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The 2026 deficit: $1.99 trillion in Treasury's year-end books, and what CBO says the 2025 tax law adds

Treasury's final fiscal 2026 statement shows a $1,992 billion deficit, about $160 billion above fiscal 2024 as first reported; CBO estimates the 2025 tax law adds $4.1 trillion to deficits over ten years with interest.

Event date: October 1, 2025 – October 16, 2026 Published: 2026-10-26 Last reviewed: 2026-10-26 Next review due: 2026-11-25 Revision: 1
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What happened

The federal government closed fiscal year 2026 on September 30, 2026 with a deficit of $1,992.5 billion, according to the Treasury's final Monthly Treasury Statement for the year [1]. That is $217 billion more than the $1,775.4 billion deficit for fiscal 2025, which spanned the last three and a half months of the Biden administration and the first eight and a half of the second Trump term [1][2]. Receipts were a record $5.40 trillion, up 3 percent; outlays were a record $7.40 trillion, up 6 percent [2][3].

The last full Biden fiscal year, 2024, was originally reported at a $1,832.8 billion deficit and later revised to $1,816.8 billion in the September 2025 statement [1]. Measured against the original figure, fiscal 2026 is about $160 billion higher; measured against the revised figure, about $176 billion higher [1].

Why it matters

The 2025 tax-and-spending law (Public Law 119-21, enacted July 4, 2025) paired large tax cuts with spending reductions in Medicaid, SNAP and other programs [4]. The Congressional Budget Office's final conventional estimate says the law lowers revenues by $4.5 trillion and lowers direct spending by $1.1 trillion over 2025-2034, for a net $3.4 trillion increase in deficits [4]. Adding $718 billion in extra interest costs brings the ten-year total to $4.1 trillion, and making the law's temporary tax provisions permanent would raise it to $5.0 trillion [5]. The $1.1 trillion spending reduction is the net across all programs, not a Medicaid-and-SNAP figure alone: CBO scores the Medicaid chapter at $886.8 billion in deficit reduction over 2025-2034, and the SNAP state cost-share provision at $41 billion over 2028-2034, with other SNAP provisions scored separately [7][6]. Those are projections; the fiscal 2026 deficit is the first full-year actual that includes the law's early effects.

The evidence

Two independent tallies agree on the year. Treasury's statement shows the $1,992.5 billion deficit [1]. CBO's Monthly Budget Review for September 2026 estimates $2.0 trillion, $218 billion above fiscal 2025, with revenues up $169 billion and outlays up $386 billion [3].

CBO's breakdown shows where the money went. Net interest on the debt rose $115 billion (11 percent) [3]. Reuters, using Treasury's broader debt-service category, puts total debt-service outlays at a record $1.36 trillion, now exceeded only by Social Security and by Medicare and Medicaid combined [2]. Medicare outlays rose $77 billion and Medicaid $55 billion [3]. Corporate income tax receipts fell $70 billion (16 percent), and customs duties fell $22 billion (11 percent) after the Supreme Court's February 2026 decision on tariffs imposed under the International Emergency Economic Powers Act led to about $130 billion in refunds, by CBO's count [3]. Reuters reports $145 billion in tariff refunds and net tariff income of about $173 billion [2].

One spending category fell: Food and Nutrition Administration outlays dropped $11 billion (8 percent), largely because SNAP caseloads declined [3].

Response and counterpoints

A Treasury official told Reuters the deficit equaled an estimated 6.2 percent of GDP, up from 5.8 percent in fiscal 2025, but did not disclose the GDP figure used [2]. CBO's own estimate notes that administrative actions on tariffs and immigration also affect deficits and are outside the law's score [5]. Supporters of the law argue that its growth effects will offset part of the revenue loss; CBO's $3.4 trillion figure excludes macroeconomic feedback and is therefore not the last word on either side [5].

What remains uncertain

The fiscal 2026 deficit is an actual, but the ten-year numbers are estimates made before the law took effect, and CBO itself labels them as relative to a January 2025 baseline [4]. How much of the 2026 increase is attributable to the law, as opposed to interest rates, tariff refunds, or the $48 billion (5 percent) rise in Defense Department military spending, cannot be read directly from the budget totals [3]. The commonly quoted "$160 billion above Biden's last year" depends on using the originally reported fiscal 2024 figure; the revised figure gives $176 billion [1]. Fiscal 2025 straddled two administrations, so year-over-year comparisons with it assign responsibility imprecisely [2]. Much of the law's projected spending reduction is still ahead; for example, CBO scores the SNAP state cost-share at $41 billion over 2028-2034, none of it in fiscal 2026 [6].

Money and method

Entity: U.S. federal government (unified budget). Money type: annual deficit, cash basis. Period: fiscal years ending September 30, 2024, 2025 and 2026. Status: actuals from Treasury's Monthly Treasury Statement [1]. The $3.4 trillion, $4.1 trillion and $5.0 trillion figures are CBO estimates over fiscal 2025-2034, relative to the January 2025 baseline, excluding macroeconomic effects; the $4.1 trillion and $5.0 trillion include debt service [4][5]. These estimates and the actual deficit are not added together anywhere in this story.

Sources cited

  1. [1]
    Monthly Treasury Statement, Table 1: Summary of Receipts, Outlays, and the Deficit/Surplus (Fiscal Data API) — U.S. Department of the Treasury, Bureau of the Fiscal Service, 2026-10-16.
    supports · API response rows: record_date 2026-09-30 and 2024-09-30, classification_desc 'Year-to-Date', fields current_month_dfct_sur_amt, current_month_gross_rcpt_amt, current_month_gross_outly_amt (also 2025-09-30 row showing the revised fiscal 2024 figure in prior_fytd fields) · checked 2026-10-26 · source N-fiscal-year-2026-deficit-01
  2. [2]
    US fiscal 2026 budget deficit rises to $1.99 trillion, largest in 5 years — Reuters, 2026-10-16.
    supports · Paragraphs 1-7 (deficit, receipts, outlays, interest, tariff refunds, deficit-to-GDP) · checked 2026-10-26 · source N-fiscal-year-2026-deficit-02
  3. [3]
    Monthly Budget Review: September 2026 — Congressional Budget Office, 2026-10-08.
    supports · Page 1 summary; 'Total Receipts' and 'Total Outlays' sections (customs duties, IEEPA refunds, net interest, Medicaid, Medicare, Food and Nutrition Administration bullets) · checked 2026-10-26 · source N-fiscal-year-2026-deficit-03
  4. [4]
    Estimated Budgetary Effects of Public Law 119-21, Relative to CBO's January 2025 Baseline — Congressional Budget Office, 2025-07-21.
    supports · Summary paragraph: $3.4 trillion net deficit increase 2025-2034, $1.1 trillion direct spending decrease, $4.5 trillion revenue decrease · checked 2026-10-26 · source N-fiscal-year-2026-deficit-04
  5. [5]
    Effects on Deficits and the Debt of Public Law 119-21 and of Making Certain Tax Policies in the Act Permanent — Congressional Budget Office, 2025-08-04.
    supports · Summary: $718 billion debt-service cost, cumulative $4.1 trillion; $5.0 trillion if temporary tax provisions made permanent · checked 2026-10-26 · source N-fiscal-year-2026-deficit-05
  6. [6]
    Estimated Effects of Public Law 119-21 on Participation in the Supplemental Nutrition Assistance Program (supplemental information) — Congressional Budget Office, 2025-08-13.
    context · 'Work Requirements' section (roughly 2.4 million fewer participants from Section 10102); Section 10105 paragraph ($41 billion, 2028-2034) · checked 2026-10-26 · source N-fiscal-year-2026-deficit-06
  7. [7]
    Public Law 119-21, Title VII, Finance, Subtitle B, Health, Chapter 1, Medicaid (supplemental cost estimate as enacted) — Congressional Budget Office, 2025-10-28.
    supports · Summary: Medicaid chapter reduces the deficit by $886.8 billion over 2025-2034 and increases the uninsured by 7.5 million in 2034 · checked 2026-10-26 · source N-fiscal-year-2026-deficit-07

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