Americans, particularly the affluent, are set to receive larger tax refunds or smaller tax bills when they file in 2026, because of President Donald Trump’s tax and spending package passed in July, an economist said.
Total taxpayer savings could amount to an additional $50 billion because the IRS has yet to update its withholding tables to account for new provisions retroactive to the start of 2025, Oxford lead economist Nancy Vanden Houten said in a report this week.
The only way taxpayers can benefit from the retroactive provisions in 2025 like the additional senior deduction, no tax on tips or overtime or higher child tax credit is by lowering their tax payments made through withholding or estimated tax payments, she said. But employers are still calculating employee withholdings, or how much federal income tax to deduct from an employee's paycheck, using the higher rates despite the law's passage in July. Each year, the IRS updates the tables to account for inflation and tax law changes.
With so many Americans still struggling under the weight of high prices of everything from beef to insurance premiums, tax savings could be welcome news, but Vanden Houten warns that most of the benefits will go to the wealthy.
