2026 Tax Refunds Coming: What Experts Predict About the Next Wave of Economic Stimulus

Major Tax Cuts Created a Refund Surprise

When tax legislation took effect earlier this year, most workers had no idea what was coming. The law included several retroactive provisions—meaning they applied to income earned in 2025, even though the policy changes happened after the year began. This mismatch between when the law passed and when it took effect is now expected to generate enormous tax refunds coming in early 2026.

According to David Kelly, a chief global strategist at JPMorgan Asset Management, the situation mirrors the pandemic stimulus checks that shocked consumers a few years ago. The difference is that this time, the money will arrive through the tax system rather than direct government payments.

Why Are These Refunds Going to Be So Large?

Several provisions in the new tax code will impact how much Americans owe. These include the elimination of taxation on tips, overtime pay, and car loan interest. Retirees gained access to a new deduction, while the cap on state and local tax deductions increased. Perhaps most significantly, both the standard deduction and the child tax credit received permanent increases across the board.

Here’s the critical issue: the IRS never updated the 2025 W-2 and 1099 forms to reflect these changes. Most employers continued withholding the same amount from employee paychecks throughout the year, unaware that their workers would likely owe significantly less in taxes. When workers file their 2025 returns in 2026, this withholding gap should translate into substantial refunds.

The Numbers Tell a Striking Story

Kelly’s analysis points to eye-opening figures. Approximately 166 million individual income tax returns should be processed by the IRS for the 2025 tax year. Of these, roughly 104 million taxpayers are projected to receive refunds, with an average refund amount of $3,278 per person.

To put this in perspective, consider what that means for household finances. A family with two working adults could potentially see $6,500 or more returned to them. That injection of capital is precisely what JPMorgan strategists believe could function as stimulus checks coming to American consumers simultaneously.

Economic Stimulus Checks Coming, But at What Cost?

Kelly explicitly stated that these large tax refunds will “work much like a new round of stimulus checks, adding to consumer demand and inflation pressures early next year.” This comparison carries weight because the earlier pandemic stimulus payments did boost consumer spending—which also contributed to the inflationary spiral that has persisted.

The concern isn’t unfounded. A sudden influx of refunds reaching over 100 million households could create demand surges that strain supply chains and push prices higher. During a period when inflation remains a key concern for policymakers, an unplanned boost to consumer purchasing power may work against efforts to stabilize the price environment.

Additional Stimulus Checks Coming Later?

Kelly went further in his analysis, suggesting that stimulus checks coming in additional forms might materialize later in 2026. Once the initial impact of the tax refunds fades, lawmakers may face pressure to shore up economic growth in the second half of the year. Anticipated tariffs and reduced immigration could both dampen economic activity, creating political incentive for supplementary payments.

Potential options under consideration include tariff rebate checks or other direct payments designed to maintain consumer confidence and spending before election cycles. While such measures would undoubtedly benefit household finances short-term, they would likely intensify inflation concerns.

The Long-Term Trade-Off

The paradox of these incoming refunds is that what helps individuals financially might hurt the broader economy. Large-scale stimulus checks coming into the system simultaneously could force the Federal Reserve to reconsider its interest rate strategy, potentially pausing or reversing recent rate cuts.

Consumers getting thousands of dollars back through tax refunds may discover that any interest savings they enjoy are offset by higher prices across the economy. In other words, today’s financial windfall could set up tomorrow’s purchasing power erosion.