One big beautiful tax refund?

Editor’s note: This article first appeared in Money Matters, a newsletter from Britannica Money, on March 22, 2026.

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Check your withholdings.

© somchaisom, chathuporn/stock.adobe.com; Photo illustration Encyclopædia Britannica, Inc.

If you’ve seen the headlines about bigger tax refunds this year, you’re probably asking the same question everyone else is: Am I getting one? The only way to know for sure is to file your return—the sooner the better. Still, the headlines aren’t just hype.

Last summer’s One Big Beautiful Bill Act (OBBBA) changed the rules midyear, and some of those changes apply retroactively to the start of 2025. The result? Millions of us had taxes withheld from our paychecks under the old rules. Some of that money may be coming back to us in the form of refunds under the new ones. Here’s what changed, who it helps, and what to do if a refund comes your way.

The new rules may make a difference for:

For these folks, the new rules may retroactively lower their tax bills enough to show up as a larger refund—even though nothing changed on their pay stubs.

But you might read all of this and think, “That’s not me.” If you’re a salaried employee without tips or overtime, live in a lower-tax state, and already had fairly accurate withholding, this may feel like a normal tax year. That doesn’t mean you missed out or did anything wrong. It just means the changes don’t touch your situation in a meaningful way.

The important thing is understanding which camp you’re in. Higher 2025 tax refunds aren’t a universal windfall; they reflect a recalibration of tax rules and withholdings that affect some people more than others.

At the start of each year, your tax withholding is set based on what you and your employer expect your income, tax credits, and deductions to look like for the year ahead. Once that’s in place, it usually just runs in the background. When deductions or credits change midyear—and especially when they apply retroactively—that original estimate can be off.

If those changes lower your taxable income compared to what you expected in January, you may have been withholding at too high a rate. Pay more than you ultimately owe, and the difference comes back to you as a refund.

Let’s start with the state and local tax (SALT) deduction, which quadrupled from $10,000 to $40,000. If you live in a high-tax state like New York or California, the higher SALT cap means more of what you paid in state and local taxes might count toward your deductions—especially if you own a home and itemize. That’s an extra tax deduction you didn’t expect back in January of last year.

And if you don’t itemize—meaning, if you just take the standard deduction—that changed as well. For 2025, it increased by $1,150 for single filers and $2,300 for married couples filing jointly, reducing taxable income for millions of households.

Do you earn tips as part of your compensation, or log a lot of overtime hours? New deductions for tips and overtime can reduce what you ultimately owe when you file. There’s also a small bump to the child tax credit—$200 per child—which may not sound like much, but it still shows up at filing time.

Your W-4 tells payroll how much federal tax to withhold from each paycheck. The IRS helps you get in the ballpark, but fine-tuning your withholding usually takes a bit of trial and error. Here’s how to do it:

Step 1: Personal info and filing status. Pick the right status (single, married filing jointly, head of household). Choose wrong, and withholding is off from the start.

Step 2: Multiple jobs. Check this box if you or your spouse has more than one job. If you skip it, you may have too little tax taken out. When in doubt, use the attached worksheet.

Step 3: Dependents. Only list dependents you’ll actually claim on your return. Don’t double count if a spouse’s W-4 already includes them.

Step 4: Other income or deductions. This line is where you account for interest, dividends, side income, or deductions beyond the standard deduction. If it doesn’t apply, leave it blank.

On a personal note, for the past two years, we’ve underwithheld and ended up owing the IRS. To this day, we have no idea why. But for 2025 and now 2026, we’ve added extra withholding (Step 4(c) on Form W-4).

If all of this leaves you wondering whether you should change something—or just wait and see—you’re asking the right question.

A big, beautiful refund might show up this year. Know where it came from, where it should go, and how to take control of your withholding going forward.