Changes to the federal tax code are likely to boost the typical refund amount for the upcoming filing season, but the effects are set to vary significantly based on income level, filing status, and eligibility for targeted tax deductions, according to a report by Accounting Today.
Though news of increased average refunds has been touted by administration officials, experts analyzing tax policies say that average refunds do not reflect the disparity in benefits that will actually exist. “Your sort of typical W-2 worker with no kids will see very little change year-over-year,” said Adam Michel, director of tax policy studies at the CATO Institute, a group he estimates represents “slightly more than half of taxpayers.”
Raises that fall under the umbrella of increased standard deductions could provide a boost no higher than a couple hundred bucks, at best in the low hundreds from some filers, Michel said.
More substantial refund amounts accrue to taxpayers who now have eligibility for newly enhanced or expanded deductions. These include an increased maximum deduction for state and local taxes, tips, overtime compensation, automobile loan interest, and a new senior deduction for individuals aged 65 and older.
“We expect that to be a smaller slice of the population,” said Andrew Lautz, director of tax policy at the Bipartisan Policy Center, when asked about provisions that boost average refund amounts.
As many of these provisions are in the form of deductions, their benefit goes ups s income goes up as well. This is because, as explained by Brendan Novak, a senior policy analyst with the Penn Wharton Budget Model, “one dollar of deduction is more valuable to someone who is richer than someone who is not making as much money.”
Analysis by the Penn Wharton Budget Model indicates that their provisions offer larger benefits in terms of income saved by those with higher incomes and a smaller benefit for those in medium incomes.
Most workers are expected to receive savings in the form of a refund and not in the form of lower withholding, since the payroll tables were not updated for 2025.