Tax Season Spending Surge: How Retailers Can Profit Despite IRS Uncertainty

Consumer spending never moves in a straight line. Instead, it ebbs and flows based on a number of factors, some more predictable than others. One of the most reliable indicators of consumer spending is the calendar. We’re all aware that people spend more during the holiday season — so much that many businesses plan their entire year around those three months. 

But as the new year begins, economic uncertainty often shapes consumer behavior. This year, potential changes to the Internal Revenue Service (IRS) have added another layer of unpredictability, causing experts to advise taxpayers to file early and lock in their refunds. For businesses, this evolving landscape makes it even more critical to plan ahead and position themselves for the next major spending surge — tax season.

The Post-Holiday Dip and the Tax Season Surge

What goes up must inevitably come down, and the post-holiday fall can be steep. Many retailers see their revenue decline by as much as 22% from December to January as consumers dial back their spending to recover from holiday splurging. However, just as businesses brace for this slowdown, another significant spending wave is on the horizon — tax season.

Historically, tax refunds have provided a predictable financial boost for consumers, driving spending across industries. In 2024, the average individual tax refund was just over $3,000 per filer — money that technically belonged to taxpayers all along (Uncle Sam was just holding it for safekeeping). 

However, uncertainty surrounding tax policies this year could affect how and when consumers receive these funds, potentially shifting spending patterns. Regardless, the overall trend holds: tax refunds create a unique seasonal opportunity that businesses can leverage with the right marketing approach.

Industries That Benefit Most

By the time the spring surge tapers off in June and July, a few standout retail sectors will have seen their volume double over January’s numbers. These industries are primed to benefit the most:

The Automotive Black Friday

If there’s one vertical that benefits most from tax season spending, it’s automotive. For auto repair shops and car part suppliers — both Original Equipment Manufacturers (OEM) and aftermarket — this period is akin to a three-month-long Cyber Week.

This surge makes sense: people often postpone expensive car maintenance and repairs until they have extra cash. With a fresh influx of money in the spring, it’s time to purchase a new set of tires, fix that nagging air conditioning issue or splurge on an upgrade that wasn’t justifiable during the rest of the year.

A Home Improvement and Furnishing Boom

While automotive takes the lead, it’s not the only sector with a noticeable spring boost. Tax refunds often fund big-ticket home purchases that consumers have been eyeing all year. Whether it’s improvement projects like new flooring and countertops or major furnishings like beds and couches, these purchases tend to fall outside the regular household budget. With uncertainty around future tax policies, some homeowners may be even more inclined to invest in upgrades while they have cash in hand.

High-Value Electronics and Apparel

Electronics retailers see a spring revenue surge as people invest their returns in high-value purchases like laptops, TVs and smartphones. Meanwhile, the rise in spending on clothes almost rivals the automotive industry as people make seasonal upgrades to their wardrobes. That’s one reason spring sales are so common in the apparel industry.

Other Notable Beneficiaries

Tax refunds also fuel discretionary spending across other sectors. Travel and tourism see a bump as people book vacations. Personal services like massages and spa treatments experience a surge, and even luxury retailers benefit as consumers splurge on high-price items like jewelry, watches and designer handbags.

Maximizing the Opportunity

To make the most of this seasonal spike, businesses must take a strategic approach to their marketing efforts.

Reading the Signs

Success begins by looking back at historical data. Smart businesses analyze past sales performance to identify their tax season surge window. While the COVID years should be excluded due to inflated eCommerce spending, data from 2024, 2023 and 2015–2019 (if available) can provide valuable insights. Metrics like conversion rates, average order value (AOV) and overall traffic help businesses determine when consumers start loosening their wallets.

Getting Ahead of the Surge

Once a business identifies its optimal window, it can proactively invest in demand generation and demand-capturing advertising channels. This means ramping up spending across search, YouTube, display and paid social. Higher funnel activities — particularly video, display and paid social campaigns — should be launched earlier to ensure brand visibility when consumers have money in hand.

Maintaining Momentum

As the spending surge begins, businesses can further leverage consumer demand by running spring promotions timed to match the seasonal uplift in spending. With economic uncertainty lingering, consumers may be more price-sensitive than in previous years, making competitive offers even more essential. Brands that continue investing in demand-capture channels during the surge stand a better chance of securing those dollars.

Slowing Down Again

Like all seasonal trends, the spring surge inevitably ends. Once tax refunds are spent, consumers shift into vacation mode as summer approaches, spending less on physical goods and eCommerce. While revenue typically doesn’t drop back to January lows, it won’t pop back up again until the holiday season. Businesses should monitor key metrics — AOV, traffic, conversions and revenue — for signs of this seasonal shift and adjust their strategies accordingly.

Stay Ahead of Refund Season

While the holiday season rightfully captures the majority of retail planning and attention, savvy businesses are quickly learning not to overlook the spring spending surge. Tax season represents one of the few times in the year when consumers have both the resources and motivation to make big purchases.

However, with potential IRS and tax policy changes on the horizon, businesses must be even more proactive in their approach. A well-executed strategy — built on historical insights, early brand awareness efforts and strategic promotional timing — can help retailers navigate uncertainties and capture their share of refund-fueled revenue.

While the spring surge may never rival Black Friday, it can provide the crucial lift businesses need to bridge the gap between the January lull and summer slowdown. And in an increasingly competitive market, that’s an opportunity no business can afford to ignore.

Article Contributed by

David Johnson, Senior Vice President of Enterprise Paid Media at Logical Position