The United States closed fiscal year 2026 with a federal budget deficit of approximately $1.99 trillion, according to preliminary figures from the Congressional Budget Office and the Treasury Department. The shortfall rose about 12% from the $1.78 trillion recorded in fiscal 2025, marking the third-largest annual deficit on record and continuing a streak of consecutive yearly deficits that began after 2001.

Total outlays reached $7.4 trillion, a 6% increase, while receipts grew more slowly at 3% to $5.4 trillion. The resulting gap exceeded 6% of gross domestic product. Treasury Secretary Scott Bessent had previously targeted a reduction of that share toward 3%.

Spending Pressures and Major Outlays

Mandatory programs and interest costs drove most of the rise in expenditures. Social Security spending approached $1.7 trillion, up roughly 5%. Medicare outlays reached nearly $1.1 trillion, an increase of about 8%. Medicaid spending rose 8% to $723 billion. Military spending increased 5% to $916 billion.

Net interest on the public debt climbed to $1.14 trillion, up more than $100 billion or about 11% from the prior year. That figure now exceeds Medicare spending and stands roughly $227 billion above military outlays. Gross interest payments on the national debt surpassed $1.3 trillion. The increase stemmed from both a larger outstanding debt stock and higher long-term interest rates.

Federal debt crossed the $40 trillion threshold earlier in the year and stood near $40.3 trillion more recently. The total has more than doubled over the past decade.

Revenue Trends and One-Time Factors

Individual income and payroll taxes provided the primary support for receipts, rising by about $255 billion or 6%. Corporate income tax collections, however, declined by approximately $70 billion, or 16%, to $381 billion. The drop followed provisions in 2025 legislation that expanded deductions for business investment.

Customs duties also fell. Although gross collections set a record, refunds of more than $100 billion—and in some accounts closer to $130 billion—reduced the net total. The refunds followed a Supreme Court ruling earlier in the year that invalidated certain tariffs imposed on national-security grounds.

Education-related spending rose by $41 billion, largely because of accounting changes tied to student loan costs.

Monthly Results and Market Context

September alone produced a deficit of $27 billion to $28 billion, compared with a $198 billion surplus in the same month a year earlier. Officials noted that a holiday-related shift in payment timing contributed to the swing.

Long-term Treasury yields have moved higher amid the larger borrowing needs. Recent readings placed the 10-year note in a range near 5.19% to 5.24% and the 30-year bond between approximately 5.43% and 5.60%, levels described as multi-decade highs.

Fiscal year 2026 ended on September 30. Subsequent monthly statements from the Treasury and the Congressional Budget Office will begin tracking results for the new fiscal year.