The federal government ran a $1.99 trillion deficit in the fiscal year that ended Sept. 30, according to a preliminary estimate from the Congressional Budget Office, the widest gap since 2021 and a $218 billion increase over the prior year.

The fiscal year 2026 shortfall marks a 12% jump from fiscal year 2025's $1.775 trillion deficit, according to Fox Business, which first reported the CBO's preliminary figures. Federal spending climbed roughly 6% to nearly $7.4 trillion for the year, while tax receipts grew a more modest 3%, topping $5.4 trillion.

Interest Costs Are the Fastest-Growing Line Item

Net interest payments on the national debt rose by $115 billion, or 11%, from the prior year, making it the single fastest-growing category in the federal budget, according to the CBO figures reported by Fox 29. The Congressional Budget Office is expected to release its full, finalized accounting of the fiscal year in the coming weeks.

THE LARGEST DEFICIT SINCE 2021

Corporate income tax collections fell by roughly 25%, or $96 billion, which the CBO attributed to provisions in last year's tax law. Customs duty revenue also declined by about 11%, or $22 billion — a drop that outlets covering the report linked to court rulings that found some of the administration's tariffs unlawful, undercutting a revenue stream the White House had counted on to help offset the gap.

The figures are preliminary, and the CBO has cautioned that final numbers released later this year could shift slightly as the Treasury Department closes its books. Economists have pointed to rising interest costs and an aging population's effect on entitlement spending as structural drivers of the deficit that are unlikely to ease without changes to tax policy or spending levels.