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

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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, 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 Jan. 1, 2025. However, the Internal Revenue Service (IRS) has confirmed that it will not be adjusting tax withholding rates in 2025 (1).

In other words, many taxpayers will pay more upfront and get a bigger refund in 2026. Kelly 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 broader economy. Plus, uncertainty is still looming, given the federal government has shut down as of Oct. 1. Lawmakers failed to reach a deal to pass a short-term funding bill, and the Democratic party is pushing for the reversal of some health care and social benefits cuts made in the OBBBA.

The OBBBA contains hundreds of provisions. Although some of those provisions are tax cuts, these cuts are focused on specific groups. For instance, the OBBBA provided a $6,000 deduction for taxpayers age 65 and over. That tax deduction phases out when income exceeds $175,000 for a single filer or $250,000 for joint filers.

Employees and self-employed individuals may also deduct qualified tips from their income, with the deduction phasing out for taxpayers with adjusted gross income over $150,000 ($300,000 for joint filers).

Then there is the Child Tax Credit, which has been increased from $2,000 up to $2,200 and is adjusted for inflation going forward.

“All of these tax breaks, with the exception of the child tax credit, are in the form of deductions” Kelly writes. “This means that the higher your marginal tax rate, the greater the value of the deduction” (1). That is, up to the point at which your income is so high that the tax cut is tapered out entirely.

Meanwhile, the Trump administration’s decision to hike tariffs impacts all consumers.

While the Trump administration is cutting taxes on personal income, it’s also raising import taxes, also known as tariffs. 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.

“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, which can disproportionately impact higher income households, 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 … You are going to get a second round of inflation.”

While inflation is back at 3%, Kelly estimates it could rise back up to 3.5% by the end of the year (3).

Read more: Warren Buffett used 8 simple money rules to turn $9,800 into a stunning $150B — start using them today to get rich (and then stay rich)

Although there’s no crystal ball to predict inflation or tariff rates, you can work with a financial planner to get a fair estimate of your tax refund well before tax season.

With Advisor.com, you can get matched with multiple qualified financial advisors in just minutes.

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Beyond understanding your future tax situation and then working within a tight budget, there are other ways to protect your earnings against inflation.

Investing can offer better protection than a checking or savings account. That said, stock market performance can be volatile.

This is where investments like real estate and gold can become attractive alternatives.

For instance, with a gold IRA through Thor Metals, you can invest directly in physical precious metals, like gold, rather than stocks and bonds.

Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold, making it an attractive option for those looking to hedge their retirement funds against economic uncertainties.

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

This article originally appeared on Moneywise.com under the title: A tax-refund surge is coming, JPMorgan strategist says — and it’ll shift US economy like a new round of stimulus checks

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