The U.S. federal government ran a budget deficit of $1.992 trillion in fiscal 2026, the Treasury Department reported Friday, Oct. 16, in its Monthly Statement for September. The fiscal year ended Sept. 30. The figure is about 12% above the $1.775 trillion deficit of fiscal 2025 and is the third-largest annual deficit in U.S. history, behind 2020 and 2021, when pandemic stimulus inflated spending.
The Treasury figures show record revenue of about $5.40 trillion and record spending of about $7.40 trillion. WebProNews reported receipts rose 3% and outlays rose 6%. The deficit equals roughly 6% of gross domestic product; WebProNews put it at an estimated 6.2%, compared with 5.8% in fiscal 2025. It was the 25th straight year of deficits, and the last surplus came in 2001, according to CNBC.
Interest on the debt was a major driver. CNBC reported net interest topped $1 trillion, versus $970 billion in fiscal 2025, while gross interest on the public debt exceeded $1.3 trillion. WebProNews reported debt-service costs of $1.36 trillion, up 12%, or $144 billion. Social Security cost nearly $1.7 trillion and Medicare almost $1.1 trillion. WebProNews said defense spending rose $48 billion, and Yahoo News cited a Bloomberg Government analysis that the Department of Homeland Security's budget is up 146% from 2025 to 2026. Gross national debt passed $40 trillion in August and was above $40.3 trillion this week.
On the revenue side, individual income taxes brought in more than $2.8 trillion, about 7% more than a year earlier, according to CNBC. Corporate income tax receipts were $381 billion, down about $70 billion, which CNBC attributed to tax cuts in the One Big Beautiful Bill Act passed last year. Yahoo News cited the Congressional Budget Office as saying corporate collections fell 16% because larger deductions offset gains.
Tariffs were another factor. The Treasury recorded record gross customs duties, but refunds ordered after the Supreme Court struck down many of President Donald Trump's tariffs in February reduced net receipts. Yahoo News reported $144.6 billion in refunds against $317.8 billion in gross receipts; WebProNews reported $145 billion in refunds and a $22 billion drop in net tariff receipts. September's deficit was $27 billion, compared with a $198 billion surplus in September 2025.
Treasury Secretary Scott Bessent has pointed to the tariff refunds as a notable factor, and Yahoo News reported that Trump administration officials have described the year as a blip. In August he told CNBC the U.S. can "grow our way out of" its debt. The Committee for a Responsible Federal Budget has warned that annual deficits could reach $3.1 trillion by 2036 without a change in course. Bond traders sent 10-year and 30-year Treasury yields to 24-year highs last week, CNBC reported.
