The federal budget deficit topped $1 trillion in the first five months of fiscal year 2026, as the U.S. government is on pace to record another massive deficit.

The nonpartisan Congressional Budget Office (CBO) reported that the federal budget deficit was just over $1 trillion through five months of fiscal year 2026, with the size of the deficit down $142 billion or 14% when compared with the same period in fiscal year 2025.

CBO noted that federal spending was just over $3.1 trillion in the first five months of fiscal year 2026, up $64 billion, or 2%, from the same period a year ago. Federal tax revenue collected jumped $206 billion, or 11%, when compared with last year and totaled nearly $2.1 trillion.

The rise in federal tax receipts was attributed to higher collections from individual income taxes and payroll taxes, with CBO noting those accounted for about two-thirds of the increase, while higher tariff rates also increased the amount of import taxes collected.

US DEBT SET TO CRUSH WORLD WAR II RECORD AS ANNUAL DEFICITS EXPLODE TO $3T WITHIN DECADE

The federal budget deficit topped $1 trillion in the first five months of fiscal year 2026, down slightly compared with last year. (J. David Ake/Getty Images / Getty Images)

CBO said that from October through February, individual income tax collections were up $99 billion, or 10%, when compared with the same period in the prior fiscal year, while payroll tax collections rose $34 billion, or 5%.

Customs duties, a category which includes tariffs, totaled $144 billion in the first five months of fiscal year 2026 – up $109 billion, or 308%, from the same period in the prior fiscal year. 

Some of those tariffs collected may ultimately be refunded to the businesses and individuals who paid them after the U.S. Supreme Court ruled that the Trump administration’s tariffs imposed under the International Economic Emergency Powers Act (IEEPA) were unconstitutional. 

Tariff refunds would lower federal tax revenue and thereby increase the deficit, and while the Trump administration has moved to implement replacement tariffs, those may face similar legal challenges and collections could face delays.

WHAT ARE THE BIGGEST BUDGET DEFICITS IN US HISTORY?

Corporate income tax collections were down $33 billion, or 23%, in the first five months of the year due to provisions in the 2025 reconciliation bill that increased the tax deductions available to companies making certain eligible investments.

Federal spending increased the most for Social Security and Medicare, the mandatory spending programs that have seen enrollment surge in recent years amid the aging of America’s population.

Spending on Social Security totaled $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 the annual cost-of-living adjustment boosted benefit amounts, while the Social Security Fairness Act’s expansion of benefits eligibility to previously non-covered professions accounted for about $7 billion of the increase.

Medicare spending jumped $34 billion, or 9%, from a year ago to a total of $475 billion in that period, which CBO attributed to higher enrollment and increased payment rates for services.

SOCIAL SECURITY’S MAIN TRUST FUND FACES DEPLETION IN 2032, TRIGGERING BENEFIT CUTS

Another significant mandatory program saw a similar rise in spending as outlays on Medicaid also increased by $22 billion, a rise of 8%, to a total of $285 billion in the five-month period.

Interest expenses 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 the larger national debt and higher interest rates.

While spending on the Department of War rose $14 billion, or 4%, and the Department of Veterans Affairs increased $11 billion, or 7%, in the first five months of fiscal year 2026 compared with last year, several agencies saw notable decreases.

Spending by the Environmental Protection Agency (EPA) decreased by $20 billion, or 74%, though that decrease was due to a $20 billion expenditure in November and December 2024 under a clean energy grant program and no comparable outlay was made in 2025.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

A similar dynamic played out with the Department of Homeland Security, which saw spending decline by $12 billion, or 23%, due to a relative decrease in spending on disasters when compared with the prior year despite being partially offset by higher spending on immigration enforcement.

This article was written by

Follow

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Operator

Good afternoon, I’d like to welcome everyone to Repay’s Fourth Quarter 2025 Earnings Conference Call. This call is being recorded today, March 9, 2026.

I’d like to turn the session over to Stewart Grisante, Head of Investor Relations at Repay. Stewart, you may begin.

Stewart Grisante
Head of Investor Relations

Thank you. Good afternoon, and welcome to Repay’s Fourth Quarter 2025 Earnings Conference Call. With us today are John Morris, Co-Founder and Chief Executive Officer; and Robert Houser, Chief Financial Officer.

During this call, we will be making forward-looking statements about our beliefs and estimates regarding future events and results. Those forward-looking statements are subject to risks and uncertainties, including those set forth in the SEC filings related to today’s results and in our most recent Form 10-K. Actual results may differ materially from any forward-looking statements that we make today.

Forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them except as required by law. In an effort to provide additional information to investors, today’s discussion will also reference certain non-GAAP financial measures. Reconciliations and other explanations of those non-GAAP financial measures can be found in today’s press release and in the earnings supplement, each of which are available on the company’s IR site.

With that, I will now turn the call over to John.