Tariff Refunds in 2026: Who Gets Money Back, and the Tax Trap Nobody Mentions

Reviewed by the WAYG tax team · Updated July 2026

TL;DR — the short version

• The Supreme Court ruled on February 20, 2026 (Learning Resources, Inc. v. Trump) that the IEEPA statute does not authorize presidential tariffs — invalidating the 2025 "trafficking" and "Liberation Day" tariffs and opening the door to refunds of roughly $166 billion in duties collected from an estimated 330,000 importers.
• Refunds are not automatic. You (or your customs broker) generally must file a claim through CBP's CAPE process in the ACE portal. Phases opened April 20, June 29, and (planned) late July 2026.
• Here's the trap: if you deducted those duties on your 2025 return — as most importers did through cost of goods sold — the refund is generally taxable income when it comes back, under the tax benefit rule. Plan for it now, not next April.
• The government has appealed parts of the refund orders, so timing and scope may still shift. Eligible importers should document entries and file sooner rather than later.

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If you imported goods between early 2025 and early 2026, you almost certainly paid tariffs you weren't legally required to pay. Picture a small home-goods importer here in South Florida: she spent 2025 watching duty bills eat her margins, raised prices twice, and told her team to hang on. Then the Supreme Court ruled, and suddenly there's real money — maybe six figures — sitting on the other side of a government claims process she's never heard of.

That's the situation thousands of importers are in right now. The money is real. The process is navigable. And there's one tax consequence almost nobody mentions until it's too late. Let's walk through all three.

What did the Supreme Court actually decide in Learning Resources v. Trump?

On February 20, 2026, the Supreme Court held 6–3 in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (IEEPA) — a 1977 sanctions law — does not give the president the power to impose tariffs. Chief Justice Roberts wrote the majority opinion.

That ruling invalidated the tariffs that had been imposed under IEEPA specifically, which generally includes:

• The tariffs on imports from Canada, Mexico, and China announced in early 2025 (the "trafficking" tariffs), and
• The worldwide "Liberation Day" reciprocal tariffs announced in April 2025.

Following the decision, the U.S. Court of International Trade (CIT) ordered the government to refund IEEPA duties — with interest — and U.S. Customs and Border Protection (CBP) built a claims process to handle it at scale.

One important caveat before you celebrate: not every tariff went away. Duties imposed under other authorities — such as Section 232 (steel, aluminum, autos) and Section 301 (many China-origin goods) — were not part of this ruling and generally remain in place. Many products that lost their IEEPA tariff are now covered by a replacement duty under a different statute. Your refund claim looks backward; your landed-cost planning still has to look forward.

Who is eligible for a tariff refund?

Generally, the importer of record (IOR) that paid or deposited IEEPA duties is the party entitled to the refund. If you paid duties through a customs broker, the broker remitted them on your behalf — but the refund claim belongs to the importer of record on the entry.

The eligibility window tracks the life of the IEEPA tariffs themselves: entries on which IEEPA duties were collected, roughly from February 2025 through the Court's February 2026 decision. CBP has estimated that about 330,000 importers paid or deposited approximately $166 billion in IEEPA duties over that period.

A few situations deserve extra care:

• You buy on delivered-duty-paid (DDP) terms. If your foreign supplier or a logistics provider was the importer of record, the refund generally flows to them — not to you. Whether any of it reaches you is a contract question worth reviewing.
• You sold or financed your refund claim. A market for purchasing tariff refund claims emerged quickly in 2026. If you assigned your claim, you generally can't also collect it.
• Your entries have already liquidated. "Liquidation" is CBP's final calculation of duties on an entry. Older entries that are finally liquidated have historically been harder to reopen, which is exactly what the later CAPE phases and pending litigation are working through. Don't assume an old entry is dead money — but don't assume it's automatic, either.

How do you actually claim it? Understanding the CAPE process

CBP calls the mechanism CAPE, and claims are filed through the ACE portal — the same system brokers use for entry filings. The claim starts with a CAPE Declaration, generally filed by the importer of record or by the broker who filed the original entries, using a CBP-provided CSV template listing the entry numbers. ACE then runs validations on the declaration and on each entry.

CBP has rolled the process out in phases:

Table reflects CBP's published phase structure as of early July 2026; details can change, so confirm current status at cbp.gov before filing.

Once a declaration is accepted, CBP has indicated valid refunds are generally issued within about 60–90 days, unless a compliance concern triggers further review. Refunds include interest.

The scale so far is encouraging. By late May 2026, CBP reported receiving over 150,000 CAPE declarations, with tens of billions of dollars in claims accepted for processing; by a June 9, 2026 court hearing, roughly $23 billion had been approved and transmitted to Treasury for payment.

Two honest cautions:

1. This is not automatic. No declaration, no refund. CBP is not mailing checks to importers who never file.
2. The litigation isn't over. In June 2026, the government appealed the CIT's universal refund orders to the Federal Circuit, arguing (among other things) that refunds shouldn't extend to importers who never filed their own lawsuits. Refunds have continued to flow during the appeal, but the outcome could affect timing or scope — particularly for importers with older, finally liquidated entries. That's a reason to file promptly and keep records, not a reason to panic.

Is your tariff refund taxable? (This is the trap.)

Here's the part that surprises almost everyone: getting your own money back can create a tax bill.

The reason is a long-standing principle called the tax benefit rule. In plain English: if you deducted an expense in a prior year and that deduction reduced your tax, then recovering that expense later generally counts as taxable income in the year you recover it.

Tariffs you paid in 2025 almost certainly reduced your 2025 taxable income — usually through cost of goods sold (COGS) as the inventory was sold, or as a deducted business expense. So when the refund arrives in 2026, it generally comes back as income on your 2026 return.

A simplified, illustrative example (your facts will differ — this is not a projection):

• Suppose a business paid $200,000 in IEEPA duties in 2025 and the full amount flowed through COGS on its 2025 return, reducing taxable income by $200,000.
• In 2026, it receives a $200,000 refund plus interest.
• Under the tax benefit rule, that $200,000 is generally includible in 2026 gross income, and the interest is generally taxable as interest income. At an assumed combined tax rate of roughly 30%, that could mean on the order of $60,000 of tax attributable to the refund — a real number to plan cash around, even though the refund still leaves the business far better off.

Now the nuances, because they matter:

• Timing depends on your accounting method. Cash-method taxpayers generally pick up the income when the refund is received. Accrual-method taxpayers generally pick it up when the right to the refund becomes fixed and reasonably determinable — which, depending on your facts and the pending appeal, may not be the same year the cash shows up. This is worth a real conversation with your CPA.
• Duties still sitting in inventory are different. If some of the refunded duties were capitalized into inventory you haven't sold yet, the refund may reduce the basis of that inventory rather than creating immediate income. The character of the recovery generally follows where the deduction went.
• The Section 111 exception. If your 2025 deduction produced no actual tax benefit — for example, because you were in a loss year — the recovery may be excludable to that extent. This is fact-specific and worth modeling.
• States get a vote. State income tax treatment generally follows federal, but conformity varies. If you file in multiple states, the refund can ripple.
• Estimated taxes. A large refund landing mid-year can leave your 2026 quarterly estimates short. Adjusting the next estimate is far cheaper than an underpayment surprise next spring.

None of this makes the refund a bad deal — it's your money, and you should claim it. It just means the after-tax refund is the number to build plans on.

What should importers do right now? A practical checklist

This is the plan we'd suggest to that South Florida importer — and to you:

1. Inventory your entries. Pull your 2025–early 2026 entry data (CBP Form 7501s or ACE reports). Your broker can identify which duty lines were IEEPA-based versus Section 232/301.
2. Check liquidation status. Unliquidated and recently liquidated entries were Phase 1 material. Older, finally liquidated entries may ride on Phase 3 and the ongoing litigation — know which bucket you're in, and calendar any protest deadlines (protests are generally due within 180 days of liquidation).
3. Decide who files. The broker who filed your entries can typically file the CAPE Declaration. Confirm in writing who's doing it, and by when.
4. File, then verify. Track the declaration through validation and keep CBP's acceptance records. If entries fail validation, fix and refile — don't let a CSV formatting issue strand real money.
5. Trace how the duties were deducted. COGS? Expensed? Still capitalized in inventory? This determines how the refund gets taxed and when.
6. Reserve for the tax. Set aside a sensible portion of any refund for federal (and possibly state) tax, and revisit your 2026 estimated payments.
7. Reprice forward. Refunds fix the past. Replacement tariffs under other statutes may still apply to what you're importing today — your landed-cost model should reflect that.

This is the moment to say the thing we say around the office all the time: problems come here to get solved. A tariff refund with a tax bill inside is exactly the kind of two-part problem where a licensed CPA or EA earns their keep — one part claims logistics, one part tax planning, both on real deadlines.

Frequently asked questions

Do I get a tariff refund automatically now that the Supreme Court ruled? Generally, no. CBP's CAPE process requires the importer of record (or its broker) to file a CAPE Declaration listing eligible entries. No filing, no refund — so if you paid IEEPA duties in 2025–2026, start the process.

Which tariffs are refundable? Generally, duties imposed under IEEPA — the early-2025 Canada/Mexico/China "trafficking" tariffs and the April 2025 "Liberation Day" reciprocal tariffs. Duties under Section 232 and Section 301 were not part of the ruling and generally remain in place.

How long do refunds take once I file? CBP has indicated that valid refunds are generally issued within about 60–90 days after a CAPE Declaration is accepted, with interest, unless compliance review slows a claim down. The government's pending appeal could affect timing for some categories, so treat any timeline as an estimate.

Is the refund taxable if I deducted the tariffs? Generally, yes. Under the tax benefit rule, amounts you deducted in 2025 that come back in 2026 are typically taxable income in 2026 — and refund interest is generally taxable too. Exceptions exist (for example, where the original deduction produced no tax benefit, or where duties are still capitalized in unsold inventory), so have your CPA look at your specific facts.

What if my entries already liquidated months ago? Don't write them off. CBP planned a Phase 3 for finally liquidated entries (targeted for late July 2026 as of this writing), and related questions are active in the courts. Gather your entry records now so you're ready when your window opens.

Sources

• Supreme Court of the United States, Learning Resources, Inc. v. Trump, No. 24-1287 (decided Feb. 20, 2026): supremecourt.gov/opinions/25pdf/24-1287_4gcj.pdf
• Congressional Research Service, "Supreme Court Rules Against Tariffs Imposed Under IEEPA" (LSB11398): congress.gov/crs-product/LSB11398
• U.S. Customs and Border Protection, "International Emergency Economic Powers Act (IEEPA) Duty Refunds": cbp.gov/trade/programs-administration/trade-remedies/ieepa-duty-refunds
• Internal Revenue Code §111 (recovery of tax benefit items) and IRS Publication 525, "Taxable and Nontaxable Income" (recoveries): irs.gov/publications/p525

This article is general information, not tax, legal, or customs advice for your specific situation. Rules and dates were current as of July 2026 and can change.

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Have a question about your own situation? Book a free 15-min call at wayg.co/book-call — or email hello@wayg.co. A real person replies within one business day.

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Related reading & tools

• Is your business affected? Start with the plain-English overview and eligibility call: wayg.co/tariff-refunds
• The bigger 2026 picture: Every 2026 Tax Change That Matters (and When It Hits You)
• Planning the refund's tax impact: Pricing & plans · Book a free 15-min call