Now that we are approaching the midpoint of this year’s tax season, it’s an appropriate time to check on how taxpayers are faring this year. The IRS has posted an updated set of filing season statistics, noting that the average refund so far this season is running 10.6% higher than last year, from $3,382 in 2025 to $3,742 in 2026. Thanks to the Working Families Tax Cuts (WFTC), taxpayers are faring very well so far this year.
How is WFTC helping taxpayers keep more of their hard-earned income? There are several reasons. Last year’s tax bill increased the standard deduction once again (from $15,000 to $15,750 on single filers, and $30,000 to $31,500 for married taxpayers) on top of the near doubling of the deduction put in place by the 2017 Tax Cuts and Jobs Act (TCJA), while also making this tax change permanent. The WFTC also made similar changes to the Child Tax Credit (CTC), making permanent large increases made by TCJA, and bumping up the credit an additional amount (from $2,000 to $2,200 per child) for most taxpayers. Millions of seniors are also now eligible to take an additional $6,000 deduction on their taxes, with phaseouts for those with higher incomes. These broad-based provisions seem to already be making a noticeable impact on tax refund levels so far this season.
Certain categories of hardworking taxpayers will likely receive even higher bumps in their refund levels this year. The substantial “no tax on tips” deduction will benefit approximately 3% of filers, generally younger and lower income than the average taxpayer. Those who qualify for the deduction will likely receive an average tax cut of $1,370, with a maximum possible deduction of $25,000. The “no tax on overtime” deduction will likely be claimed by a larger segment of filers (around 9%), with an average tax cut of $1,440. The overtime deduction only covers the “half” in time-and-a-half pay, is capped at $12,500 for single filers, and is also subject to income limitations. Around six million Americans—also subject to income limitations—may take advantage of the “no tax on car loans” provision in WFTC, with a $10,000 maximum deduction on loans for new American-made vehicles.
Overall, we anticipate that the broad-based tax breaks—increased standard deduction and CTC—included in the WFTC will account for the largest share of refund increases for taxpayers this year, followed by the “no tax on overtime” and the increased senior tax deduction. We will continue to pay close attention to upcoming IRS tax return reports and compile further updates as they come in. However, at this point in the tax return cycle, taxpayers are greatly benefiting from the Working Families Tax Cuts.