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The signed into law by President Trump in July provides a bevy of new tax cuts and deductions that could lower taxes for millions of Americans, according to a recent analysis from the Tax Foundation.
The typical filer could see a tax cut of $3,752 in 2026, the nonpartisan think tank . But the impact will also vary geographically, with some residents in some states likely receiving a bigger tax benefit than others under the new law, Garrett Watson, director of policy analysis, told CBS MoneyWatch.
For instance, the biggest average cut will go to residents of Wyoming, with a reduction of $5,374, according to his analysis of the law's impact.
The geographic differences are due partly to variations in the average income of each state, given that the law provides compared with low-income households, Watson noted. Other provisions also could help some regions more than others. That includes the higher deduction cap for state and local taxes, which will give more of a lift to people in states with high property taxes, such as New Jersey and New York.
"Places with higher incomes are going to have higher nominal tax cuts," Watson said. "The largest tax benefits are going to the mountain states — it's due to a subgroup of higher-income business owners."
Residents of Mississippi and West Virginia are likely to see the smallest tax cuts next year, the analysis found. Incomes in those states tend to be lower than the national average, with median household income in Mississippi standing at about $55,000 as of 2023 and $60,000 for West Virginians, according to the Federal Reserve Bank of St. Louis. The national household median income is about $80,600.
The Tax Foundation analysis projects the average tax cut in tax year 2026, meaning that these numbers reflect the reductions for the next calendar year. Although many of the law's provisions are effective in 2025, the IRS is still working out the details on some of them, which means lower tax withholding for the new provisions won't be fully in place until 2026, Watson said.
Tax refunds are also likely to be larger in early 2026, when people file their taxes for the 2025 calendar year, Watson said, although he hasn't calculated the potential impact.
Seniors who can claim a new $6,000 deduction for people over 65 under the law may get a bigger refund, as well as taxpayers across the board due to the higher standard deduction, said Mark Steber, chief tax officer at Jackson Hewitt.
Because of the tax changes in the new law, Steber recommends that people start preparing now. For example, workers who are newly eligible for and on should keep track of such income.
"Having this much time left in the year allows taxpayers to make any necessary adjustments to help increase a refund or lower an amount due, and can be as simple as adjusting the withholding on a W-4," Steber told CBS MoneyWatch.
The top 1% of earners around the U.S. — those with incomes over $1.1 million — will receive a $75,410 annual tax break from the new law in 2026, according to a from the Tax Policy Center, nonpartisan think tank. That compares with an average tax break of $150 for households in the bottom 20% of the income distribution, or people earning less than $36,000 a year, and of $1,780 for earning $66,801 to $119,200.
To be sure, many of new law's tax cuts will depend on an individual's financial circumstances. For instance, a low-income worker who earns tips or overtime could see a much bigger tax cut due to the law's "no tax on tips" and "no tax on overtime" provisions, Watson noted.
"If a taxpayer isn't taking tips or overtime or new car loan deduction, they may see a lower benefit," he said.
