U.S. budget deficit hits $1.99 trillion for fiscal 2026, up 12% from last year

The federal government ended fiscal year 2026 with a budget deficit of $1.992 trillion, the Treasury Department reported Friday, Oct. 16. That is up from $1.775 trillion in fiscal 2025, an increase of about 12%.

The figure is the largest annual deficit in five years, the biggest since fiscal 2021's $2.77 trillion, Reuters reported. It is the third-largest in U.S. history, behind only the pandemic years of 2020 and 2021. The fiscal year ran from Oct. 1, 2025, through Sept. 30, 2026.

Where the money went

Social Security was the single biggest expense at nearly $1.7 trillion, up from about $1.6 trillion a year earlier, according to CNBC's reading of the Treasury data. Medicare cost almost $1.1 trillion.

Net interest on the debt, meaning what Treasury pays in interest minus what it collects, topped $1 trillion for the year, up from $970 billion in fiscal 2025. Gross interest on the public debt was more than $1.3 trillion.

Receipts and outlays both set records, according to a Treasury Department official cited by CNBC. Total receipts were about $5.40 trillion and outlays about $7.40 trillion. Individual income taxes brought in more than $2.8 trillion, up about 7%. Corporate income taxes fell by about $70 billion to $381 billion, a drop CNBC tied to tax cuts in last year's One Big Beautiful Bill Act.

Customs duties hit a record on a gross basis, the Treasury official said, but refunds required after the Supreme Court struck down many of the administration's tariffs earlier this year cut into the net total. Reuters reported about $145 billion in tariff refunds during the year, leaving net tariff income down 11% at about $173 billion.

September alone

For September, the government ran a $27 billion deficit (Treasury lists it as $26.9 billion), compared with a $198 billion surplus in September 2025.

Why it matters

This was the 25th straight year of federal deficits; the government last ran a surplus in 2001. Total federal debt passed $40 trillion earlier this year.

Rising borrowing has added to pressure in the bond market. CNBC noted that 10-year and 30-year Treasury yields hit 24-year highs last week. Treasury Secretary Scott Bessent told CNBC in August that the U.S. can "grow our way out of" its debt.