Taxpayers expecting a refund could be in for a boost because of changes in the One Big, Beautiful Bill, with the White House saying average refunds are projected to rise by $1,000 or more.
But the K-shaped economy could put a dent in any extra cash.
The K-shaped economy has been described by experts as a trend where wealthier Americans have pulled ahead of lower-income workers due in part to the stock market and rising home prices.
“A K-shaped economy means capital owners rise while wage earners tread water,” Chad Cummins, CPA and attorney with Cummins & Cummins Law, tells Realtor.com®. “This has been the case since the recovery from the 2008 recession. Historically, workers and capital owners shared in gains in productivity and improvements to quality of life.”
With the changes from the One Big, Beautiful Bill, some tax experts point out this K-shaped trend could extend into refunds—with high-earning Americans standing to gain more than low-wage earners.
“Investors enjoy gains from equities, private funds, and real estate, whilst the middle class has suffered a gradual erosion in purchasing power because wages have been outpaced by inflation,” Cummins explains.
“The tax code mirrors that divide. Preferential rates protect long-term capital gains which are not subject to payroll taxes, but payroll taxes apply in full to earned wages. The structure rewards ownership of assets and penalizes labor.”
The Internal Revenue Service expects about 164 million Americans will file an individual tax return for tax year 2025. During last year’s tax filing season, the IRS processed more than 165 million individual tax returns, with about 104 million taxpayers receiving an average refund amount of $3,167.
The Tax Foundation, an independent tax policy nonprofit, points out that because the IRS did not adjust withholding tables after the OBBB passed, workers generally continued to withhold more taxes from their paychecks than the new law required. As a result, instead of gradually receiving the benefit of the tax cuts through higher take-home pay during the year, most taxpayers will receive it all at once when they file their returns.
Who stands to get the most money back
The highest income earners aren’t necessarily the ones who stand to get the most. Those in the top 1% may not benefit as much as the top 10% to 15% because the One Big, Beautiful Bill eliminated some tax deductions for the top earners.
The state and local tax (SALT) deduction is raised to $40,000 for the current tax year—that’s up from the $10,000 limit. This deduction will be phased out for taxpayers earning more than $500,000. So, those in the top 1%, or households earning above $1.15 million, will not be able to claim.
On the other hand, low earners, those who earn $33,000 or less, stand to gain bigger refunds depending on what kind of tax breaks they’re able to claim.
“Lower income taxpayers who qualify for refundable credits will still see the largest refunds relative to income. Those credits function as income support delivered through the tax code,” says Cummins. “If you depend on the Earned Income Tax Credit or the Child Tax Credit, your refund may remain intact or even rise somewhat with inflation adjustments, but that does not reflect real prosperity.”
Meanwhile, top 1% earners could see their average tax refund increase by an average $908.
Cummins shares this advice to his higher-wage earning clients: “I am telling my clients: Do not expect a boost. A refund signals excess withholding and poor planning, not financial health.”
And what about those in the center—the “middle class”?
“Many middle income households earn too much for meaningful credits yet lack asset growth,” Cummins adds. “In other words, they fund the system and receive little back.”