Key Takeaways
- A large refund usually means you were paying the IRS too much all year.
- Plan ahead and adjust in real time to avoid surprises next year.
- If you owed more than expected, learn why you landed where you did and make adjustments.
If you celebrated a big tax refund this year, you’re not alone. According to IRS data, the average refund amount in 2026 is more than $3,000, up 11% from 2025.
What’s behind the increase? Several provisions in the One Big Beautiful Bill Act took effect for the 2025 tax year. New deductions were introduced, existing credits were updated, and many taxpayers did not adjust their withholding to reflect those changes.
A windfall is fun. But here’s the reality most people overlook: a large refund often means you were paying too much all year. You let the IRS borrow your money, interest free, instead of putting your hard-earned dollars to work for you.
“You should owe the IRS a small amount of money,” says Hunter Satterfield, CPA and Partner at CWA.
Don’t Treat Taxes as a Once-a-Year Event
For many, tax planning begins and ends at filing season. But that leaves opportunities on the table.
When income changes, your tax liability changes with it.
Think of taxes as an ongoing process. With a reasonable estimate of your liability, you can plan ahead, adjust in real time and avoid surprises.
“If you’re only looking backward, you’re missing what’s happening now,” says Hunter.
What If You Owed Instead of Getting a Refund?
Owing at tax time is not necessarily a bad outcome. In fact, if the amount is manageable, it can mean your withholding was closer to your actual tax liability than it would have been with a large refund.
That said, if the bill was larger than expected, it may be a sign that too little was withheld from your paycheck, your income increased during the year, or estimated tax payments did not keep pace. In some cases, owing too much can also increase the risk of underpayment penalties if not enough tax was paid throughout the year, which generally requires taxpayers to pay in at least a threshold amount (e.g., based on current or prior-year tax) to avoid penalties.
The key is not to aim for a refund or a balance due. It is to understand why you landed where you did and make adjustments now.
That’s where a strategic CPA can really help. Reviewing your withholdings, updating your W-4, or revisiting estimated payments can help you avoid a bigger surprise next year and keep your tax strategy aligned with your income.
Turn Insight Into Action
Once you have a forward-looking view, the next step is to make targeted adjustments.
If you don’t know what your tax payment is going to be, start by getting a projection of what you’re expected to owe. From there, you can update your federal and state withholdings as needed to stay on track.
The One Big Beautiful Bill Act introduced several changes that may affect your tax profile. The most relevant provisions include:
- Expanded SALT deduction (subject to phaseouts)
- Increased to up to $40,000 for tax years 2025–2029
- The benefit phases down at higher income levels and may be significantly reduced for top earners
- Permanent extension of the TCJA framework
- Higher standard deduction amounts are now permanent
- Current income tax rate brackets (10%–37%) are also preserved long-term
- Child Tax Credit increase
- Increased from $2,000 to approximately $2,200 per qualifying child
- Continues to phase out at $400,000 (married filing jointly) and $200,000 (all other filers)
You can also use tax-advantaged strategies to reduce your taxable income. For example, tax-deferred contributions to a 401(k) can lower your current-year tax burden while boosting your retirement savings.
As your plan allows, consider adjusting your 401(k) plan deferral contributions, if necessary, to ensure you reach the maximum statutory limits for the year. For 2026, the 401(k) maximum limits have increased to $24,500 for those under 50 or $32,500 for those over 50 by year-end.
If you’re not confident you are maximizing your tax planning opportunities, our advisors are here to help.
The CWA team can review your current tax situation and help discuss opportunities to take advantage of now. Because the real win isn’t a big refund. It’s withholding as close as possible to what you actually owe, with no surprises along the way.
