Tax refund surge is coming, JPMorgan strategist says, will shift US economy like stimulus

quote:

---

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.

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.

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.

---

quote:

---

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.

---

quote:

---

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

---