Taxpayers across the United States, including those in Southern Maryland counties such as Calvert, Charles, and St. Mary’s, are expected to receive significantly larger federal income tax refunds when filing 2025 returns in early 2026. This projection stems from retroactive provisions in the One Big Beautiful Bill Act, signed into law by President Donald Trump on July 4, 2025. The legislation, which extends and expands elements of the 2017 Tax Cuts and Jobs Act while introducing new deductions, applied changes to 2025 income without corresponding adjustments to paycheck withholding tables by the Internal Revenue Service.
Treasury Secretary Scott Bessent stated in a December interview with a Philadelphia NBC station that the bill’s retroactive nature meant many working Americans continued with pre-existing withholding rates. “The bill was passed in July. Working Americans didn’t change their withholding, so they’re going to be getting very large refunds in the first quarter,” Bessent said. He estimated total refunds between $100 billion and $150 billion, translating to $1,000 to $2,000 per household on average. Bessent noted that after refunds are issued, updated withholding would lead to higher take-home pay throughout the year.
Ways and Means Committee Chairman Rep. Jason Smith (R-MO) referenced an analysis by financial services company Piper Sandler in an early December memo, describing 2026 as shaping up to be “the largest tax refund season.” Piper Sandler projected refunds could increase by about $1,000 on average compared to prior years, potentially pushing the typical amount toward $4,000 for some filers, with middle- and upper-income households seeing the largest gains.
Adam Brewer, a tax attorney with AB Tax Law, explained the practical impact. “Because of the changes within the Big Beautiful Bill most taxpayers should expect to see a larger refund in 2025, but how much they receive will really depend on the specifics of their tax situation,” Brewer told Nexstar. He added, “The administration and Congress picked winners and losers. As a result, not all income is taxed equally. If your income is based largely on overtime or tips, then you could be paying much less income tax than your co-worker who is a salaried employee even if you earn roughly the same amount.”
Key changes affecting 2025 returns include a higher standard deduction, an increased cap on state and local tax (SALT) deductions, an additional $6,000 deduction for seniors, and exemptions from federal income tax on tips, overtime pay, and car loan interest. These provisions, retroactive to January 1, 2025, reduced overall tax liability for many filers without altering withholding during the year, leading to overpayments returned as refunds.
Experts emphasize that larger refunds represent over-withheld funds rather than new income. Once withholding tables are adjusted for 2026, the tax reductions will appear as increased paychecks rather than lump-sum refunds. Taxpayers are advised to avoid anticipating and spending potential refunds prematurely. Brewer cautioned clients, “What I am telling my clients is that if they receive a larger refund than prior years then it will be a pleasant surprise, but don’t spend in anticipation of a large refund just yet.”
Analyses from nonpartisan sources highlight uneven distribution of benefits. A Congressional Budget Office review found that the top 10 percent of earners would see an average additional $12,000 annually from 2026 to 2034, while the poorest 10 percent could face an average annual reduction of $1,600, partly due to associated cuts in programs such as Medicaid and food assistance.
The One Big Beautiful Bill Act makes permanent several individual tax provisions from the 2017 law, including lower tax brackets and a doubled standard deduction, while adding targeted relief for specific groups like tipped workers and seniors. The IRS has issued guidance on implementing these changes, including transitional rules for certain deductions and credits.
For Southern Maryland residents, who often rely on a mix of federal government employment, military service at Naval Air Station Patuxent River, and service-sector jobs, provisions like no tax on overtime and tips could provide meaningful relief. The higher SALT deduction cap may also benefit homeowners in areas with elevated property taxes. Filing for 2025 taxes begins in late January 2026, with refunds typically issued within 21 days for electronic returns.