The numbers
The average US federal tax refund reached $2,290 as of 6 February 2026, up 10.9% from $2,065 at the same point in 2025. Direct deposit refunds averaged $2,388, a 10.3% increase year-on-year.
Total refunds issued fell 8.1% to 7.4 million, down from 8.1 million in 2025. Returns received dropped 5.2% to 22.4 million, but the IRS processed 12.3% fewer returns (20.6 million versus 23.5 million in 2025).
What's driving this
The One Big Beautiful Bill Act is doing the heavy lifting. The Child Tax Credit increased from $2,000 to $2,200 per child. More significantly, a new $25,000 tips deduction applies to single filers with modified AGI up to $150,000 (or $300,000 for married filing jointly).
The Tax Policy Centre estimates five million taxpayers will claim the tips deduction, with an average tax cut of $1,400. For someone in the 24% bracket maxing out the deduction, that's $6,000 in savings.
Processing capacity concerns
The IRS workforce was cut 25% whilst simultaneously implementing OBBB changes. Both the Treasury Inspector General and the National Taxpayer Advocate warned last month that service levels may suffer between now and 15 April. Translation: delays on refunds and phone queries are likely.
IRS website traffic is up 35.2% year-on-year, hitting 126.8 million visits. Everyone's trying to work out how these provisions apply to them.
What this means for practitioners
The compositional shift matters. Fewer total filings but higher average refunds suggests high-income earners and families with dependents (who benefit most from OBBB) are filing earlier. That likely reverses as we approach April.
The PATH Act still holds refunds claiming Earned Income Tax Credit or Additional Child Tax Credit until 15 February, so early-season statistics exclude those credits entirely.
Substantiation requirements for the tips deduction warrant particular attention. The IRS hasn't published comprehensive guidance yet, and clients will have questions.