Executive Summary 

• Fiscal stimulus remains a key pillar of the above-trend growth outlook for 2026.
• Despite fewer returns filed thus far in 2026, refund activity points to a meaningful fiscal lift for consumers.
• Rising energy costs may disrupt intentions to either save or spend tax refunds on bigger-ticket items.
• Consumer sentiment remains subdued, but spending has remained on a healthy uptrend.
• Increased tax refunds may provide support for consumers, partially offset higher energy prices, and contribute to strong growth in 2026.

Fiscal stimulus remains a key pillar of the above-trend growth outlook for 2026

• The One Big Beautiful Bill Act (OBBBA) enacted last summer is expected to provide a meaningful fiscal tailwind to the economy in 2026 and help sustain above-trend growth.
• With tax season underway, refund trends may provide one of the earliest signals that some of that support is beginning to reach consumers.

 Shown on the left is a brief breakdown of major expected economic drivers in 2026. Shown on the right are the drivers and their estimated impact on U.S. real gross domestic product (GDP) growth. GDP Baseline is an assumed long-term growth rate for the U.S. economy that is consistent with estimates used by both the Congressional Budget Office (CBO) and the Federal Reserve. Though created in good faith, there can be no guarantee that these indicators will be accurate. Actual results may differ materially from projections. 

Despite fewer returns filed thus far in 2026, refund activity points to a meaningful fiscal lift for consumers

• Although the number of filed tax returns is lagging prior years, the dollar value of refunds already issued is coming in notably higher, running 14% above last year’s pace.
• As more returns are filed and processed, the boost to household cash flow could strengthen further in the weeks ahead.

Shown on the left is the total number of tax returns received by the Internal Revenue Service (IRS) during the specified week of the filing season. Shown on the right is the cumulative total of tax refunds issued for calendar years 2024 through 2026, measured in billions of U.S. dollars. 

Consumers are expected to allocate higher refunds across a range of saving and spending categories

• Many consumers are expecting to allocate higher refunds toward categories like saving, paying down debt, and everyday expenses.
• Refund‑driven spending could contribute moderately to economic growth, particularly through everyday expenses and select discretionary categories.
  

Shown on the left is the total number of tax returns received by the Internal Revenue Service (IRS) during the specified week of the filing season. Shown on the right is the cumulative total of tax refunds issued for calendar years 2024 through 2026, measured in billions of U.S. dollars. 

Rising energy costs may dampen some of the stimulus from tax refunds

• Amid conflict in the Middle East and tensions around the Strait of Hormuz, gasoline prices are trending higher and putting added pressure on consumers.
• Even so, the boost from tax refunds appears large enough to help partially offset rising energy costs across many income groups, potentially leaving households with room to direct a portion of funds toward additional discretionary spending.

Consumer sentiment remains subdued, but spending has remained on a healthy uptrend

• Consumer sentiment remains depressed, nearing pandemic lows, amid persistent pressure from higher prices, economic uncertainty, and weakening confidence in the economy.
• At the same time, retail sales continue to trend higher, indicating that consumers are still spending despite downbeat assessments about the economy and their personal finances.
• Higher tax refunds may provide support for consumers, helping to cushion the impact of rising energy prices while contributing to stronger growth in 2026.