US fiscal 2026 budget deficit rises to $1.99 trillion, largest in 5 years

The US budget deficit for fiscal year 2026 reached an unprecedented $1.99 trillion, the largest shortfall in five years, according to Treasury Department figures released on Friday. This substantial increase, amounting to $217 billion, was primarily driven by tariff refunds and record spending to manage the nation's debt, which surpassed $40 trillion.

The deficit for the year ending September 30th, marking the first full budget year of President Donald Trump's second term, surpassed the $1.78 trillion deficit in fiscal year 2025.

Total receipts for fiscal year 2026 amounted to a record $5.40 trillion, a 3% increase from the $5.24 trillion recorded in the previous year. However, outlays also reached a record $7.40 trillion, a 6% rise from $7.01 trillion the prior year. Debt-service outlays alone amounted to a staggering $1.36 trillion, a 12% increase, now constituting the largest spending category after Social Security and combined Medicare and Medicaid outlays.

A significant factor contributing to the widening deficit was a $22 billion drop in net tariff receipts following a Supreme Court decision that invalidated a portion of tariffs imposed by the previous administration. This decision resulted in $145 billion in tariff refunds, leading to an 11% decline in net tariff income to approximately $173 billion.

The Treasury Department estimated an estimated deficit-to-GDP ratio of 6.2% for fiscal year 2026, slightly higher than the 5.8% ratio observed in the previous year. For the final month of September, the Treasury reported a $27 billion deficit, contrasting with a $198 billion surplus in the corresponding period of the previous year.