6 Ways to Make the Most of Your 2026 Tax Refund
With record amounts expected to be returned to taxpayers this year, having a plan for the money in advance is key.
You may get a pleasant surprise from Uncle Sam this spring: A bigger-than-usual tax refund. Experts are projecting that this year may set records for refunds, both in the number issued and in the average amount returned. That's because the One Big Beautiful Bill Act, which passed last summer, included several retroactive tax changes for the 2025 tax year, such as a higher standard deduction, a higher cap on property-tax deductions and an extra deduction for most taxpayers 65 and older.
But the IRS never updated the withholding tables used to determine how much tax to take out of your paycheck and other income throughout the year.
"Unless someone went in knowing about these tax cuts and adjusted their own withholding, they overpaid taxes in 2025," says Erica York, vice president of the Tax Foundation, a nonpartisan research group. "So when people file their taxes in 2026, that's when they'll receive the benefit of those tax cuts."
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The Tax Foundation projects that the average refund this year will be $3,800, up from about $3,000 for the 2023 and 2024 tax years. York says middle- and upper-income taxpayers will reap the greatest benefit, because lower-income taxpayers typically have little or no tax liability, and most of the tax changes phase out for high earners. Among taxpayers in the 60th to 80th income percentile, the Tax Foundation estimates that 98% will owe less in taxes for 2025 — $1,150 less, on average —versus what they paid in 2024.
Anticipating a tidy sum this year from Uncle Sam? Here's how to maximize the impact.
1. Reduce your financial stress.
One of the best uses for a portion of the money, experts say: Replenishing an emergency fund. If you had to dip into liquid savings to cover unexpected expenses or pay holiday bills in 2025, your refund gives you an opportunity to reset after a tough financial year.
"Everyone should have three to six months' worth of living expenses in a cash reserve," says CFP Gary Williams, president and CEO of Williams Asset Management in Columbia, Md. Two-income households may need a smaller emergency fund, while single-income families might aim for the six-month benchmark.
2. Budget for upcoming expenses.
If you know you have a big bill coming up — such as college tuition payments or major car repairs — your refund can serve as a buffer, protecting the rest of your budget.
3. Do some advance planning.
Research shows that people tend to view a tax refund as a bonus or a windfall rather than as a return of their own income. That type of mental accounting often leads to spending more of the refund than you might otherwise — unless you plan ahead for how best to deploy it.
"When people have a mindset of how they're going to use the refund, whether that's earmarking it for savings or some kind of debt reduction, they're far less likely to impulse-spend once the money hits their account," says Michelle Wolff, a certified financial planner and wealth adviser at HB Wealth in Atlanta. "Preplanning effectively removes the temptation."
The more detailed your plan, the better. Studies show that those who commit in advance to saving a specific percentage of their refund and identify a purpose for the money are more likely to follow through. They also save a larger amount than those who do not make a plan.
"With those situations in mind, you definitely want to keep that refund somewhere liquid," says CFP and accountant Benjamin Dorsey, vice president of tax services at Wealth Enhancement in Annapolis, Md. "I'd look at high-yield savings accounts."
4. Max out your HSA.
If you have a high-deductible health insurance plan and contribute to a health savings account, consider adding part of your refund to it, Williams recommends. "It comes down to the fact that an HSA has superior tax benefits over a traditional investment account," he says.
HSAs, in fact, offer a triple tax advantage: Your contributions are tax-deductible, investments in the account grow tax-free, and withdrawals for qualified medical expenses are tax-free. Account holders 65 and older can tap the account for non-medical expenses without incurring the 20% penalty that younger HSA owners must pay, although you'll have to pay income tax on those withdrawals.
HSA contribution limits for 2026: $4,400 for individuals or $8,750 for those who have family coverage. If you're 55 or older, you can add an extra $1,000.
5. Split your direct deposit.
If you haven't filed your taxes yet and intend to use your refund for multiple goals, the IRS makes it easy to divvy up the money. Using Form 8888, you can direct the agency to split your refund among up to three different accounts.
Not having to deal with the logistics of moving funds to separate locations for saving, investing and spending makes it more likely you'll follow through on your intentions, Dorsey says.
6. Right-size your withholding.
This year's withholding tables have been updated to reflect the 2025 changes in tax law. So if you, like nearly two-thirds of taxpayers, typically get money back at tax time, your refund for the 2026 tax year should return to a more typical level.
Generally, though, financial advisers say you're better off trying to align the amount withheld from your income with how much you'll actually owe in taxes. That way, you can maximize immediate cash flow for savings, debt reduction or daily expenses. To update your withholding, use Form W-4 for employee wages, Form W-4V for Social Security benefits and Form W-4P for pension and annuity payments.
"It really becomes a question of people's preferences," says Tom O'Saben, director of tax content for the National Association of Tax Professionals. "Some people love getting big refunds. Other people are happy with owing some tax at the end of the year — but the smaller that number is, the better."
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
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