Bigger Tax Refunds in 2026: Smart Moves for Military Families

Americans are seeing noticeably higher tax refunds this year, with early IRS data showing average refunds up 10% or more compared to last year. New tax provisions from the 2025 “One Big Beautiful Bill,” are boosting refund amounts for many households.

For military families—who juggle PCS moves, deployments, childcare, and unpredictable expenses—this year’s larger refund can be a real opportunity. The key is using it intentionally, not impulsively.

A larger refund this year can be a real opportunity for military families. PCS moves, deployments, uncertain schedules, and unpredictable expenses can play havoc on budgets, but the wise use of a tax refund can bring stability and confidence. 

Let’s look at some ways to make the most of this year’s refund and set up smarter withholding for the year ahead.

1. Start With Your Mission: What Does Your Family Need Most Right Now? - Before spending a single dollar, pause and assess your current situation. A refund is simply money you already earned—now returned to you. Treat it like a strategic asset. This quick “mission brief” helps you spend with clarity instead of emotion.

• Questions to ask:
  • Are there any overdue or upcoming bills that need attention?
  • Do we have a PCS move coming up?
  • Are we prepared for deployment‑related expenses?
  • Do we have at least a small emergency cushion?

2. Strengthen Your Financial Readiness

• Build or Rebuild Your Emergency Fund
  • Aim for at least $500–$1,000 if you’re starting. If you already have an emergency fund, consider boosting it for extra protection. Military life is unpredictable—car repairs, childcare gaps, and PCS surprises happen.
• Prepare for PCS Costs
  • Even with reimbursements, out‑of‑pocket expenses add up. Temporary lodging, pet transport, storage, and extra travel days can wreck your financial plan, especially when reimbursement is slow. Setting aside part of your refund now reduces stress later.
• Pay Down High‑Interest Debt
  • If you’re carrying credit card balances, using part of your refund here is like giving your future self a raise. Every dollar paid down saves future interest.
• Cover Medical, Dental, or Family Needs
  • Even with TRICARE, families often face dental and vision costs not covered. Special-needs equipment and childcare interruptions or transitions can create a financial emergency. Your refund can create breathing room.

3. Invest in Your Future Self

• Boost Your TSP
  • Even a small one‑time contribution can grow significantly over a military career. If you’re in the Blended Retirement System, this also helps maximize DoD matching.
• Fund Education or Skill‑Building
  • Using part of your refund for a certification, college classes, career transition prep, and spouse education can be especially valuable for families planning for post‑service life.
• Save Toward Housing Goals
  • Whether you’re preparing for a VA loan purchase or saving for future rent deposits, earmarking refund dollars now builds stability. While you can get a VA loan with no money down, every $100 of down payment you make can save over $120 in interest over the life of the loan. 

4. Allow Room for Some Joy - Financial readiness doesn’t mean zero fun.  Set aside a small percentage for something that brings your family joy, such as a weekend trip, a special meal, or a family activity. A little morale boost goes a long way!

5. Plan Your Withholding So Next Year’s Refund Isn’t Your Only “Pay Raise” - Bigger refunds feel great—but they also mean you gave the government an interest‑free loan all year. Many military families prefer to get that money in their monthly paycheck instead.

Here’s how to adjust your withholding wisely:

• Step 1: Review Your LES
  • Look at your current federal withholding.
  • If your refund was large this year, you may be withholding too much. If you owed, you nay not be withholding enough.
• Step 2: Update Your W‑4 in MyPay
  • You can adjust your withholding anytime.

A few final tips:

• If you want a smaller refund and bigger paychecks, decrease your tax withheld.
• If you owed taxes this year, increase withholding. You can choose a flat amount each month.
• You may need to update your W-4 if your life has changed this year. Marriage or divorce, birth or adoption, spouse employment changes, promotion, reenlistment bonus, a change in spousal employment, or a deployment to a tax‑free zone, as each of these can have significant tax implications.
• A financial counselor at your installation can help you determine if you should change withholding. 

Explore More with My Military Lifestyle and Finance!