A record year for both receipts and spending
The United States closed fiscal 2026 with a budget deficit of $1.992 trillion, the Treasury Department reported on Friday, about 12% higher than the $1.775 trillion shortfall a year earlier. It is the largest deficit in five years and the third-highest on record, behind only 2020 and 2021, when pandemic stimulus drove spending sharply higher.
The gap widened even though revenue set a record. Receipts reached $5.40 trillion, up $169 billion, or 3%, from the year before. Outlays reached $7.40 trillion, up $386 billion, or 6%.
Where the money went
Individual income taxes brought in more than $2.8 trillion, about 7% more than in fiscal 2025. Corporate income tax raised $381 billion, down about $70 billion, a drop Treasury linked to the tax cuts in the One Big Beautiful Bill Act passed last year.
Defence spending rose 6% to $917 billion. A Treasury official said it was not clear how much of that increase reflected the war the United States and Israel began against Iran this year. Spending on Social Security and Medicare also grew, and interest costs on more than $40 trillion in debt continued to climb. Tariff refunds added to the total.
The department estimated a deficit-to-GDP ratio of 6.2%, against 5.8% in fiscal 2025.
Why investors are watching
The numbers land at an awkward moment. Investors have been nervous about the debt load and about inflation that reached 3.7% in September, and Treasury yields, which set the tone for mortgages, credit cards and car loans, hit their highest levels in two decades earlier this month before easing.
"When the next crisis strikes, we will almost certainly be more indebted than ever before when entering a crisis, which will limit our capacity to respond and exacerbate the damage we face," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
The White House has argued that tariff revenue and cost cuts will narrow the gap over time. The fiscal 2026 figures show both receipts and spending rising, but not enough to offset each other.