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Key Takeaways
- A tax refund can feel like a welcome bonus, though it usually reflects money you could have received in paychecks throughout the year.
- Based on the average tax refund, adjusting your withholding could add about $250 a month to your budget for bills, saving, or spending.
- Changing your withholding isn’t permanent—you can modify it if your situation changes or you decide you want a larger refund.
In a typical year, over 100 million U.S. tax filers receive a refund—and the average amount is more than $3,000. But while a big tax refund can feel like a windfall, there could be a better way to manage your finances. By adjusting your tax withholding throughout the year, you may be able to add $250 or more to your monthly budget.
Making changes now doesn’t affect the 2025 tax season, so don’t worry about giving up any upcoming tax refund you’re banking on. But making this adjustment means you can increase the flexibility of your budget while maximizing your dollars throughout 2026.
Why a Big Tax Refund Feels Like a Win (Even When It’s Not)
It’s understandable why people love tax refunds. It basically feels like getting a big bonus just for filing your tax return.
Plus, many people view tax refunds as forced savings. Instead of being tempted to spend the money throughout the year, the government gives you a big check back that you can use to tackle big goals, like paying down debt or booking a vacation.
Still, reframing how you think about this money could help you accomplish more of your goals, and do it faster. You can still get the satisfaction of receiving extra money, but you get it one or two times every month instead of just once a year.
You can even set these extra payments up so they still result in forced savings. One approach is to set up a monthly automatic transfer of $250 (or whatever your extra paycheck amount turns out to be) to a separate high-yield savings account. That can reduce your temptation to touch that money.
Why This Matters
Getting a tax refund usually means you overpaid throughout the year, essentially giving the government an interest-free loan. Adjusting your withholding increases your paycheck so you can use or earn interest on that money all year—and potentially come out ahead.
What an Extra $250+ Each Month Could Unlock for You
In 2025, the average tax refund was $3,167. Dividing that number by 12 means the typical refund recipient could have received nearly $264 more per month in take-home pay. Or, if you’re paid every two weeks, you could divide that average tax refund by 26, which would result in almost $122 more per paycheck.
Of course, your individual tax situation may look different. But you can similarly divide your last tax refund by the number of paychecks you get per year to get a sense of how much more you might keep.
Making this change does mean giving up the big tax season bonus you may be used to, but the advantages of receiving a higher paycheck throughout the year can be even greater. This extra money can help you:
The common thread is flexibility: receiving more of your money throughout the year increases your control over day-to-day decisions, rather than waiting to receive your money as a lump sum each spring.
How to Change Your Withholding—It’s Easier Than You Think
Changing your tax withholding may sound complicated, but for most people it’s a quick update, not a permanent commitment. In most cases, it just requires resubmitting IRS Form W-4 to your employer, something you can do at any time and for any reason. And the sooner you make the change, the sooner you’ll see a larger paycheck.
Have More Than One Source of Income?
If you’re married and file jointly with a spouse who works, or if you have two jobs, you may need to coordinate how you fill out your W-4s to end up with the right withholding amount.
To figure out what to adjust, you can use the Tax Withholding Estimator on the IRS’s website. Or, you might be able to make some simple adjustments by following the instructions on Form W-4, like adding that you have a dependent child if you never updated the form after having a baby.
Your HR department may also be able to help if you have any questions, and there’s plenty of information online about how to fill out these forms if you get stuck.
Note, however, that these changes only apply to your federal taxes. If you keep getting a big state tax refund, you might need to adjust a state-specific form. These go by different names in different states, such as form DE 4 in California and form IT-2104 in New York. A few states, however, follow your federal W-4, so you might only need to change that.
This Isn’t a Permanent Decision
Adjusting your withholding doesn’t lock you into anything long term. If you decide you’d rather save less per paycheck or prefer a larger refund, you can always resubmit your forms. There’s no limit on changes, though it may take a paycheck or two to show up.
For many people, getting more money throughout the year can make a real difference—like avoiding credit card balances or earning more interest on a higher savings balance. That’s why, for a lot of households, adjusting tax withholding is often worth it.
