US annual budget gap hits nearly $2 trillion, largest in 5 years
SPY•The US budget deficit rose by $217 billion to $1.99 trillion in fiscal 2026, the largest shortfall in five years. Record debt-service outlays reached $1.36 trillion, while tariff refunds contributed to a $22 billion drop in net tariff receipts.
1. Deficit widens
The US budget deficit rose from $1.78 trillion in fiscal 2025 to $1.99 trillion in the year ended September 30, 2026, Treasury Department figures showed. It was the largest shortfall since fiscal 2021 and the third-largest annual deficit ever.
2. Spending and receipts
Fiscal 2026 receipts reached a record $5.40 trillion, up 3% from the prior year, while outlays rose 6% to a record $7.40 trillion. Debt-service outlays climbed 12%, or $144 billion, to a record $1.36 trillion; defense spending rose 6% to $917 billion, including a $48 billion increase.
3. Tariff refunds and GDP
Net tariff receipts fell $22 billion to about $173 billion after $145 billion of refunds followed a Supreme Court ruling negating a large portion of tariffs imposed by President Donald Trump. The Treasury estimated the deficit at 6.2% of GDP, compared with an actual 5.8% in fiscal 2025, and reported a $27 billion deficit for September, versus a $198 billion surplus a year earlier.
