Make the Most of Your 2026 Refund

The smartest way to use a tax refund starts before the money even hits your account.

The more detailed your plan, the better. Dreamstime/TCA

By Beth Braverman From Kiplinger’s Personal Finance

Anticipating a tidy sum this year from Uncle Sam? Here’s how to maximize the impact.

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.

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.

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.

“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.”

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 a health savings account (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 percent penalty that younger HSA owners must pay, although you’ll have to pay income tax on those withdrawals. 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.

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.

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.”

©2026 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC.

The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.