Americans hoping for bigger tax refunds this spring are losing much of that extra money at the gas pump. Gas prices have surged following the outbreak of war with Iran, hurting one of President Donald Trump’s key economic claims. The national average for regular gasoline reached $3.956 a gallon on March 23, according to AAA. Just a month earlier, prices were much lower.
Trump pushed the 2026 filing season in a December speech, stating that “Next spring is projected to be the largest tax refund season of all time.”
Early IRS data indicate refunds are coming in ahead of last year, but not by as much as some of the claims suggested. As of March 6, the average refund was $3,676, up from $3,324 a year earlier, according to IRS filing statistics.
Economists now warn that the extra cash many households expected might be canceled out by higher fuel costs. Fortune, citing estimates based on Goldman Sachs oil forecasts and Tax Foundation refund projections, reported that the average household could spend about $740 more on gasoline this year.
Higher energy prices could eat your tax refund, economists say
Stanford economists assumed a three-week closure of the Strait of Hormuz with prices mostly retreating to pre-war levels by June.
They find that in this scenario, retail gasoline prices peak at $4.36 a gallon in…
— Peter Roman (@TsarKastik) March 18, 2026
This is nearly equal to the estimated $748 increase in refunds. Oxford Economics separately estimated that if gas averages $3.70 a gallon for the year, consumers would pay about $70 billion more for fuel, surpassing the roughly $60 billion increase in refunds.
The average American who is on the lower and middle-income tax bracket are expected to feel the most pressure. These families typically get smaller refunds and spend more of their income on gas. AP, in a report carried by Fortune, quoted Alex Jacquez, chief of policy at Groundwork Collaborative and a former Biden White House economist, who said, “The energy shock is going to hit those who have the least cushion.”
Julie Margetta Morgan, president of The Century Foundation, pointed out that many consumers are already relying on credit cards and buy now, pay later services to meet routine expenses.
Recent consumer spending data suggests this impact is already evident. The Bank of America Institute found that gas spending using credit and debit cards rose 14.4% in the week ending March 14 compared to a year earlier.
BIG BOOST: Americans are receiving larger tax refunds this year, even though taxpayers are filing at a slower pace than they were a year ago.
The average tax refund has climbed to $2,290 — up 10.9% from this time last year — according to the latest IRS data.
For many… pic.twitter.com/Eqv8JfpY6U
— Fox News (@FoxNews) February 17, 2026
Prior to the war that began on February 28, this category had been below last year’s levels, giving households more space for other purchases. The institute’s David Tinsley stated, “The longer gasoline prices stay high, the more that will gradually reduce consumer discretionary spending.”
Forecasts for economic growth have also been adjusted downward. Oxford Economics lowered its 2026 U.S. growth estimate to 1.9% from 2.5%, according to the AP report reproduced by Fortune. Reuters reported on March 20 that the national gas average reached $3.912, the highest level since October 2022, as the conflict in Iran disrupted oil markets and increased financial pressures on consumers.
For the White House, this comes at a tough time with devastating poll numbers and a likely loss at the midterms in November.
The administration had expected a strong refund season to drive spending early in the year. Instead, the same households that anticipated relief from larger refunds are now using more of that money for basic transportation costs. This leaves them with less for restaurants, travel, clothing, and other discretionary purchases.
