Recently, many Chinese friends living and working in Austin have been pleasantly surprised to find that their tax refund this year is noticeably higher than in previous years. That's certainly good news, and you may already be planning how to spend this "windfall" — maybe on some Texas barbecue or a new gadget for the house. But as your neighborhood Austin Chinese CPA, I want to remind everyone: this year's larger refund may only be a temporary phenomenon. Without proactive planning, next year's refund could very well shrink — or you might even end up owing tax.
The "Windfall" from OBBBA's New Tax Cut Provisions
Why did refunds go up this year (the 2026 filing season, covering 2025 income)? The main reason is the tax cut provisions for working families included in the One Big Beautiful Bill Act (OBBBA), signed into law in July 2025. The Act added several new deductions for tax year 2025. According to IRS data, about 45% of tax returns claimed these new deductions, with an average refund of over $3,200 for those who did. These changes provided a real, tangible reduction in tax burden for taxpayers in the short term.
However, there's a reason this "bonus" showed up concentrated in the form of a refund: because the new law wasn't enacted until mid-2025, many employers' withholding systems didn't update in time to reflect the new deductions. As a result, paychecks continued to have too much tax withheld under the old rules, and the excess was returned to you all at once during tax season. While getting a refund feels great, from a financial planning perspective, it essentially means you gave the government an interest-free loan for a year.
Watch Out: Why Might Next Year's Refund Shrink?
While this year's situation is encouraging, we should be aware of a possible reversal next year. First, as the IRS updates withholding tables and employers' payroll systems catch up with the new tax law, the amount "over-withheld" from your 2026 paychecks will decrease — the same tax savings will show up in your monthly take-home pay instead of being accumulated and refunded to you all at once the following year. So it's normal for your refund to drop next tax season; it doesn't necessarily mean you paid more in taxes.
Second, and most importantly, everything hinges on how your tax withholding is set up. If you haven't reviewed and adjusted your W-4 form in light of the new tax law this year, next year's outcome will involve a lot of uncertainty. Even more important to note: if you pick up additional side income or investment income next year, or change jobs without correctly updating your withholding, you could go from "getting a refund" to "owing tax." To better understand how these changes may affect you personally, please refer to our Chinese Tax Filing Guide to get familiar with the key steps in the filing process ahead of time.
Is a Bigger Refund Always Better?
This is a common misconception. Many of our Austin Chinese tax filing clients feel that the bigger the refund, the better — and some even take pride in it. But rationally speaking, a large refund means the government withheld money from your paycheck that should have been in your hands each month. For example, if you received a $3,000 refund this year, that works out to about $250 a month. If that money had been in your pocket all along, you could have used it for more financial planning — even just parking it in a high-yield savings account (HYSA) would have earned you some interest income.
Therefore, the goal of tax planning next year shouldn't be to chase a "large refund," but rather to aim for "breaking even" — meaning you neither owe additional tax nor receive a large refund when you file, and your monthly take-home pay is maximized. This requires precisely calculating your withholding allowances on your W-4 form based on your household situation.
Special Considerations for Chinese Americans
For Chinese Americans, the situation is often more complex than for the average American taxpayer. Many families have not only domestic U.S. income but also assets or income overseas. If the balance in your overseas accounts exceeds the threshold, don't forget to file an FBAR (Report of Foreign Bank and Financial Accounts) — failing to do so could result in steep penalties. For more details on this, please see our FBAR Filing Guide.
In addition, if you receive support payments from parents back in China, or earn rental income from property in China, these can also affect your overall tax liability. As the automation of tax data matching increases — especially scrutiny of overseas assets — next year's filing calls for even more care. We shouldn't focus only on this year's refund number, but should keep an eye on long-term compliance and asset protection.
YZ CPA Note
As we navigate this transition period following the rollout of the new tax law, we recommend not waiting until next tax season to start scrambling. Now is the best time to plan. Take a moment to check whether your W-4 withholding settings this year are appropriate and already reflect OBBBA's new deductions — especially if you've recently changed jobs, gotten married, or had a child. Also, if you hold overseas assets, be sure all your filing documentation is in order. Tax planning isn't just about filling out forms — it's about protecting your family's wealth.
For professional tax assistance, please visit our YZ CPA Services page or contact us.