Tax refund estimator for state and federal 2026

Why your state and federal tax refunds are calculated differently

Most taxpayers focus exclusively on their federal refund when estimating what they will receive at tax time, but their state tax refund represents an equally important piece of the equation. State and federal tax systems operate under completely separate rules, brackets, deductions, and credit structures, meaning your refund from one does not predict what you will receive from the other.

A taxpayer who owes money on their federal return may still receive a substantial state refund, and someone expecting a large federal refund might be surprised by a state tax bill. Understanding how both systems interact helps you accurately estimate your total refund and make smarter decisions about withholding, deductions, and tax savings throughout the year.

The 2026 filing season covers the 2025 tax year, and several federal and state-level changes affect how refunds are calculated this year. States have been actively adjusting their own tax codes in response to federal legislation, creating a shifting landscape that makes estimating both refunds together more important than ever. Taxpayers who plan at both levels can capture savings that single-focus planners miss entirely.

How your federal tax refund is determined

Your federal tax refund equals the difference between what you paid the IRS throughout the year through withholding and estimated payments and your actual tax liability calculated on Form 1040. When your payments exceed what you owe, the IRS refunds the excess.

The federal calculation starts with your total income, subtracts above-the-line adjustments like Traditional 401k contributions and Health savings account contributions to reach your adjusted gross income, then applies either the standard deduction or itemized deductions to determine taxable income. Federal tax brackets for 2025 range from 10% to 37%, and your liability is calculated progressively across these brackets as outlined in IRS Publication 17.

Federal tax credits then reduce your liability directly. The Child & dependent tax credits can reduce your federal tax bill by up to $2,200 per qualifying child, and refundable credits like the earned income tax credit can push your refund beyond what you paid in. These credits apply only at the federal level, though many states offer their own versions with different eligibility rules and amounts.

How state tax refunds differ from federal

State income tax systems vary dramatically across the country, and no two states calculate refunds in the same way. While the federal system uses progressive brackets for all taxpayers nationwide, states employ flat taxes, progressive brackets, or no income tax at all, each of which creates different refund dynamics.

Nine states currently have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire joined this group after repealing its interest and dividends tax effective January 1, 2025. Taxpayers in these states receive no state refund but also face no state withholding, which simplifies their overall tax picture. Check your 2026 Texas State Tax Deadlines or applicable state deadlines for business filing obligations that may still apply.

States with income taxes use different approaches that affect your refund:

• Flat-rate states like Illinois (4.95%), Pennsylvania (3.07%), and Colorado (4.40%) apply a single rate to all taxable income, regardless of earnings level
• Progressive states like California, New York, and New Jersey use multiple brackets where higher earners pay higher marginal rates on portions of their income
• Some states use federal AGI as their starting point, while others require a completely separate income calculation
• State-specific deductions and credits may apply that have no federal equivalent

These structural differences mean your state's effective tax rate can vary significantly from your federal rate, producing very different refund amounts even when withholding percentages seem comparable.

The SALT deduction and its impact on both refunds

The state and local tax deduction represents the most significant connection between your federal and state tax calculations. This deduction allows taxpayers who itemize on their federal return to deduct state and local income taxes, sales taxes, and property taxes paid during the year, directly reducing federal taxable income.

The SALT deduction cap was raised by the One Big Beautiful Bill Act to $40,000 for taxpayers with modified adjusted gross income under $500,000 for the 2025 through 2029 tax years. Taxpayers with MAGI above $500,000 see the cap reduced by 30% of the excess, with the deduction flooring at $10,000 once MAGI reaches $600,000. This expanded cap means more taxpayers in high-tax states like California and New York may benefit from itemizing their state and local taxes on their federal return.

Taxpayers should evaluate whether itemizing with SALT produces a better federal outcome than taking the standard deduction. For the 2025 tax year, the standard deduction is $15,750 for single filers, $31,500 for married filing jointly, and $23,625 for heads of household. If your total itemized deductions, including SALT, mortgage interest, and charitable contributions, exceed the standard deduction, itemizing increases your federal refund.

1. Calculate your total state and local taxes paid during 2025
2. Add property taxes, noting the combined SALT cap of $40,000 for most filers
3. Include mortgage interest and charitable contributions to determine total itemized deductions
4. Compare total itemized deductions against your standard deduction amount
5. Choose the higher amount to maximize your federal refund

The interaction works in reverse as well. Some states require you to add back certain federal deductions when calculating state taxable income. Understanding these add-back requirements for your specific state prevents underestimating your state tax liability and overestimating your state refund.

State-specific strategies to maximize both refunds

Different states offer unique deductions and credits that can significantly boost your state refund when claimed alongside federal strategies. Coordinating both returns ensures you capture every available benefit at each level.

Several states offer their own retirement contribution deductions beyond the federal benefit. Contributing to a Traditional 401k reduces both your federal and state taxable income in most states that use federal AGI as their starting point. However, states like New Jersey and Pennsylvania may treat retirement contributions differently, so verify your state's rules.

Business owners operating in multiple states face additional complexity. Home office deductions reduce federal taxable income, and most states with income taxes allow corresponding deductions. States like 2026 California State Tax Deadlines have specific filing requirements for business deductions that differ from federal rules.

• Many states offer property tax credits or circuit breaker programs for homeowners and renters that reduce state tax liability
• State-level earned income tax credits are available in approximately 30 states, often calculated as a percentage of the federal credit
• Education-related deductions and credits vary by state, with some states offering 529 plan contribution deductions that have no federal equivalent
• State child tax credits in states like New York and Colorado provide additional per-child benefits beyond the federal credit

Tax loss harvesting provides dual benefits by reducing both your federal and state taxable income when you sell investments at a loss. The $3,000 annual limit on ordinary income offset applies at the federal level, and most states conform to this treatment, effectively doubling the refund impact of this strategy.

Estimating refunds when you lived in multiple states

Taxpayers who moved during the year, worked remotely across state lines, or earned income in multiple states face additional complexity when estimating their total refund. Each state where you earned income or maintained residency may require a separate return, and the combined refunds and liabilities from all states affect your overall tax picture.

Part-year residents typically file returns in both their former and new states, allocating income to each state based on the period of residency. Some states tax all income earned while you were a resident, while others only tax income sourced within their borders. The allocation method directly affects your refund from each state.

Remote workers present unique challenges under state tax rules. If you live in one state but work for a company headquartered in another, you may owe taxes in both states depending on reciprocity agreements and employer withholding practices. States like New York apply a "convenience of the employer" rule that can create tax obligations for out-of-state remote workers.

1. Determine your residency status in each state where you lived or worked
2. Allocate income to each state based on residency periods and income sourcing rules
3. Claim credits for taxes paid to other states to avoid double taxation
4. File returns in the correct order, typically starting with nonresident states
5. Verify each state's filing deadline at the State Tax Deadlines page

Consulting IRS Publication 505 guides withholding adjustments when you have multi-state obligations, helping you avoid both underpayment penalties and excessive overwithholding.

Common errors that reduce your state or federal refund

Mistakes on either return can cost you money, and errors on one return often cascade into problems on the other. Avoiding these common pitfalls ensures you receive the maximum refund from both your state and federal filings.

Filing the wrong state return ranks among the most expensive mistakes. Taxpayers who move mid-year sometimes file full-year resident returns in both states rather than part-year returns, creating duplicate taxation and delayed refunds. Others miss filing requirements in states where they earned income but did not live, which can trigger penalties.

Failing to claim the credit for taxes paid to another state is equally costly. Most states allow residents to credit taxes paid to other states against their home state liability, preventing double taxation. Missing this credit means you effectively pay tax twice on the same income, dramatically reducing your net refund across both returns.

• Overlooking Travel expenses and Vehicle expenses that reduce both state and federal business income
• Using the wrong state tax form for your residency status
• Forgetting state-specific deductions like 529 contributions or property tax credits
• Not adjusting state withholding when your federal withholding changes significantly
• Missing state filing deadlines, which differ from federal deadlines in some states

Plan your total refund with the right tools

Estimating your state and federal refund together gives you a complete picture of your tax situation and reveals strategies that work across both levels. The most effective approach analyzes how each deduction and credit affects returns simultaneously, rather than treating them as separate calculations.

Instead's comprehensive tax platform evaluates your tax situation across federal and state levels, identifying personalized strategies that maximize your combined tax savings. Instead's intelligent system accounts for state-specific rules and federal interactions to ensure no savings opportunity is overlooked.

The Instead platform provides detailed tax reporting that tracks both your federal and state tax positions throughout the year. Explore our flexible pricing plans to start optimizing your total refund across every return you file.

Frequently asked questions

Q: Can I get a state tax refund if my state has no income tax?

A: No, states without income tax, such as Texas, Florida, and Wyoming, do not withhold state income tax from your paychecks, so there is no overpayment to refund. However, you may still need to file state returns for business taxes, franchise taxes, or other obligations, depending on your state's requirements.

Q: How does the SALT deduction cap affect my federal refund in 2026?

A: The OBBBA raised the SALT cap from $10,000 to $40,000 for taxpayers with MAGI under $500,000 for tax years 2025 through 2029. If your MAGI exceeds $500,000, the cap is reduced by 30% of the excess until it reaches the $10,000 floor at $600,000 MAGI. This higher cap makes itemizing more beneficial for many taxpayers in high-tax states, potentially increasing their federal refund compared to prior years when the $10,000 limit applied.

Q: Do I need to file state returns in every state where I earned income?

A: Generally, yes, you must file a nonresident return in any state where you earned income, even if taxes were not withheld. Many states have minimum income thresholds below which filing is not required. Reciprocity agreements between some neighboring states may also eliminate the need to file in the state where you work if your home state has such an agreement.

Q: Should I estimate my state and federal refunds separately or together?

A: Estimating both refunds together produces the most accurate results because the two calculations interact. Your federal refund affects your state return when states use federal AGI as their starting point, and state tax payments affect your federal return through SALT deductions. A combined approach reveals strategies that optimize savings across both levels.

Q: How do retirement contributions affect my state tax refund?

A: Most states that impose income tax allow deductions for retirement contributions that mirror the federal treatment, meaning Traditional 401k and IRA contributions reduce both your federal and state taxable income. However, a few states, like New Jersey and Pennsylvania, do not allow these deductions, so your state refund calculation may differ from your federal projection.

Q: What happens if I overpay state taxes and receive a state refund?

A: If you itemized deductions on your federal return and deducted state income taxes paid, a state refund you receive the following year may be taxable as federal income under the tax benefit rule. This applies only to the extent the original deduction provided a tax benefit. If you took the standard deduction, your state refund is generally not taxable on your federal return.

Q: When should I file my state return relative to my federal return?

A: Filing your federal return first is generally recommended because most state returns reference federal figures like AGI. However, some states have earlier deadlines than the federal April 15 date, so check your specific state's deadline. Filing both returns electronically and simultaneously speeds processing and ensures consistency between the two.