taxpayers in high-tax states who itemize deductions instead of taking the standard deduction.

The new law eliminated taxes on tip income and overtime pay, which will provide significant tax relief for service industry workers and those who work extra hours.

Additional changes include a slightly higher Child Tax Credit (now $2,200 per child, up from $2,000) and a new deduction for auto loan interest.

Sarah is 28, earns $55,000 as a marketing specialist, and takes the standard deduction. Last year, her refund was $1,200.

2025 Impact: With the increased standard deduction and unchanged withholding, Sarah will receive approximately $2,300 in her refund – about $1,100 more than last year.

Mike and Lisa are married, file jointly, and have a combined income of $95,000. They have no children and typically take the standard deduction.

2025 Impact: The increased standard deduction of $31,500 (up $1,500) will increase their refund by approximately $900 compared to last year.

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The Garcia family has two children under 17 and a household income of $73,000. They claim the Child Tax Credit and take the standard deduction.

2025 Impact: With the increased standard deduction, higher Child Tax Credit ($400 more for two children), and unchanged withholding, they'll receive approximately $2,800 more in their refund.

Robert and Eleanor are both 68, with a retirement income of $65,000. They typically take the standard deduction.

2025 Impact: The new $12,000 senior deduction (for married seniors) combined with the higher standard deduction will result in approximately $3,500 more in their refund.

The IRS recommends filing electronically and choosing direct deposit to get your refund as quickly as possible – typically within 21 days. In fact, the IRS is phasing out paper refund checks, making direct deposit even more important.

After filing, you can check your refund status using the IRS "Where's My Refund?" tool. You'll need your Social Security number, filing status, and exact refund amount.

Check Refund Status

Make sure you have all your tax documents before filing, including:

While a big refund feels good, it means you've been giving the government an interest-free loan. Consider adjusting your withholding for 2026 by submitting a new W-4 form to your employer. This will give you more money in each paycheck rather than waiting for a refund next year.

The deadline to file your 2025 tax return is April 15, 2026. If you need more time, you can request an automatic six-month extension, but remember that any taxes owed are still due by April 15 to avoid penalties.