As Tax Day approaches, there’s good news. The average tax refund amount is up 11 percent this year, giving individuals and families a needed financial boost. The Working Families Tax Cuts, also known as the One Big Beautiful Bill Act (OBBBA), are delivering relief for American households, just when they need it.
Bigger refunds help cushion the temporary gas price spikes from the Iran conflict. Importantly, long after energy prices recede, the many tax breaks for households and small businesses codified by the OBBBA will remain.
According to the latest data from the Internal Revenue Service (IRS), $221.7 billion has been refunded to taxpayers for the 2025 tax filing year, a 13.6 percent increase from 2024. The average refund amount this tax season is a little over $3,500 compared to over $3,100 for 2024 returns. Uncle Sam has handed over 1.4 million more tax refunds this year than last year.
Before critics minimize the $400 increase in average tax refunds, let’s remember that 37 percent of Americans do not have enough cash to cover a $400 unexpected expense. Increased tax refunds are a cash infusion for individuals and families that provide extra padding to household budgets and savings accounts. A plurality of consumers (40 percent) plan to save or invest their tax refunds, according to Experian’s recent survey. Another 20 percent of consumers plan to pay down debt. Splurge spending accounted for just six percent of tax filers, down from nine percent last year.
Not surprisingly, higher-income consumers drive splurge spending—on clothes, dining out, and traveling. They are also leaning into investing their tax refunds. Middle-class consumers plan to pay down debt, while working-class and lower-income Americans will spend their refunds on daily expenses. This reflects the reality that lower-income Americans spend a disproportionate amount of their income on gas, groceries, and other necessities. Just as they feel the pinch of rising prices first and hardest, they depend on tax refunds more to stay afloat.
Unexpected global and domestic price shocks are precisely why tax policy should lean toward reducing taxes for all Americans rather than raising them on a select few. The OBBBA took this approach by making permanent important tax incentives for tens of millions of individuals and households.
Last year’s larger standard deduction explains most of the increase in refunds, since paycheck withholdings were not adjusted right away. That means the entire standard deduction increase is reflected in this season’s tax refunds. While big tax refunds may be a one-time gift, weekly paycheck relief will be ongoing now that the larger standard deductions are fully accounted for. In addition, this larger deduction translates into simplified taxes for millions of people; over 90 percent of tax filers took the deduction, freeing themselves from tax schedule attachments.
Some 45 million families can also count on a permanent increase to the Child Tax Credit (CTC). The OBBB increased the maximum CTC by $200 to $2,200 per child, a great bonus for families with multiple kids. Even parents who owe no federal income taxes may receive the partial CTC boost. A conservative idea from its start, the CTC has lifted millions of people out of poverty, particularly children. And we can count on it to continue to help families in need.
New provisions ending taxes on tipped income and overtime pay are proving popular among working Americans. Servers and construction workers, who often see the fruits of their good service or extra hours consumed by taxes, now get to keep hundreds and even thousands of their own dollars, ending the penalty on hard work. The overtime deduction, which allows couples to deduct up to $25,000, has been claimed on 23 percent of tax returns. The tipped income deduction of up to $25,000 has been claimed on five percent of tax returns. Millionaires and billionaires are not taking these deductions, but police officers, nurses, and EMTs are.
Women are big beneficiaries of no tax on tips. According to our analysis, women comprise over 50 percent of the employment in nearly two dozen occupations that qualify for the deduction, ranging from food preparation workers, wait staff, and restaurant hosts to manicurists, hairdressers, and cosmetologists.
Seniors aren’t left behind either. Older taxpayers are learning that the tax bill has something big and beautiful in it for them, too. About 17 percent of taxpayers have claimed the new $6,000 per-person deduction for those 65 and older.
Cori Huston, owner of Convenient Tax Services in Wisconsin and Independent Women’s Network member, noted that this tax season, most of her clients “are genuinely surprised by their refund amount. Even the ones who don’t really want to give Trump the credit.” She pointed out that the senior deduction was “something worth paying attention to beyond just the refund.” Her older clients, especially couples, were blown away by the tax savings from this deduction.
The numbers speak for themselves. Americans are better off thanks to the conservative tax law that made permanent critical tax relief while adding popular new tax benefits that will reward work for many years to come.
Patrice Onwuka is vice president for economic policy at Independent Women.