Tax season is well underway, with almost half of U.S. taxpayers typically filing by mid-March, according to historic IRS filing trends. As residents begin getting their 2026 refunds, some are spotting larger federal returns than in previous years.

This boost is largely tied to changes in the One Big Beautiful Bill Act, which was passed in July 2025 and took effect on Jan. 1. The Republican bill enacted key pillars of President Donald Trump’s domestic agenda, including extending the 2017 tax cuts and reducing government spending on social programs like Medicaid and food benefits through the Supplemental Nutrition Assistance Program.

Although the act was signed into law halfway through 2025, many of its provisions applied retroactively to income starting Jan. 1, 2025. Because the Internal Revenue Service didn’t change federal withholding tables to reflect those provisions and paychecks continued being taxed without the new deductions, taxpayers are seeing greater federal refunds in 2026.

Some of the major implications for 2025 tax returns include a bonus deduction for seniors, dollar-for-dollar deductions on tips, new deductions on overtime pay, an increased child tax credit and additional vehicle and home-related tax benefits. These benefits are largely income tested and capped, so refunds can fluctuate based on earnings and other factors.

“If you’re a middle-wage waiter or waitress that has $25,000 in tips that you can deduct, that means you probably don’t pay 15-20% on those tips,” said Chris Stiffler, senior economist with the Colorado Fiscal Institute. “You suddenly got (around $3,750), that’s how much extra you would have got from not taxing your tips.”

Stiffler said a big part of the bill also reinstated bonus depreciation, which enables taxpayers to accelerate depreciation deductions for qualifying business assets during their first year of use. Unlike several of the other provisions, this one benefits business owners and corporations more than individuals. 

Colorado mountain towns see larger federal tax cuts

A February analysis from the Tax Foundation found that the average U.S. taxpayer was poised to see an average tax cut of over $2,300 in 2026 under the Big Beautiful Bill. At the county level in Colorado, however, the largest average tax cuts were identified in mountain resort towns.

Pitkin County was identified as having the second-highest average tax cut in the country for 2026, at $22,717 per individual filer. Other Western Slope counties are also seeing significantly higher-than-average tax cuts, including Routt ($9,686), Eagle ($8,267), Summit ($5,573) and Garfield ($4,357) counties, according to February data from the Tax Foundation.

On Monday, March 30, U.S. Treasury Secretary Scott Bessent said individual tax refunds during the 2026 tax filing season are ​up more than 10% year over year, with nearly half of filers claiming new deductions offered in the One Big Beautiful Bill Act.

The latest Internal Revenue Service filing data suggests these cuts are leading to greater refunds for most taxpayers, with the average individual refund amount for 2026 sitting at $3,571 as of March 20. That’s about 10.9% higher than last year’s average, or an increase of $350.

Lower-income families see minimal tax return benefits

For some taxpayers, however, bigger refunds aren’t always a good thing. Generally, a greater refund means the government withheld more funds from an individual’s income than it needed, similar to collecting an interest-free loan. Stiffler said that, depending on an individual’s situation, an extra $100 in each bi-monthly paycheck could be worth more than a larger sum of money refunded all at once.

The One Big Beautiful Bill Act has also resulted in changes to tax credits typically designed to reduce tax liability and increase refunds for lower-income families, he said. Because Colorado’s tax system conforms to federal law, new deductions in the bill have helped reduce the state’s taxable income base, contributing to slower revenue growth — one of several factors preventing enhanced versions of state-level tax credits like the Family Affordability Tax Credit and Earned Income Tax Credit from triggering next year, according to revenue growth projections from December.

“Looking at the projections right now, it doesn’t look optimistic,” he said. “It’s bad news for lower-income families who got those targeted credits (this year). We don’t know about 2027 or 2028 (yet), but looking at the projections of revenue, it is not rosy at the moment.”

Additionally, some social program advocates argue that cuts to programs like Medicaid and SNAP — included alongside tax cuts in the legislation — will far outweigh what taxpayers are getting back in their future refunds.

“There’s going to be additional work requirements for anyone to qualify for Medicaid starting in 2027. There’s also going to be different requirements for people who are on food stamps starting next year,” Stiffler said. “If you look at the distributional impacts of (the Big Beautiful Bill), a big bulk of it was that the upper 5% of taxpayers really benefited from all those tax cuts, whereas people who are being kicked off their food stamps and their Medicaid … they didn’t really benefit.”

“Compare $70 in annual savings to losing your food stamps for the year or your medical,” he continued. “It would be drastically more devastating to lose your benefits.”

Why TABOR refund checks are smaller this year

Although Coloradans are seeing larger refunds from their federal taxes, state refunds are more modest this year, with most refund checks falling between $20 and $62 for single filers, depending on income, according to projections from the Colorado Legislative Council Staff. This is notably less compared to last year’s $177 to $565 range for single filers.

The Taxpayer’s Bill of Rights, a 1992 voter-approved amendment to the Colorado Constitution, caps the revenue the state can collect from taxes and every year. Refunds from TABOR were smaller in 2026 due to a combination of less generated revenue for the state and lawmakers redirecting part of the surplus into other forms of relief instead of direct refunds.

“If people saw some increase in what they got back from the federal tax but also saw a decrease in what they got back from the state, it’s likely because part of that chunk was TABOR rebates,” Stiffler said.

Aside from impacting 2025 tax returns, the One Big Beautiful Bill Act introduced several changes that will apply to 2026 taxes and beyond, including a Child and Dependent Care Credit expansion and deduction expansions for educator expenses.