California homeowners could see bigger federal tax refunds in 2026. Here’s why
When California homeowners file their tax returns, many could be in for a pleasant surprise.
According to real estate website Realtor.com, federal refunds are expected to grow for many households.
The U.S. Treasury projects the average refund will increase by about $1,000 per household, driven by new and expanded tax breaks that took effect for the 2025 tax year, the site said in a Jan. 29 finance report.
“Homeowners in high-tax states like New York, New Jersey and California are far more likely to see meaningful benefits from the SALT expansion than homeowners in lower-tax states,” Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth, told Realtor.com.
The most significant change for California homeowners is the expansion of the SALT — or state and local tax — deduction cap.
According to the Internal Revenue Service, the deduction for state and local taxes quadrupled from $10,000 to $40,000.
However, Realtor.com said, “not all homeowners will benefit equally — and some may still be better off taking the standard deduction.”
Here’s how to determine whether you’re in line for a larger federal tax refund:
How are tax laws changing for California homeowners?
The biggest tax change for homeowners filing 2025 returns is a major increase to the SALT deduction limit, according to Realtor.com.
The cap has jumped from $10,000 to $40,000 for married couples filing jointly, and from $5,000 to $20,000 for married couples filing separately, according to the IRS.
“The SALT deduction allows homeowners who itemize to deduct property taxes plus either state and local income taxes or sales taxes from their federal taxable income,” Realtor.com said.
This lowers the amount of income the federal government can tax.
While the deduction was limited to $10,000 under the 2017 Tax Cuts and Jobs Act, the One, Big, Beautiful Bill Act has now raised the cap through 2029.
Will federal tax refunds be bigger in 2026?
The One, Big, Beautiful Bill includes several changes to the federal tax code, according to the IRS.
However, the IRS didn’t update its tax withholding tables after the One, Big, Beautiful Bill Act passed in 2025, Realtor.com said.
That means employers kept taking taxes out of paychecks using the old rules. As a result, many workers had more money withheld than they actually owed.
“A refund just means you paid more tax during the year than you actually had to,” Spencer Carroll, a certified public accountant and account executive at Gelt, told Realtor.com. “It’s basically an interest-free loan that you gave the government for months to over a year.”
Will I get an extra $1,000 this year?
The U.S. Treasury estimates refunds could be about $1,000 higher on average per household — but that doesn’t mean everyone will see that amount.
“Taxes are so individual (that) I would not be able to tell someone definitively that their refund is going to be $1,000 this year,” Carroll said. “The better headline is that people in general will pay less income tax, which is what everybody wants.”
Several changes are helping lower tax bills this year, The Sacramento Bee previously reported.
Along with an increase on the child tax credit, the standard deduction went up slightly, benefiting the vast majority of taxpayers who don’t itemize.
For filers who do itemize, the higher SALT deduction cap could reduce taxable income even more, according to Realtor.com.
“Higher-income households with large property tax bills and state income taxes stand to benefit the most, while middle-income homeowners may see a more modest bump or none at all,” Boneparth said. “The expanded SALT deduction benefits homeowners more than renters because homeowners typically pay property taxes in addition to state and local income taxes.”
However, how much you actually save — or get back — depends on your income, deductions and family situation.
When do I have to file my 2025 tax return?
In California, the deadline to file both state and federal income tax returns for the 2025 tax year is Wednesday, April 15.
Taxpayers who need more time can request a six-month filing extension — but any taxes owed must still be paid by the April deadline to avoid penalties and interest.
When will I get my federal tax refund?
If you file your taxes electronically and choose direct deposit, you can usually expect your refund within about 21 days, as long as your return is complete and error-free, according to the IRS.
Refunds for federal taxes can take more time if you file an amended return or submit your paperwork by mail.
In those cases, processing can take four weeks or longer, the IRS said.
California taxpayers can track a federal refund using the IRS tool Where’s My Refund?
This story was originally published March 5, 2026 at 5:00 AM with the headline "California homeowners could see bigger federal tax refunds in 2026. Here’s why."
