The "K-shaped" economy will affect your 2026 tax refund. Here's how.

February 11, 2026

TL;DR

The U.S. economy is described as "K-shaped," with wealthier Americans benefiting more than lower-income workers.
A new tax law signed in July 2025 is extending tax cuts and introducing new breaks, leading to larger tax refunds.
The average taxpayer's refund is expected to increase by over $700, reaching about $3,800.
Benefits are skewed toward higher-income households, with the top 10% and 5% seeing the largest gains.
The top 1% will see an average refund increase of $908, but this is less than the additional amount received by the top 5%.
The state and local tax (SALT) deduction cap is raised to $40,000 but phases out for incomes over $500,000.
Lowest earners ($33,000 or less) are projected to see an average refund increase of only $18.
This disparity in refunds is expected to worsen the "K-shaped" divergence among consumers.
Some lower-earning households, particularly in the hospitality industry, may see larger refunds due to new deductions for tips and overtime.

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