A tax-refund surge is coming, JPMorgan strategist says — and it’ll shift US economy like a new round of stimulus checks

Overview

A major increase in U.S. tax refunds is expected for early 2026, according to JPMorgan Asset Management’s chief strategist, David Kelly. This is due to new tax breaks from the “One Big, Beautiful Bill Act” (OBBBA), retroactively effective from January 1, 2025, while tax withholding rates in 2025 will remain unchanged, as announced by the IRS. As a result, taxpayers will likely pay regular rates throughout the year and receive larger refunds when filing 2025 taxes in 2026.

Key Facts

Taxpayers could see an average refund increase to $3,743, up by about $557 from last year's $3,186 average.
Refunds are expected to act similarly to previous rounds of stimulus, quickly boosting consumer demand and inflation at the start of 2026.
The IRS’s decision not to adjust withholding schedules means the extra tax savings from OBBBA provisions will be mostly refunded in a lump sum, rather than spread throughout 2025 paychecks.
Provisions include: no income tax on tips, overtime, auto loan interest; increased SALT deduction; permanent increases in standard deductions and child tax credits; bonus deduction for those 65 and older.
Up to 110 million refunds may be processed, assuming two-thirds of tax break savings are paid out as refunds.

Economic Implications

“This rush of tax refunds…is going to be like extra stimulus. When people get a stimulus, they tend to spend it quickly, leading to a surge in spending and second-round inflation.”
— David Kelly, JPMorgan Asset Management

While increased refunds will provide a temporary economic boost (“economic sugar rush”), spending may slow substantially later in 2026 once most refund money is used and supply constraints—such as tariffs—raise costs.

Possible Unintended Consequences

The distribution of refund increases will not be uniform; some groups may benefit more than others.
There’s potential for higher inflation and subsequent reduction in consumer spending after the initial boost.
Policymakers, such as the Federal Reserve, might delay interest rate cuts due to this temporary surge in demand.

Author’s Summary

JPMorgan expects a record tax refund surge in early 2026 due to new tax breaks, likely delivering a sharp yet short-lived boost to the U.S. economy, with mixed long-term effects on growth and inflation.

AOL.com — 2025-11-30

Overview

Key Facts

Economic Implications

Possible Unintended Consequences

Author’s Summary

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