WASHINGTON — The 2026 tax filing season is shaping up to be one of the most generous in recent history. Analysts expect a roughly $65 billion increase in total federal tax refunds, driven by sweeping tax-law changes and months of over-withholding during 2025. While much of the attention has focused on workers and families, Social Security recipients also stand to benefit — in some cases significantly.
For retirees living on fixed incomes, the size and timing of a tax refund can have a real impact on household budgets, medical expenses, and financial planning. Understanding what’s behind this refund surge — and how it affects Social Security benefits — is especially important this year.
Why Refunds Are Expected to Jump by $65 Billion
The projected surge in refunds is not the result of a single change, but rather a combination of new tax rules and outdated withholding practices.
Major tax law changes took effect late
In mid-2025, Congress passed a broad tax overhaul that applies retroactively to the entire 2025 tax year. The law expanded standard deductions, introduced temporary deductions for certain groups, and reduced taxable income for millions of filers.
However, IRS withholding tables were not fully updated during 2025, meaning many taxpayers — including retirees with pensions or part-time income — had more federal tax withheld than they ultimately owed.
When taxpayers file their 2025 returns in early 2026, that excess withholding is returned in the form of larger-than-usual refunds.
Average refunds are expected to be higher
Economists estimate that:
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Total refunds will rise by about $65 billion compared with last year
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Many filers could see refunds hundreds or even thousands of dollars larger than normal
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Some households may receive the largest refunds they’ve seen in years
Why Social Security Recipients Should Pay Close Attention
Even though Social Security benefits are not always taxable, millions of beneficiaries still file federal tax returns — and many pay tax on part of their benefits due to other income sources.
This year’s changes create several important opportunities.
1. A new senior deduction reduces taxable income
Taxpayers age 65 and older may qualify for a temporary “senior bonus” deduction that stacks on top of the standard deduction.
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Up to $6,000 for single filers
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Up to $12,000 for married couples filing jointly
This deduction directly reduces taxable income, which can:
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Lower overall tax liability
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Reduce the portion of Social Security benefits subject to tax
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Increase refunds for those who had taxes withheld in 2025
2. More seniors may owe no federal tax at all
For many retirees with modest income, the expanded deductions mean:
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Federal income tax on Social Security benefits could drop to zero
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Some seniors who previously owed small amounts may now receive refunds instead
However, the benefit phases out at higher income levels, so not every retiree will qualify for the full deduction.
3. Over-withholding means money coming back
Retirees who had taxes withheld from:
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Social Security benefits
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Pension payments
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IRA or 401(k) distributions
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Part-time or seasonal work
may discover that too much tax was withheld under the old rules, resulting in a refund when they file.
How Social Security Benefits Are Still Taxed
It’s important to note that the tax law does not automatically make Social Security benefits tax-free for everyone.
Benefits are still taxed based on combined income, which includes:
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Adjusted gross income
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Nontaxable interest
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Half of Social Security benefits
The new deductions reduce taxable income, but high-income retirees may still owe taxes on a portion of their benefits.
Key Changes at a Glance
| Category | What Changed | Why It Matters for Social Security Recipients |
|---|---|---|
| Refund Surge | Total refunds projected to rise by ~$65 billion | Larger refunds possible due to over-withholding |
| Standard Deduction | Increased for all filers | Lowers taxable income |
| Senior Bonus Deduction | Extra deduction for age 65+ | Can reduce or eliminate tax on benefits |
| Withholding Lag | Payroll tables not updated in 2025 | Excess taxes refunded in 2026 |
| Income Phase-Outs | Benefits reduced at higher incomes | High earners may see smaller gains |
| Scam Risk | Refund season attracts fraud | Seniors should be especially cautious |
What Social Security Recipients Should Do Now
To make the most of this tax season:
Gather important documents
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SSA-1099 (Social Security benefits statement)
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1099-R forms for pensions and retirement accounts
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W-2s or 1099s for any work income
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Records of medical expenses and charitable donations
Review withholding
If you receive regular income in retirement, this filing season may reveal whether withholding was higher than necessary — information that can help you adjust future payments.
File carefully — and safely
Tax-refund scams increase every year during filing season. Remember:
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The IRS does not contact taxpayers by text or email
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Refund promises that sound urgent or guaranteed are often fraudulent
The Bottom Line
The 2026 tax filing season is expected to deliver an unusual wave of large refunds, fueled by retroactive tax changes and months of over-withholding. For Social Security recipients, especially those age 65 and older, new deductions may reduce taxes on benefits and increase refunds — sometimes dramatically.
While not every retiree will qualify for the full benefit, understanding the changes and filing accurately could make this one of the most financially meaningful tax seasons in years.
