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The federal one budget deficit passed the $1 trillion mark in the first five months of the 2026 budget year, with the US government on track to post another massive deficit.
The impartial one Congressional Budget Office (CBO) reported that the federal budget deficit was just over $1 trillion over the five months of fiscal year 2026, with the size of the deficit declining by $142 billion, or 14%, compared to the same period in fiscal year 2025.
CBO noted that federal spending in the first five months of fiscal year 2026 was just over $3.1 trillion, an increase of $64 billion, or 2%, compared to the same period a year ago. Federal tax revenues collected increased by $206 billion, or 11%, compared to last year and totaled nearly $2.1 trillion.
The increase in federal tax revenues was attributed to higher collections from individual income taxes and payroll taxes, with CBO noting that these accounted for about two-thirds of the increase, while higher rates also increased the amount of import taxes collected.
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The federal budget deficit exceeded $1 trillion in the first five months of the 2026 budget year, down slightly from last year. (J. David Aké/Getty Images/Getty Images)
CBO said that from October through February individually income tax payroll tax collections increased by $99 billion, or 10%, compared to the same period in the previous fiscal year, while payroll tax collections increased by $34 billion, or 5%.
Customs duties, a category that includes ratestotaled $144 billion in the first five months of fiscal year 2026 – an increase of $109 billion, or 308%, compared to the same period in the previous fiscal year.
Some of these collected tariffs may eventually be refunded to the companies and individuals who paid them after the US Supreme Court ruled that the tariffs imposed by the Trump administration under the International Economic Emergency Powers Act (IEEPA) were unconstitutional.
Fare Refunds Federal tax revenues would fall, increasing the deficit, and while the Trump administration has taken steps to implement replacement rates, they could face similar legal challenges and collections could experience delays.
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Corporate tax collections fell by $33 billion, or 23%, in the first five months of the year due to provisions in the 2025 Reconciliation Act that increased the tax deductions available to companies making certain eligible investments.
Federal spending have risen the most for Social Security and Medicare, the mandatory spending programs that have seen massive enrollment increases in recent years amid the aging U.S. population.
Spending on Social security reached $676 billion in the first five months of fiscal year 2026 – an increase of $48 billion, or 8%, from the same period last year. CBO noted that the annual cost-of-living adjustment increased benefit amounts, while the Social Security Fairness Act’s expansion of benefit eligibility to previously uncovered occupations accounted for approximately $7 billion of the increase.
Medicare Spending increased $34 billion, or 9%, from a year ago for a total of $475 billion in the period, which CBO attributed to higher enrollment and higher payment rates for services.
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Another major mandatory program saw a similar increase in spending, as Medicaid spending also rose by $22 billion, an increase of 8%, for a total of $285 billion in the five-month period.
Interest charges on the national debt also saw a notable jump, with net interest costs totaling $433 billion in the first five months of the fiscal year. That’s a jump of $31 billion, or 8%, from the previous year and was due to larger government debt and higher interest rates.
While expenditure on the Ministry of War increased by $14 billion, or 4%, and the Department of Veterans Affairs increased by $11 billion, or 7%, in the first five months of fiscal year 2026 compared to last year; several agencies saw notable declines.
Spending by the Environmental Protection Agency (EPA) fell by $20 billion, or 74%, although that decline was due to spending of $20 billion in November and December 2024 under a clean energy subsidy program and no comparable spending in 2025.
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A similar dynamic played out at the Department of Homeland Security, where spending fell by $12 billion, or 23%, due to a relative decline in disaster spending compared to the previous year, despite being partially offset by increased disaster spending. immigration enforcement.
