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

There’s a fresh wave of tax refunds coming for Americans in 2026. That’s according to the chief strategist at JPMorgan Asset Management, David Kelly.

In a note published on LinkedIn, (1) Kelly explained that many of the tax cuts announced as part of President Donald Trump’s One Big Beautiful Bill Act (OBBBA) are retroactively effective from January 1, 2025. However, the Internal Revenue Service (IRS) has confirmed that it will not be adjusting tax withholding rates in 2025.

In other words, many taxpayers will pay more upfront and get a bigger refund in 2026. He estimates that the average refund could be roughly $3,743 — that’s up from the average refund of $3,186 for the previous tax year, according to the IRS. (2)

An extra $557 in tax refunds sounds like good news, but Kelly warns that this wave of repayments is not spread equally and could have unintended consequences for the wider economy.

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Lopsided benefits

Although the OBBBA cuts taxes, these cuts are focused on specific groups. For instance, the elimination of income taxes is focused on those who earn overtime and tips, while the auto-loan interest deductions are for car owners who purchased a vehicle assembled in the U.S. and financed it recently.

There’s also a new deduction for seniors over the age of 65 and a boost to the child tax credit.

“All of these tax breaks, with the exception of the child tax credit, are in the form of deductions rather than credits,” Kelly writes in his article. “This means that the higher your marginal tax rate, the greater is the value of the deduction.” (1)

In other words, the higher your income the more you benefit from many of these changes to the tax code. Meanwhile, the Trump administration’s decision to hike tariffs impacts all consumers.

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Inflation reignition

While the Trump administration is cutting taxes on personal income, it’s also raising import taxes (also known as tariffs) on imports. In an interview with Bloomberg, Kelly estimated that the current effective tariff rate is 8% and could rise to 14.5% in the near-future. (3)

“People say the retailer is going to eat it — no they’re not, they just wrote the check,” Kelly explained. “Of course, it looks like they’re eating it [but if] Walmart writes a check eventually they’re going to pass it on.” (3)

Tariffs in effect as of September, 2025, could cost U.S. households up to $2,400 on average, according to Yale’s Budget Lab. (4) Unlike the OBBBA tax cuts, these import taxes have a greater impact on poor households because a larger share of their income is spent on buying essentials, according to the Tax Foundation. (5)

The combination of tariffs and tax refunds could create economic conditions that are similar to the Covid pandemic, according to Kelly. (1)

“The big kicker here, that people are not talking about, is this huge rush of income tax refunds that’s going to kick in at the start of next year is going to be like an extra stimulus check,” he said. “And we’ve seen what happens…you give an American consumer a stimulus check, they will spend it. And you can have a surge of spending in the first half of next year with limited supply because of all these tariff and supply chain disruptions. You are going to get a second round of inflation.” (3)

Kelly estimates inflation could hit 3.5% by the end of the year.

What can you do?

Although you can’t predict inflation or tariff rates in this environment, you could get a fair estimate of your tax refund well before tax season. Reach out to a financial planner or tax expert to see if any of the new deductions or tax credits apply to you and how big your refund could actually be.

Once you have a fair estimate of your refund, you can use that as an offset for any surge in consumer prices that lay ahead. A tight and robust budget could be your primary defense against any unexpected inflation.

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

LinkedIn (1); IRS (2); Bloomberg Television (3); The Budget Lab (4); Tax Foundation (5)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.