Tax Refunds Forecast: A Major Tailwind for the Economy

Tax-rebate checks are expected to start arriving in the second quarter, but most of the relief from Trump’s One Big Beautiful Bill Act is directed toward businesses.

Stocks could see another leg higher next year as taxpayers begin receiving refunds tied to President Donald Trump’s major tax-and-spending package signed this summer.

White House National Economic Council Director Kevin Hassett said Monday that typical workers, now exempt from taxes on tips or overtime, could receive an extra $1,600 to $2,000 next year. “A lot of that will come as tax refunds at the beginning of the year,” he told CNBC. Hassett is also viewed as a top contender to replace Fed Chair Jerome Powell in May.

Analysts at the Wells Fargo Investment Institute expect about $517 billion in tax refunds next year — a surge they believe will help “reignite broad consumer spending” and support both the economy and markets.

If accurate, it would be one of the largest refund years since 2017, excluding the pandemic-stimulus years.

“We expect the nearly 44% year-over-year increase to meaningfully boost consumer spending and help the U.S. economy gather renewed momentum in 2026,” wrote Jennifer Timmerman, an investment-strategy analyst at Wells Fargo.

Wells Fargo forecasts the S&P 500 ending 2025 in the 7,400–7,600 range, while the 10-year Treasury yield is expected to stay between 4% and 5%. On Wednesday, the 10-year yield was at 4.15% and the S&P 500 closed just below record highs at 6,886 — poised for a 17.1% annual gain.

Will stocks stumble early next year?

Meghan Shue, chief investment strategist at Wilmington Trust, expects the current rally to continue through December but is more cautious about the first quarter. After a strong 2025 — especially for AI-related stocks — she anticipates more volatility, selling, and profit-taking as investors rebalance.

She also notes tariff uncertainty. Many businesses may be holding off on passing higher import costs to consumers during the critical holiday season. “There could be more supply-chain pressure and more tariff price increases to come in the first quarter,” she said.

The outlook brightens in the second quarter as clarity around tariffs and tax relief improves. For consumers, that’s when tax refunds arrive. For businesses — the biggest winners under the new tax law — the payoff will depend more on capital-expenditure incentives than timing.