President Donald Trump and House Speaker Mike Johnson called the refunds for the 2025 tax year “historic” and predicted they would be significant for millions of people.
Millions of Americans are expecting big tax refunds this year. However, not everyone can see a big payout from the IRS. Here’s why (Pexel)According to Internal Revenue Service (IRS) data, the average refund for this filing season will be about $4,000 this year, up from $3,167 in 2025, Johnson revealed last month.
Millions of Americans are expecting big tax refunds this year thanks to new laws and big deductions. However, not everyone can see a big payout from the IRS.
Big tax refunds are always preferable, but they are not free.
In essence, the refund is the government returning the money that Americans made over the year from interest-free loans.
Here are 5 reasons why you might get a small tax refund.
Also Read: US Tax Refund 2026: How to Check IRS Refund Status? Steps to monitor progress
The main reason is that tax refunds may be lower in 2026IRS refund offset for debtRefunds can be automatically reduced to settle certain debts you owe to government agencies or, in joint return situations, taxes owed by a spouse. This triggers an offset notice.
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A “reduced refund” can occur when a portion of your refund is offset or redirected to settle certain outstanding bills, including child support, student loans, or federal agency obligations, according to official IRS guidance in Tax Topic 203.
An offset notice outlines how much has been taken and which organization has received it.
Capital gains and sale of assetsYour taxable income increases when you sell a personal asset such as a house or boat. Similarly, if you own certain stocks and cryptocurrencies that you have sold in the market and gained significant capital from, that could push you into a higher tax bracket.
If you haven’t set aside funds for the estimated payment, it will show up as a large gain, resulting in a refund or reduced tax when you file.
Short staffed IRSThe Internal Revenue Service was understaffed and overburdened when the 2026 filing season began, increasing the potential for delays and problems for millions of taxpayers, according to the Treasury inspector general’s assessment.
While this doesn’t necessarily mean a small tx refund, delays and service issues can cause delays if returns are processed more slowly because the company sees them as complex.
Also Read: IRS issues warning to people claiming 2 specific tax credits – what to know
Aging from the Child Tax CreditChild Tax Credit remains a major refund driver for families. However, once a child turns 17 or older, the $2,200 extended credit often drops to about $500 per child.
If multiple dependents age out in the tax year, this change alone can substantially reduce your expected refund.
High income and multiple jobsIf you get a raise, a bonus or start a gig company side hustle in 2025, you’ll move into a higher tax bracket.
The IRS may collect less tax from you if you don’t make expected tax payments or change your W-4 withholding allowance. This will reduce your refund or make it the outstanding balance.
Furthermore, when taxpayers work multiple jobs, they often find themselves in a situation where each employer withholds taxes, which would project as the employee’s sole source of income.
As a result, insufficient total severance across occupations may result in underpayments at tax time.
