Washington DC. Due to customs duty refunds and interest payments on national debt exceeding $40 trillion, the US budget deficit for fiscal year 2026 has increased by $217 billion to nearly $2 trillion.
According to data released by the US Treasury Department on Friday, this is the largest budget deficit in five years.
The continuous increase in spending on social welfare programs such as Social Security and Medicare, along with a $48 billion increase in defense spending, has also contributed to the budget deficit. A deficit of $1.99 trillion was recorded for the fiscal year ending September 30, which is President Donald Trump’s first full budget year of his second term.
This deficit is higher than the $1.78 trillion in fiscal year 2025. It is the second-largest deficit after the $2.77 trillion deficit in fiscal year 2021 due to COVID-19 pandemic relief spending, and the third-largest annual budget deficit in US history.
In fiscal year 2026, total revenue collection reached a record $5.40 trillion, an increase of $169 billion, or 3 percent, from $5.24 trillion in fiscal year 2025. Similarly, total spending for fiscal year 2026 also reached a record $7.40 trillion, an increase of $386 billion, or 6 percent, compared to $7.01 trillion in the previous fiscal year.
Interest payment on debt alone reached a record $1.36 trillion, an increase of $144 billion, or 12 percent. This spending category has now become the second largest after the combined spending on Social Security, Medicare, and medical assistance. About two months ago, the total US debt crossed the $40 trillion mark.
Another reason for the widening budget deficit is a $22 billion decline in net customs duty revenue. This decline occurred after the Supreme Court’s decision this year to revoke a large portion of the customs duties imposed by Trump during his first term. Due to that decision, $145 billion in customs duties had to be refunded this year, causing net customs revenue to decrease by 11 percent to about $173 billion.
Year-round defense spending increased by 6 percent to $917 billion. An official from the US Treasury Department stated that it is unclear how much spending increased due to the war initiated by Trump and Israel against Iran at the beginning of this year.
According to Treasury Department officials, the department has calculated the estimated budget deficit for fiscal year 2026 and its ratio to gross domestic product (GDP) to be 6.2 percent. However, he declined to disclose which GDP estimate was used. This figure is higher than the actual deficit-to-GDP ratio of 5.8 percent in fiscal year 2025.
For the final month of fiscal year 2026, September, the Treasury Department reported a deficit of $27 billion, whereas the same month last year had a surplus of $198 billion.