What's Happening?
Military service members and retirees are being advised to review and adjust their tax withholding settings as they head into 2026. This recommendation comes as part of a financial health initiative aimed at preventing unexpected tax bills or large refunds.
Many service members set their tax withholding during initial processing and fail to update it despite changes in their personal circumstances, such as marriage, having children, or acquiring additional income. The IRS Tax Withholding Estimator is a tool recommended for use to ensure that withholding aligns with current tax situations. Adjustments can be made through platforms like myPay for most military branches or Direct Access for the Coast Guard. These changes are crucial as they can prevent the financial inconvenience of owing taxes or losing access to funds throughout the year.
Why It's Important?
Adjusting tax withholding is significant for military personnel as it directly impacts their financial stability. Incorrect withholding can lead to either owing taxes at the end of the year or receiving a large refund, which essentially means the government held onto their money interest-free. By ensuring that withholding matches their current financial situation, service members can better manage their finances, either by having more money available in each paycheck or by avoiding a large tax bill. This proactive approach is particularly important given the unique financial circumstances faced by military families, such as deployments and relocations, which can affect tax liabilities.
What's Next?
Service members are encouraged to review their withholding annually or when significant life changes occur. This includes events like marriage, divorce, having children, or changes in employment status. Additionally, military-specific events such as deployments or permanent change of station (PCS) moves should prompt a review of tax withholding. As tax laws and brackets can change, staying informed and adjusting withholding accordingly can help service members avoid financial surprises. The military community is advised to utilize available resources and tools to stay updated on benefits and financial planning strategies.
