Taking a big bite out of those fatter tax refund checks.

JPMorgan warned in a new note on Tuesday that surging gas prices will “eat up” a good chunk of consumer tax refund checks. That could set the stage for a less-than-expected growth rate in the US economy in the first and second quarters.

“Unfortunately, both the size of the boost from tax refunds and withholding changes and the size of the drag from higher energy prices are uncertain,” JPMorgan strategist Michael Hanson said. “However, there are plausible circumstances in which higher gasoline prices eat away much or all — or more — of the expected tax benefit this year. If realized, this situation would represent a downside risk to our current growth forecast for 2026.”

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The national average for gasoline has just reached $4.00 a gallon, according to GasBuddy. That marks the highest since Aug. 8, 2022. The rise is now the largest monthly increase ever recorded for GasBuddy.

Hanson stopped short of saying entire tax refund checks would be wiped out by higher energy prices, though he left the door open.

“Probably not, but it could if lost global supply pushes retail gasoline prices near $5 per gallon — or more. Every $0.10 rise in the price per gallon means over $12 billion of additional spending on gasoline versus 2025,” he added.

The average tax refund has risen to $3,571 as of late March, a significant 10.9% increase over the previous year. This surge in refund size is primarily attributed to the One Big Beautiful Bill Act (OBBBA), a landmark tax code overhaul signed by President Trump that took effect for the 2025 tax year.

A major reason for the larger checks is that the IRS did not fully adjust withholding tables to match these new tax cuts, meaning many workers overpaid throughout the year and are now receiving the benefit as a lump-sum refund.

The higher refunds are driven by several new or expanded provisions under the Trump tax code. Millions of taxpayers are claiming new deductions for tips (up to $25,000) and overtime pay (up to $12,500 for individuals).

A new $6,000 additional deduction for seniors has benefited more than 9.2 million filers so far this season. And the child tax credit was increased to a maximum of $2,200 per child, and a $10,000 deduction for auto loan interest was introduced.

Hanson said that, for the time being, those fatter refund checks outweigh the higher bills at the pump.

“We continue to assume that the benefit for this year is a bit over $200 billion, with perhaps $180 billion of that recognized in the first half of the year,” he said. “In contrast, today’s level of elevated gas prices would only incur an additional $100 hit to purchasing power, under the important assumption that this level persists for the entire year.”