3 Common Reasons Middle-Class Taxpayers May Bring Home Bigger Refunds in 2026
The average tax refund as of March 20 was $3,570, according to the IRS. Higher refunds were driven by two groups of tax cuts enacted in the 2025 One Big Beautiful Bill Act (OBBBA).
MoneyLion consulted experts to explain why you may receive a larger refund in 2026 as a middle-class taxpayer.
Here are three common reasons why middle-class taxpayers may bring home bigger refunds in 2026.
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Inflation Adjustments
"In 2026, middle-class taxpayers could wind up with bigger refunds than they [received before] because of inflation adjustments to tax brackets, the standard deduction and some credits," said David Kang, an enrolled agent and CEO at Keeper. "Increased brackets could result in excess withholding for W-2 employees who did not adjust their W-4s and for people with other sources of income."
Since tax brackets and standard deductions are adjusted for inflation each year, the changes result in some taxpayers getting money back. This means that you would have paid more in taxes throughout 2025 than you needed to and are getting some of that money back.
Extended Tax Breaks
Even though the OBBBA came into effect in July 2025 with expanded tax breaks, the IRS chose not to update withholding tables. This means that taxpayers paid more in taxes than they were required to in 2025, which should result in larger refunds.
Kang elaborated, "Refunds also increase when withholding does not fully take into account credits, including the child tax credit or education credits, which are reconciled at filing."
He noted that a bigger refund doesn't mean a lower total tax, and larger tax bills are usually the result of timing differences between amounts withheld compared to what's actually owed.
New Credits or Deductions May Be Available to You
Gene Bott, a CPA, tax advisor and partner at Tax Hive, pointed out that new credits and decisions may be available to middle-class people.
"Refunds might grow if they're able to take advantage of new credits or deductions because of changes in life circumstances, such as the birth of a child, child care expenses, adding energy-efficient equipment and even starting a side business with deductible expenses," shared Kang.
Bott pointed out the following notable tax cuts from the new OBBBA policies that may help out middle-class taxpayers:
Those who receive tips can deduct up to $25,000 of those from their income, which would lower their tax bill.
Another great deduction is qualified overtime compensation, which could result in tax cuts for married couples earning below $300,000.
You can deduct $2,000 of qualifying cash contributions even if you take the standard deduction.
As always, we recommend that you work with a certified tax professional to ensure that you can take advantage of the tax credits that you're eligible for, especially if any of the recent legislation is relevant to your financial situation.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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