11:45 pm - February 4, 2026
Tax season is bringing more than just paperwork for Americans, as Bank of America analysts predict significant benefits for certain retail stock sectors. The bank estimates that tax refunds and reduced tax bills could inject as much as $140 billion into the US economy, creating a substantial tailwind for retail stocks during the current filing season.
According to Bank of America, the economic boost stems from several policy factors, including the state and local tax cap, potential elimination of taxes on overtime and tips, and an increased standard deduction for seniors. The bank’s US Economics team projects these policies will increase tax refunds by 26%, adding approximately $1,000 per family on average.
Tax Refunds Drive Retail Stock Performance
Bank of America analyst Robert Ohmes identified two specific categories within the retail sector positioned to capitalize on the influx of tax refund money. The analysis suggests that consumer spending patterns tied to tax refunds will create distinct opportunities across different retail segments.
The first category, value retail, is expected to benefit as lower and middle-income taxpayers direct their refund cash toward essential purchases. Additionally, these consumers are likely to use refund money for paying down existing debt obligations.
Value Retailers Poised for Growth
Value retail stocks, including Dollar General, stand to gain from taxpayers in lower refund brackets. According to the analyst, tax refunds below $3,000 typically support growth in both general merchandise purchases and spending on groceries and gas.
This spending pattern reflects the priorities of middle and lower-income households, who tend to allocate unexpected funds toward immediate needs and discretionary items. The value retail sector has historically seen increased traffic and sales during tax refund season as consumers seek to maximize their purchasing power.
Broadline Retailers Target Higher-Income Households
Meanwhile, broadline retailers like Walmart and Costco are expected to benefit from higher-income households receiving larger refunds. Bank of America notes that these retailers have strengthened their appeal through expanded same-day delivery services and enhanced e-commerce platforms.
Ohmes stated that Walmart and Costco could see greater benefits from tax refunds in 2026 compared to the previous year. However, this advantage is partly attributed to their higher exposure to middle and higher-income filers who benefit from increased standard deductions for seniors and the higher SALT cap.
Consumer Electronics Spending Expected to Rise
The analyst also anticipates increased spending on consumer electronics among broadline retail shoppers, which could create opportunities for other retail names like Best Buy. In contrast to value retail purchases, higher-income consumers often allocate tax refund money toward larger discretionary purchases and technology upgrades.
The retail sector showed strength in recent trading sessions, with many stocks posting gains amid a broader market rotation away from technology stocks. Walmart shares jumped 3% on Tuesday, pushing the company’s valuation to the $1 trillion milestone, according to market reports.
The full impact of tax season on retail stocks will become clearer as more Americans file their returns in the coming weeks. Analysts will monitor consumer spending patterns and retail sales data to confirm whether the projected $140 billion economic boost materializes as expected, though the timing and distribution of refunds remain subject to IRS processing schedules.
