US citizens in some states have an extra reason to cheer because a recent court ruling means they could get bigger tax returns in 2026. That’s on top of what President Donald Trump and other federal officials have promised with an average check of about $4,000.
The US Court of Appeals for the Fifth Circuit ruled in February to reverse a Tax Court decision in Serious Solutions, LLLP v. Commissioner. Images for representational purposes. (unsplash)”We’re going to see the biggest refund cycle ever in American history, and people are going to get huge refund checks,” said Kevin Hassett, director of the National Economic Council, speaking to Fox Business. He added that the numbers were ‘shocking’.
Which state will benefit from this?People in the states of Louisiana, Mississippi and Texas are likely to benefit from the court’s ruling. The US Court of Appeals for the Fifth Circuit ruled in February to reverse a Tax Court decision in Serious Solutions, LLLP v. Commissioner.
Because of this, Americans living in these three states will not have to pay self-employment tax on their returns this year. This will only be the case if they are recognized as true limited liability partners under the law.
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A limited liability partner is an owner operating in a limited liability partnership (LLP) setup. Separate profits stated from a business’s obligations, debts, and protection from personal liability from misconduct or negligence. LLP partners manage the day-to-day operations of a business while protecting personal assets from business-related lawsuits or lawsuits that may affect other partners.
This practice is common in medical, accounting and law firms. Individuals’ risk is limited to how much they invest in the company. LLPs also do not pay federal income tax. Profits are passed on to the partners and they report on separate returns via Schedule K-1. While these partners would previously be subject to self-employment tax, a February court ruling eliminates this for limited liability partners in these three states.
