As most people remember, the COVID-19 pandemic brought with it an unprecedented lockdown and a substantial amount of government support to help people survive it. During the pandemic, a total of three separate stimulus checks were paid out, which helped boost many people's savings rates and may have arguably contributed to the massive inflation that has been occurring more recently.
Now, more stimulus from the government could be coming, but in an unexpected form.
David Kelly, a chief global strategist at J.P. Morgan Asset Management, posted on LinkedIn in August that tax refunds expected in early 2026 could function similarly to stimulus checks that were sent during the pandemic.
Here's why Kelly says Americans are on track for massive stimulus payments, along with some details on what these big tax refunds could mean for your wallet and what the future of stimulus spending looks like.
Image source: Getty Images.
Massive tax refunds could act like stimulus payments
According to Kelly, Americans are expected to receive large personal income tax refunds, which may even exceed the expectations for large refunds that were communicated when President Donald Trump's "big, beautiful bill" was signed into law.
Refunds are expected to be very substantial because many of the tax cuts included in the bill took effect retroactively. In other words, the tax cuts will impact the income that you earned in 2025, even though the law wasn't passed at the start of the year.
Some of those retroactive tax cuts include the elimination of tax on tips, overtime, and car loan interest. There's also a new bonus deduction for retirees, and the amount of state and local taxes that you are allowed to deduct has increased. A permanent increase in both the standard deduction and child tax credit will also take effect retroactively.
The IRS did not adjust the 2025 W-2 or 1099 forms, though, so unless workers individually went to their employers and changed the amount they were having withheld from their pay, their employers continued to take the same amount of taxes out of their checks each week -- despite the tax law changes that will likely mean workers owe less.
The result is expected to be a huge number of large refunds that will be available when taxpayers file their tax returns in 2026 for the 2025 year.
Kelly believes that these large refunds will "work much like a new round of stimulus checks, adding to consumer demand and inflation pressures early next year."
How much money will taxpayers get?
Kelly provided an estimate of exactly what those big tax refunds could mean for consumers. According to data analyzed through mid-May, around 166 million individual income tax returns should be processed by the IRS. The processing of those income returns is likely to result in 104 million taxpayers collecting an average refund of $3,278.
That's obviously quite a lot of money. And that may not be the end of the stimulus payments that are coming.
Kelly predicted that additional stimulus money could also be made available in a more direct form. That's because when the effects of the refund fade, lawmakers will want to avoid an economic slowdown in the second half of the year that's likely to result from tariffs and reduced immigration. Lawmakers may potentially pay a tariff rebate check or a DOGE dividend to keep the economy from faltering before an election.
While getting a lot of cash in the form of a higher tax refund, and potentially an additional payment, may seem attractive, the reality is that a massive surge in consumer demand caused by these payments could make inflation worse and exacerbate the problems of surging prices that we've experienced since the pandemic payments went out in the first place.
This, in turn, could have ripple effects on the economy as a whole, including potentially causing the Federal Reserve to pause the interest rate cuts. So, while a big refund and possibly more may sound good, the long-term outcome may not be so great for consumers.
