Bigger tax refunds are landing in Americans' bank accounts, and fresh stimulus from President Donald Trump's 2026 tax changes could translate into a tangible boost in retail spending.

An 11% increase in the average refund may look modest on paper. Yet for households facing tight budgets, that extra cash can drive incremental purchases.

IRS data through Feb. 6 shows the average individual refund rose to $2,290 in 2026 from $2,065 in 2025. Analysts expect that momentum to build through late February and March.

Refund Momentum Is Building

In a note shared this week, Bank of America analyst Lorraine Hutchinson, CFA, expects the 2026 refund increase versus 2025 to widen as the tax season progresses.

A key catalyst is now looming. Filers who claimed the Earned Income Tax Credit and the Additional Child Tax Credit cannot have refunds processed until mid-February due to a 2015 ruling.

That sets up the potential for a noticeable jump in reported refund totals in the coming weeks.

Beyond timing effects, structural changes are also at play.

Provisions from last year's One Big Beautiful Bill Act (OBBBA) are expected to deliver approximately $1,000 of stimulus per household, on average, during tax season, according to economists at Bank of America.

Measures such as a higher SALT deduction cap and the "no tax on overtime" provision are contributing to both larger refunds and smaller payments owed.

Historically, refunds peak in February and remain elevated through March and April — aligning closely with key spring retail periods.

Why This Matters for Retail

Lower and middle-income consumers tend to spend refunds rather than save them.

Early data suggests many households track those payments closely. Visits to IRS.gov climbed 35% year over year as of Feb. 6.

Last year, clothing was the largest beneficiary of tax refund spending among low-income households.

“We think this means retailers serving low/middle income consumers will see the largest lift in 2026, though stretched budgets from tariff-driven inflation means dollars are likely to be directed toward essentials first, with only the remainder flowing into discretionary categories,” Hutchinson said.

For investors, the key question isn't just how much money is coming back to households — it's where those dollars will ultimately land.

If history is any guide, value-oriented retailers could be among the first to feel the positive impact.

3 Retail Stocks In Focus

Bank of America highlighted three potential stock winners in the consumer retailer space.

• Burlington Stores Inc (NYSE:BURL): Burlington's off-price model and focus on branded apparel at discount levels make it well-positioned if refund dollars flow into clothing. Hutchinson sets a $363 price objective, implying approximately 15% upside from Feb. 19 levels.
• Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI): With a heavy emphasis on closeouts and deeply discounted goods, Ollie's serves highly value-conscious consumers — the same cohort most likely to spend refund checks. The firm carries a $150 price target, suggesting roughly 35% upside from current levels.
• Ross Stores Inc. (NASDAQ:ROST): Bank of America assigned a $200 price objective, roughly in line with current market prices. Ross operates off-price apparel and home fashion chains that cater to middle-income consumers.

Image via Shutterstock/ noamgalai

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