How will the massive tax refunds in 2026 change consumer spending patterns

An Invisible “Stimulus Check” Is Coming

Senior analyst David Kelly of JPMorgan Asset Management recently pointed out that the large tax refunds expected by American taxpayers in early 2026 will have an economic impact comparable to direct stimulus checks during the pandemic. This forecast is based on an important tax reality—many tax benefits have been retroactively effective since 2025, and the IRS( has not adjusted the payroll withholding amounts for 2025 accordingly.

Why Will There Be Such a Large Refund?

The key issue is the timing gap. When the new tax law took effect at the beginning of the year, most American businesses and employers did not immediately adjust employees’ tax withholding. This means that throughout 2025, employees continued to pay taxes at the old rates. When the 2026 tax filing season arrives, this gap will translate into substantial refunds.

Kelly’s analysis indicates that approximately 1.04 million taxpayers are expected to receive an average refund of $3,278. The source of this windfall includes: the elimination of taxes on tips, overtime pay tax benefits, auto loan interest deductions, and new deductions for retirees. Meanwhile, standard deductions and child tax credits are also increasing.

Pressure on the Consumer Market

From a macroeconomic perspective, this concentrated refund wave will produce effects similar to stimulus checks in early 2026. A large number of consumers suddenly receiving thousands of dollars will inevitably lead to a surge in demand. Kelly believes this will “push up consumer spending and inflationary pressures early next year.”

Historically, three rounds of direct stimulus checks during the pandemic significantly boosted household savings rates but were also believed to have fueled subsequent severe inflation. The same risk now reemerges—the concentrated refund wave could once again stimulate price increases.

Are There Any Follow-up Stimulus Measures?

Kelly further predicts that as this wave of refunds gradually diminishes, policymakers may introduce a second round of direct payments to prevent the economy from weakening in the second half of the year. Considering the potential economic shocks from tariffs and immigration restrictions, the government is likely to stabilize the economy with tariff rebates or other forms of dividend checks, especially on the eve of elections.

Long-term Hidden Concerns Behind the Seemingly Good News

While receiving large refunds and possible additional stimulus payments in 2026 sounds encouraging, the potential negative effects cannot be ignored. The sudden surge in consumer demand will directly drive up prices, which could force the Federal Reserve to pause or delay its planned interest rate cuts. Consumers who experienced high inflation during the pandemic may face the same troubles again—declining purchasing power and rising living costs.

In short, this “windfall” in 2026 may stimulate economic activity in the short term, but the inflationary pressures it triggers could have more profound negative impacts on the overall economic environment in the long run.