Morgan Stanley analysts project U.S. individual tax refunds will jump 20% this season, reaching roughly $350 billion by May. This surge is attributed to President Donald Trump’s budget bill, which increased standard deductions and cut corporate taxes. The firm expects this will deliver a significant boost to personal incomes when official data is released in March.

The refund windfall is expected to support consumer spending, which drives over two-thirds of U.S. economic activity. However, analysts note that the broader spending impact may be limited to a few tenths of a percentage point in the first quarter. Higher savings and lower withholdings are seen sustaining expenditures later in the year.

This forecast arrives as recent data shows personal income growth lagging behind consumption in late 2025, causing savings rates to decline. The tax refund dynamics are expected to reverse that trend near-term. Investors will watch upcoming Commerce Department reports to gauge whether this income injection translates into sustained retail strength or merely a temporary cash infusion.