Wolfe Research anticipates that U.S. taxpayers, particularly those earning under $200,000, will see substantially larger tax refunds this season. This prediction follows the firm's analysis that the IRS failed to update withholding tables after the passage of the OBBB in mid-2025. As a result, nearly all the stimulus benefits from 2025 are expected to be provided through 2026 tax refunds.

The firm estimates that households with incomes below $200,000 could receive an additional $75 billion in refunds, averaging around $500 per filing. For those earning between $200,000 and $500,000, incremental SALT benefits could add about $20 billion in refunds, averaging $2,000 per taxpayer. These projections suggest a significant boost in consumer spending, especially for lower-income households.

Looking ahead, Wolfe Research notes that the 2026 tax and withholding brackets for lower incomes have increased by about 4 to 7%, which may further lift take-home pay. The firm also highlights additional savings opportunities, such as the reinstated $20,000 Form 1099-K reporting threshold and the absence of a wash sale rule for cryptocurrency. These factors could further influence consumer spending and investment decisions.

The tax refund season begins on January 26, with the largest volume of refunds historically occurring after February 15 due to rules governing refundable credits. Wolfe Research expects the season to follow a normal schedule, with the week of February 15 seeing the biggest payouts because of credits like the Child Tax Credit and Earned Income Tax Credit.