2026 Tax Refunds Could Function Like Stimulus Payments—Here's What J.P. Morgan's Top Strategist Expects

Will There Be a Stimulus Check in 2025? Not Directly—But Tax Season Might Deliver Something Better

The question on many Americans’ minds: will there be a stimulus check in 2025? According to David Kelly, chief global strategist at J.P. Morgan Asset Management, the answer isn’t a direct payment—but 2026 could bring something remarkably similar through unexpectedly large tax refunds.

Here’s Why Americans Should Expect Substantial Tax Refunds in 2026

When tax season arrives in early 2026, the IRS is projected to process approximately 166 million individual income tax returns. Of those, around 104 million taxpayers are anticipated to receive refunds, with an average payout of $3,278 per return. Kelly notes that these figures could actually exceed initial estimates.

The reason? The retroactive nature of recent tax legislation. Many of the tax cuts signed into law took effect on January 1, 2025—before most workers adjusted their withholdings. This means employers continued deducting the same amount from paychecks throughout 2025, even though the new tax rules entitled workers to keep more money.

What Tax Benefits Are Driving These Large Refunds?

Several retroactive tax provisions are fueling the anticipated refund surge:

• Elimination of taxes on tips and overtime pay—workers in service and manufacturing sectors will see particularly large returns
• Removal of tax on car loan interest
• Enhanced deductions for retirees, including a new bonus provision
• Increased state and local tax (SALT) deduction limits
• Permanent expansion of the standard deduction and child tax credit, both taking effect retroactively for 2025 earnings

Because the IRS didn’t update W-2 and 1099 forms to reflect these changes mid-year, most taxpayers overpaid throughout 2025 without realizing it.

Why JPMorgan Sees This as Stimulus-Like Economic Activity

Kelly’s comparison to pandemic stimulus checks isn’t casual. He argues these refunds will “function much like a fresh round of stimulus payments, bolstering consumer spending and inflation pressures in early 2026.” Given that approximately $342 billion in aggregate refunds ($3,278 × 104 million) could hit consumers’ accounts simultaneously, the economic stimulus effect could be substantial.

Could Additional Payments Follow?

Kelly suggests that once the initial refund wave’s economic impact fades in mid-2026, lawmakers may consider supplementary stimulus measures. These could take the form of tariff rebate checks or other direct payments, designed to prevent an economic slowdown caused by tariff implementations and tighter immigration policies before the next election cycle.

The Inflation Trade-Off: Why This “Stimulus” Could Backfire

However, there’s a significant downside to this refund windfall. Massive injections of consumer cash often overheat demand, putting upward pressure on prices. This mirrors what happened after the three rounds of pandemic stimulus checks—the resulting surge in consumer spending arguably contributed to the inflation spike of recent years.

If the 2026 refunds trigger similar demand spikes, the Federal Reserve may reconsider its interest rate cut trajectory, ultimately making borrowing more expensive for consumers despite their temporary cash bonuses. In other words, while the immediate refund feels like free money, the longer-term inflationary consequences could erode purchasing power and economic stability.

The Bottom Line

Americans expecting substantial tax refunds in 2026 are likely to see this prediction materialize. Whether that’s ultimately good news depends on your time horizon—short-term windfall versus long-term inflation headwinds.