The Internal Revenue Service has paid out roughly $30.7 billion more in income tax refunds so far this filing season than at the same point a year earlier, according to federal cash records. Average refunds rose to $3,742 from $3,382 as new deductions for tips, overtime and car-loan interest began to filter into returns, giving many workers larger checks at a time of higher household costs.
The bigger refunds also mean less money flowing into federal coffers, even as policymakers debate how generous the new tax breaks from the One, Big, Beautiful Bill Act should be in future years.
Why the larger 2026 refunds matter now
The core shift is in the size and volume of refunds. For the week ending Feb. 27, 2026, the average refund reached $3,742 compared with $3,382 at the same point a year earlier, according to Primary IRS filing data. Over that same week, total refunds climbed to $136.597 billion from $124.804 billion, an early sign that more money was heading back to households rather than staying with the Treasury.
By the week ending March 20, 2026, total refunds had grown to $202.595 billion, up from $179.469 billion a year before, according to later-season figures from the same IRS statistics series. That gap of roughly $23.126 billion between the March snapshots, combined with the earlier-season increase, aligns with Daily Treasury Statement data showing about $30.7 billion more flowing out under the “Income Tax Refunds Issued” line item, as tracked in the Treasury’s Primary cash reports.
The timing coincides with the rollout of new deductions for “no tax on tips,” “no tax on overtime” and “no tax on car loans” that were created by the One, Big, Beautiful Bill Act and implemented by the IRS for tax year 2025. The agency detailed those breaks in IR‑2026‑28, which announced Schedule 1‑A for claiming “no tax on tips,” “no tax on overtime,” “no tax on car loans” and “no tax on seniors,” according to a Primary IRS release on Schedule 1‑A.
For workers in restaurants, hospitality and other tipped or overtime-heavy jobs, the new deductions mean a larger share of pay is effectively shielded from income tax. As more employers and payroll providers adjust withholding and as more filers learn to use Schedule 1‑A, early adopters in those sectors are likely to show faster growth in amended returns and withholding changes once the 2026 filing season begins in full. That pattern would follow the money: the sectors with the most tipped and overtime income have the most to gain from deductions that directly target those categories.
The evidence tying refunds to new deductions
The IRS has built a formal structure around the new breaks. IR‑2026‑28 states that Schedule 1‑A applies to deductions for “no tax on tips,” “no tax on overtime,” “no tax on car loans” and “no tax on seniors,” and that taxpayers will use this schedule for tax year 2025 returns, according to the Primary IRS hub for the One, Big, Beautiful Bill provisions. A separate IRS fact sheet on the One, Big, Beautiful Bill Act explains how workers and seniors qualify for those deductions and sets out reporting rules and conditions, including details for car-loan interest tied to vehicles that meet specific criteria.
The same Primary IRS filing-season tables that show the jump from $3,382 to $3,742 in average refunds and from $124.804 billion to $136.597 billion in total refunds for the week ending Feb. 27, 2026, also provide the year-over-year comparison that analysts used to calculate the roughly $30.7 billion increase in refund outflows, according to the Authoritative IRS index of weekly statistics. The Treasury’s Daily Statement, which lists “Income Tax Refunds Issued” as a separate cash item, offers a second view of the same trend and allows outside reviewers to match IRS processing data against actual payments.
External analysts have seized on those numbers. The Associated Press reported that the IRS “touts a 24% increase in tax refunds,” relying on Daily Treasury Statements and the latest IRS average refund figure, according to a Major analysis that cites Treasury and IRS datasets. While the IRS tables themselves present absolute dollar amounts rather than percentages, both sources point to the same direction of change: more money going out in refunds, with average checks several hundred dollars larger than a year earlier.
What remains unresolved about the refund surge
Several key questions remain open. Neither the IRS filing-season tables nor the Daily Treasury Statement break down how much of the extra $30.7 billion in refunds is directly tied to the new “no tax on tips,” “no tax on overtime” or “no tax on car loans” deductions. The data show that refunds rose and that the new deductions exist, but they do not isolate the share of the increase that stems from each provision.
The weekly statistics also lack demographic or industry-level detail, so there is no public dataset yet that shows whether restaurant servers, rideshare drivers, warehouse workers or other overtime-heavy groups are claiming Schedule 1‑A at higher rates than other filers, according to the Discovered IRS tax professional portal. Without that breakdown, the hypothesis that early adopters in tipped and overtime-heavy sectors will show faster growth in amended returns and withholding changes remains an informed expectation rather than a measured outcome.
There is also a gap between the IRS implementation record and longer-term budget analysis. The IRS fact sheet on the One, Big, Beautiful Bill Act describes how the deductions for working Americans and seniors operate but does not include new revenue-impact studies that would show the projected cost of the larger refunds over several years, according to the Discovered bill text for the One, Big, Beautiful Bill. The Federal Register entry that defines “occupations that customarily and regularly received tips” sets parameters for who qualifies as receiving “qualified tips,” yet it does not attach updated fiscal projections either, according to the Discovered Federal Register definition.
For households, the practical next step is straightforward: anyone with significant tips, overtime pay or qualifying car-loan interest needs to confirm whether Schedule 1‑A applies to their 2025 return and check that employers and tax software are capturing those deductions correctly. For policymakers and budget watchers, the next thing to track will be whether future IRS releases begin to separate out how much of the higher $3,742 average refund and the extra $30.7 billion in “Income Tax Refunds Issued” can be traced back to each new deduction, or whether the effect remains buried inside aggregate totals.
