U.S. Budget Deficit Finalized at $1.9925 Trillion; In Treasury Year-End Accounts, Net Interest Outlays of $1.0518 Trillion Exceeded Defense Spending of $965.2 Billion

United States

The U.S. fiscal deficit was finalized at $1.9925 trillion in the fiscal year 2026 (October 2025–September 2026) final accounting. The U.S. Department of the Treasury's Bureau of the Fiscal Service stated in the final edition of the September Monthly Treasury Statement (MTS) that the federal government collected $5.4033 trillion and spent $7.3958 trillion during this period. The Treasury stated in the summary at the beginning of the document that this issue contains the final budget results and presented the fiscal year 2026 deficit as $1.9920 trillion. Compared to the previous year's deficit of $1.7754 trillion, it increased by $217.1 billion.

The Federal Government Collected Only 73% of What It Spent and Borrowed the Remaining 27%

Dividing total receipts of $5.4033 trillion by total outlays of $7.3958 trillion in the Treasury's table yields 73.1%. For every $100 the federal government spent, it collected about $73 through taxes and various revenues, leaving a shortfall of about $27. This ratio is a calculated value. Dividing the $1.9925 trillion shortfall by 365 days yields about $5.46 billion per day. Dividing the previous year's deficit of $1.7754 trillion in the same way yields about $4.86 billion per day, meaning the daily shortfall increased by about $600 million.

The Treasury covered this shortfall by selling Treasury securities. In the financing section of the same table, net borrowing from the public was $2.0730 trillion, compared to $1.9731 trillion the previous year. Net borrowing was $80.5 billion higher (calculated value) than the deficit. In the same table, the Treasury's operating cash balance rose by $93.2 billion to reach $984.0 billion at the end of September. Borrowed funds were used not only to cover the deficit but also to build up the cash balance.

The U.S. fiscal year begins on October 1 and ends on September 30 each year. The official account of the Bureau of the Fiscal Service announced on October 1 that fiscal year 2027 had begun on that day and would run through September 30, 2027, advising users to follow the flow of federal dollars on the fiscal data website, Fiscal Data.

This final accounting is not a calendar-year figure from January to December 2026, but the total for the 12 months from October 2025 to September 2026. Looking at the $1.9925 trillion deficit by month, the July deficit was the largest at $432.3 billion, while April recorded a surplus of $215.0 billion. The deficit in the final month, September, was $26.9 billion.

Receipts Grew 3.2% and Outlays Rose 5.5%, Widening the Deficit by 12.2%

Compared to the previous year, the deficit widened because outlays grew faster than receipts. Total receipts increased by $168.7 billion, or 3.2%, from $5.2346 trillion to $5.4033 trillion. Total outlays rose by $385.8 billion, or 5.5%, from $7.0100 trillion to $7.3958 trillion. Because the increase in spending was 2.3 times the increase in receipts, the deficit expanded by $217.1 billion, or 12.2%. All of these growth rates are values calculated from the figures for the two years in the Treasury's table.

The Congressional Budget Office (CBO) released estimates pointing in the same direction in its Monthly Budget Review on October 8. The CBO estimated the fiscal year 2026 deficit at $2.0 trillion, stating it was $218 billion higher than the previous year. The CBO stated that receipts rose by $169 billion (3%) and outlays grew by $386 billion (6%). The CBO cited net interest on the public debt, major entitlement programs, national defense, and education as areas where spending increased.

On the spending side, the largest portion was Social Security. In the Treasury's table of outlays by function, Social Security accounted for $1.6671 trillion and Medicare for $1.0726 trillion. Social Security represented 22.5% of total outlays, and Medicare represented 14.5%. Following Social Security and Medicare, the next largest outlay was net interest. The sources of tax receipts funding these outlays are as follows.

86% of Receipts Came from Individual Income Taxes and Payroll Taxes

In the Treasury table, individual income taxes were $2.8455 trillion, accounting for 52.7% of total receipts. Social insurance and retirement receipts, commonly referred to as payroll taxes, amounted to $1.8118 trillion, or 33.5%. Combined, the two categories accounted for 86.2%. Individual income taxes rose by $189.5 billion, or 7.1%, from $2.6560 trillion the previous year, while payroll taxes rose by $63.5 billion, or 3.6%.

The corporate side moved in the opposite direction. Corporation income taxes dropped by $70.7 billion, or 15.6%, from $452.1 billion to $381.4 billion. Corporation income taxes accounted for 7.1% of total receipts. U.S. Treasury Secretary Scott Bessent said in a video posted by the Treasury Department's official account on September 27 that the "Working Families Tax Cut" passed last July 4 was beginning to take effect. Secretary Bessent said that on one side, the tax bill included full expensing for business equipment, factories, and agricultural structures, while on the other side it included the President's promised no tax on tips, no tax on overtime, tax cuts on Social Security income, and deductions for interest on auto loans for American-made cars. He described the result as "more jobs, an accelerating economy, and Americans keeping more of what they earn."

The Treasury's final accounting table does not state the reason for the decline in corporate income taxes. What is confirmed by the final figures is that individual income tax receipts increased while corporate income tax receipts decreased.

Net Customs Duties Fell to $173.2 Billion, but Gross Receipts Actually Rose

In the Treasury table, gross customs duties collections for fiscal year 2026 were $317.8 billion, and net receipts after subtracting $144.6 billion in refunds were $173.2 billion. In the previous year, gross collections were $202.4 billion, refunds were $7.5 billion, and net receipts were $194.9 billion. While gross collections rose by 57.1%, refunds increased approximately 19-fold, leading to an 11.1% decrease in net receipts. Net receipts accounted for 3.2% of total receipts.

Monthly net receipts were as follows. From October through April, monthly collections ranged from $22.1 billion to $31.4 billion, bringing the seven-month total to $188.6 billion. Starting in May, net receipts turned negative to minus $42 million, minus $25.6 billion in June, and minus $8.5 billion in July, before recovering to $12.8 billion in August and $5.9 billion in September. The five-month total from May through September was minus $15.4 billion. Adding these five months to the earlier seven months' $188.6 billion yields annual net receipts of $173.2 billion (calculated value). The quarterly figures reported by the Treasury in the September Treasury Bulletin are consistent. In the third quarter running from April through June, net customs duties were minus $3.5 billion, down $67.9 billion from the same quarter of the previous year, with the Treasury citing a $71.1 billion increase in customs refunds as part of the reason.

The reasons and recipients for the refunds are not specified in the body of the Treasury's Monthly Treasury Statement or the Bulletin. The table in the Monthly Treasury Statement also lists an annual estimate for customs duties of $406.1 billion. Actual net receipts of $173.2 billion were 42.7% of this estimate. The timing of preparation and source of this estimate column are not stated in the Treasury document.

Net Interest Outlays Were $1.0518 Trillion, Exceeding Defense Spending by $86.6 Billion

In the Treasury table of outlays by function, net interest was $1.0518 trillion, up $81.4 billion, or 8.4%, from $970.4 billion the previous year. National defense was $965.2 billion, with net interest exceeding it by $86.6 billion, or 9.0%. In terms of spending size, the order was Social Security, Medicare, net interest, health, and national defense. In the previous year as well, net interest of $970.4 billion surpassed national defense of $916.6 billion; thus, interest spending exceeding defense spending is not occurring for the first time, and the gap has widened further.

Calculating the share of tax receipts taken up by net interest yields 19.5%. For every $100 collected in taxes and revenues, about $19.50 went toward Treasury interest, compared to $18.50 in the previous year. As a share of total outlays, it rose to 14.2% from 13.8% the previous year. On a daily basis, net interest alone amounted to about $2.88 billion. All three ratios are calculated values based on figures in the Treasury table.

Net interest and interest on the public debt are not identical figures. In the Treasury table, interest on the public debt administered by the Department of the Treasury (gross amount) was $1.3600 trillion, an increase of $144.3 billion, or 11.9%, from $1.2156 trillion the previous year. On a gross basis, it represented 25.2% of receipts and 18.4% of outlays. The difference between the gross amount and net interest was $308.2 billion.

Interest on the Public Debt Has Already Surpassed the Table's Full-Year Estimate

In the Monthly Treasury Statement table, there is an "Estimated Full Year" column next to the current fiscal year to date. In this column, estimated total receipts are $5.4757 trillion and estimated total outlays are $7.5404 trillion. Actual receipts were $72.4 billion below the estimate, and actual outlays were $144.6 billion below the estimate. Subtracting the two estimates yields an estimated deficit of $2.0647 trillion, and the actual deficit of $1.9925 trillion is $72.3 billion smaller than that figure. This estimated deficit is not a figure announced by the Treasury, but a value calculated from two entries in the table.

Gross interest on the public debt exceeded the estimate of $1.3013 trillion by $58.7 billion, or 4.5%. Conversely, net customs duties reached only 42.7% of the estimate. Within the same table, interest outlays exceeded estimates while customs receipts fell short of estimates.

The same table also contains estimates for the upcoming fiscal year, fiscal year 2027: total receipts of $5.9210 trillion and total outlays of $8.0929 trillion. Calculating the difference between the two entries yields $2.1719 trillion. This is also a calculated value. In the fiscal year 2027 estimates, outlays surpass $8 trillion and the gap with receipts exceeds $2 trillion.

Total Federal Debt Reached $40.1718 Trillion, Rising $2.5343 Trillion in One Year

In the Monthly Treasury Statement's financing table, total public debt outstanding grew by $2.5343 trillion, or 6.7%, from $37.6376 trillion at the start of fiscal year 2026 to $40.1718 trillion at the end of September. Of this amount, debt held by the public rose by $2.1472 trillion, or 7.1%, from $30.2778 trillion to $32.4250 trillion. The remaining $7.7468 trillion is debt held by federal government accounts. Adding the portion held by the public to the portion held by federal government accounts yields the total balance of $40.1718 trillion (calculated value). Total debt was approximately 7.4 times total receipts for this fiscal year, and debt held by the public alone was 6.0 times total receipts. Both multiples are also calculated values.

In the Treasury's daily debt dataset, Debt to the Penny, the first date on record when total debt surpassed $40 trillion was August 18, when total debt stood at $40.0474 trillion. In the most recent record on October 22, it stood at $40.4443 trillion, an increase of $272.5 billion from the end of September. Debt increased by that amount in just over three weeks since the start of the new fiscal year. In the same dataset, total debt fell slightly from $40.1756 trillion on August 31 to $40.1718 trillion on September 30.

As debt increases, interest grows as well. In the average interest rates dataset of the Treasury's Bureau of the Fiscal Service, the average interest rate on total interest-bearing Treasury securities rose from 3.363% on September 30, 2025, to 3.531% on September 30, 2026. Both the volume of debt and the average interest rate rose simultaneously.

Treasury Yields Rose Over the Year, with the 10-Year Climbing from 4.16% to 5.29%

On the Treasury yield curve published daily by the U.S. Department of the Treasury, the 10-year yield was 4.16% on September 30, 2025, and 5.29% on September 30, 2026. The 2-year yield rose from 3.60% to 4.88%, and the 30-year yield increased from 4.73% to 5.64%. In the most recent values on October 23, the 10-year was at 5.00%, the 2-year at 4.69%, and the 30-year at 5.33%.

Treasury yields represent the federal government's borrowing costs and are frequently used in markets as benchmark reference points for long-term interest rates. For those who deposit in dollar assets, buy bonds, or borrow in dollars, these yields serve as the benchmark for interest rates. Over the same period, the deficit widened from $1.7754 trillion to $1.9925 trillion, total debt rose from $37.6376 trillion to $40.1718 trillion, and the 10-year yield climbed from 4.16% to 5.29%.

In a structure where individual income taxes and payroll taxes account for 86.2% of federal receipts, net interest consuming 19.5% of receipts means that for every $100 paid in taxes, about $19.50 went toward interest on previously borrowed money. This share rose by 1.0 percentage point from 18.5% the previous year. What is paid out in interest represents money that cannot be freshly allocated to roads, national defense, or social welfare.

CBO Projections and Treasury Figures Point to Ongoing Deficits Around $2 Trillion

The Congressional Budget Office's Budget and Economic Outlook: 2026 to 2036 projected the 2026 deficit at $1.9 trillion, outlays at $7.4 trillion, and revenues at $5.6 trillion. In the CBO projections, net interest equals 3.3% of gross domestic product (GDP) in 2026 and rises to 4.6% by 2036. The actual final accounting showed outlays of $7.3958 trillion, receipts of $5.4033 trillion, and a deficit of $1.9925 trillion. By category, projections versus actual results were $7.4 trillion versus $7.3958 trillion for outlays, $5.6 trillion versus $5.4033 trillion for receipts, and $1.9 trillion versus $1.9925 trillion for the deficit. Outlays were in line with projections, while the deficit was slightly larger than projected.

The Treasury announced in the document that the next Monthly Treasury Statement, covering October 2026, will be released on November 12 at 2:00 p.m. (EDT). That release will provide the first confirmation of whether the first month's deficit in the new fiscal year continues the trend seen in this final accounting. In fiscal year 2026, U.S. public finances covered 27% of outlays by borrowing, operating at a scale of borrowing roughly $2 trillion annually. Individual income taxes and payroll taxes accounted for 86.2% of receipts, while corporation income taxes dropped 15.6% to $381.4 billion. Total national debt surpassed $40 trillion, and net interest outlays on that debt stood at $1.0518 trillion, exceeding national defense spending of $965.2 billion and surpassing $1 trillion.

Sources (KST)

• U.S. Department of the Treasury Bureau of the Fiscal Service, "Monthly Treasury Statement, September 2026" (dataset page updated 2026-10-23): https://fiscaldata.treasury.gov/static-data/published-reports/mts/MonthlyTreasuryStatement_202609.pdf
• U.S. Department of the Treasury Bureau of the Fiscal Service, Debt to the Penny: https://fiscaldata.treasury.gov/datasets/debt-to-the-penny/
• U.S. Department of the Treasury Bureau of the Fiscal Service, Average Interest Rates on U.S. Treasury Securities: https://fiscaldata.treasury.gov/datasets/average-interest-rates-treasury-securities/
• U.S. Department of the Treasury Daily Treasury Par Yield Curve Rates: https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve
• Congressional Budget Office (CBO) Monthly Budget Review (2026-10-08) and The Budget and Economic Outlook: 2026 to 2036
• Posts on X (U.S. Department of the Treasury Bureau of the Fiscal Service @FiscalService, U.S. Department of the Treasury @USTreasury): https://x.com/FiscalService/status/2105719512796385753 , https://x.com/USTreasury/status/2104238356460642529