* Tax refunds jump sharply due to new individual,

corporate tax breaks

* Military outlays for Iran war to appear in budget

results for later months, official says

* Customs duty collections start to wane after Trump's

biggest tariffs were invalidated

By David Lawder

WASHINGTON, April 10 (Reuters) - The U.S. federal

government's March budget deficit rose $4 billion or 2% to $164

billion from a year ago as new individual and corporate tax

breaks pushed refunds sharply higher, while relief payments to

farmers also grew, the U.S. Treasury said on Friday.

The monthly budget data did not show a major increase in

spending on the Iran war, with military and defense program

outlays rising just $2 billion or 3% to $65 billion during the

conflict's first month compared with March 2025.

But Trump administration officials have estimated that the

conflict cost $11.3 billion in its first six days alone, and

U.S. Senate Democratic leader Chuck Schumer said on Wednesday

the war's "price tag" was $44 billion, without citing the source

of that estimate.

A Treasury official told reporters that many war-related

outlays, such as for replacing expended weapons, would come in

later months.

Tax refunds for individuals in March jumped $15 billion, or

22% compared with the prior year, to $85 billion as the April

15 filing deadline approached. Corporate tax refunds also grew

$5 billion or 215%, to $8 billion as a result of new tax breaks

in last year's Republican-backed tax legislation.

These include new individual income deductions for

overtime, tips, domestic car loan interest and much higher state

and local tax payments as well as immediate expensing of

business capital expenditures and research costs.

But economists say that for many taxpayers, those bigger

refunds will be eaten up by fuel costs driven sharply higher by

the Iran war.

SIX-MONTH DEFICIT FALLS

For the first half of fiscal 2026, which started October 1,

the Treasury reported that the deficit fell $139 billion or 11%

from the same period of fiscal 2025 to $1.169 billion as receipt

growth far outstripped outlay growth.

A major driver of that reduction has been revenue from

President Donald Trump's tariffs, which brought year-to-date

customs receipts to $166.5 billion, nearly four times the $43.6

billion collected in the first half of fiscal 2025.

Customs duty collections softened in March, following the U.S.

Supreme Court's annulment on February 20 of President Donald

Trump's broadest global tariffs imposed under an emergency law.

Customs receipts totaled $22.2 billion in March, down from

$26.6 billion in February and monthly totals in the low $30

billion range late last year, but up from $8.2 billion in March

2025.

But there could be further declines ahead, as customs duties

are often paid a month in arrears. That means that most of the

March collections reflected February import entries prior to the

February 24 suspension of the 10% to 50% duties under the

International Emergency Economic Powers Act, the Treasury

official said.

On the same day, the Trump administration imposed a 10%

temporary duty on all imports and still has in place various

tariffs under other authorities.

Total U.S. receipts for March were $385 billion, up $17 billion

or 5% from March 2025, while outlays totaled $549 billion, up

$21 billion, or 4% from a year earlier. Both receipts and

outlays were March records, the Treasury official said.

After accounting for calendar-related adjustments of benefit

payments, the March deficit would have been $250 billion, up $9

billion or 4% from March 2025.

For the first half of the fiscal year, receipts totaled

$2.483 trillion, up $222 billion or 10%, while outlays grew $84

billion, or 2%, to $3.651 trillion, the Treasury said.