Why Some Older Americans Could See Their Biggest Tax Refunds Ever in 2026

A rare combination of higher deductions, late tax adjustments, and Social Security modifications could result in unexpected cash back for retirees in 2026. For millions of older Americans, this tax season may feel different—not louder or more dramatic, but quietly transformative.

In an era of rising prices and shrinking savings, a set of recent tax changes is creating an unusual outcome: some retirees could receive the largest tax refunds of their lives. This isn't a stimulus cheque or a government giveaway. It's the result of careful policy timing and higher deductions that temporarily reduce the amount of income subject to federal tax. These changes are shifting how retirement income is taxed, leading to potential windfalls for eligible taxpayers.

A Law That Reshaped Retirement Taxes

The legislation behind this shift is the One Big Beautiful Bill (OBBB), enacted in 2025. The law was designed to ease the tax burden on seniors and provide additional protection from inflation's negative impacts. Its effects on the 2026 tax filing season—covering income for the year 2025—are now becoming evident.

One key factor is the increase in Social Security payments, alongside rising tax threshold amounts. Many taxpayers will find they have paid more in taxes throughout the year than they needed to, as the withholding was based on older rules that no longer apply. Consequently, a greater number of retirees could see larger refunds when they file their returns.

The New 6,000 Seniors Bonus Explained

One of the most significant recent reforms is the introduction of age-based deductions, which are now the most notable change in tax law for older Americans. The IRS allows individuals aged 65 and over to deduct up to $6,000 from their taxable income, provided their adjusted gross income (AGI) is $75,000 or less.

For married couples both aged 65 or older, the deduction is generally $12,000, assuming their combined AGI remains below $150,000. These age-based deductions are not tax credits; instead, they lower the amount of income liable to tax, which can push many retirees into a lower tax bracket.

This deduction is available only from 2025 to 2028, making 2026 a potentially opportune year for eligible retirees to maximise their benefits.

Higher Standard Deduction Changes the Maths

Alongside the Seniors Bonus, the standard deduction has increased again for the 2026 tax year:

• Single filers: $16,100
• Married couples filing jointly: $32,200

This increase means more income is shielded from taxation before calculations even begin. For retirees who do not itemise, this simplification can lead to lower tax bills. When combined with the age-based deduction, some households could see tens of thousands of dollars excluded from their taxable income.

Why Refunds Could Be Unusually Large

Here's the twist. Because these laws were enacted after 2025 had already begun, many employers and pension administrators did not adjust their tax withholding in time. The same applies to Social Security calculations.

As a result, many older Americans paid more tax during the year than they actually owed. This over-withholding will only be corrected when they file their tax returns. Financial analysts estimate that average refunds could be between £300 and £1,000 higher than in previous years, with some households potentially receiving even larger sums.

Who Benefits the Most?

The biggest beneficiaries are retirees with modest to middle incomes. Those relying on Social Security, small pensions, or part-time work stand to gain the most from higher deductions. Married couples over 65 filing jointly are especially likely to see significant refunds, as are single retirees who continued working part-time in 2025.

Conversely, those with very high incomes are less likely to benefit, as deductions tend to phase out beyond certain income thresholds. Nonetheless, this set of reforms offers notable financial relief to a sizeable segment of the older population, providing a welcome boost as they navigate ongoing economic challenges.