Editor’s note: This is the fourth installment of New Year, New You, a weeklong look at your financial health headed into 2026. 

You get your W-2 in January and realize you either owe thousands in taxes or get a massive refund. Both mean your withholding was wrong all year.

Most service members set their tax withholding once during in-processing and never look at it again. Life changes. You get married, have kids, buy a house or pick up a second job. Your tax situation changes, but your withholding stays the same.

Adjusting your withholding takes five minutes and can save you from owing the IRS or giving the government an interest-free loan all year.

Use the IRS Tax Withholding Estimator First

Before changing anything, run your numbers through the IRS Tax Withholding Estimator at www.irs.gov/individuals/tax-withholding-estimator. The calculator asks about your filing status, income, current withholding, deductions and credits. It tells you whether you need to adjust.

The calculator considers multiple jobs, spouse income and other factors that affect your tax bill. Running it takes about 10 minutes and prevents you from withholding too much or too little.

Read More: The Cost of Skipping Sick Call: How Active-Duty Service Members Can Protect Future VA Claims

Changing Withholding in myPay (Most Services)

Army, Navy, Air Force, Space Force and Marine Corps members use myPay at mypay.dfas.mil. Log in and click Federal Withholding. Click the yellow pencil icon to edit.

The page lets you enter information about multiple jobs, change dependents, add additional income, make deductions or withhold extra tax. You can see when the changes take effect on the blue bar at the top of the page.

Changes typically show up on your next pay statement. If you make changes early in the month, they might appear on your mid-month paycheck. If you make them later, expect them on the end-of-month check.

State tax withholding works differently. DFAS can only withhold for states with signed agreements. Changes require submitting DD Form 2866 through myPay or by mail. Not all states allow DFAS to withhold state tax.

Changing Withholding in Direct Access (Coast Guard)

Coast Guard members use Direct Access at hcm.direct-access.uscg.mil. The system processes changes the same way as myPay. Log in, navigate to tax withholding and update your information.

Coast Guard members can also submit written requests using IRS Form W-4. Mail completed forms to the Pay and Personnel Center in Topeka, Kansas, or submit them through your Personnel and Administration office.

Read More: Here’s Why January Is the Best Time to File Your VA Disability Claim

When to Adjust Withholding

Check your withholding when major life events happen. Marriage or divorce changes your filing status. Having kids adds dependents. Buying a house affects deductions. A spouse starting or stopping work changes household income.

Military-specific events matter, too. Deploying to a combat zone makes some pay tax-free. PCS moves change state tax situations. Separation from service means losing military income but potentially gaining civilian income.

Check at the start of each year, even if your circumstances seemingly stayed the same. Tax laws change. Brackets adjust for inflation. Your situation might be different even if it seems the same.

The Balance

Withholding too little means owing taxes in April plus potential penalties. Withholding too much means getting a refund but losing access to that money all year.

Some people like big refunds and treat it like forced savings. Others would rather have the money in each paycheck to pay bills, invest or set aside in normal savings.

Neither approach is wrong. What matters is that your withholding matches your tax situation and your preference for how you receive your money.

Run the estimator. Adjust your withholding. Check it annually. This simple process prevents tax surprises.

Previously In This series:

Part 1: 2026 Guide to Pay and Allowances for Military Service Members, Veterans and Retirees

Part 2: Understanding All the Deductions on Your 2026 Military Leave and Earnings Statements

Part 3: Should You Let the Military Set Aside Allotments from Your Pay?

Part 4: This Is the Best Thing to Do With Your 2026 Military Pay Raise

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Editor’s note: This is the fourth installment of New Year, New You, a weeklong look at your financial health headed into 2026. 

The military’s regularly occurring pay raises provide an opportunity that many civilians only dream of. Not only do the annual percentage increases troops receive each January provide frequent chances to rebalance financial priorities — savings vs. current standard of living — so do time-in-service increases for every two years of military service, not to mention promotions.

Two experts in military pay and personal finance — a retired admiral and a retired general, each at the head of their respective military mutual aid associations — advised taking a similarly predictable approach to managing each new raise: 

Cut it in half.

In one variation of the strategy, a service member simply adds to their savings: whatever it is they prioritize. In the other, consistent increases in retirement contributions soon add up to a desirable threshold.

Rainy Day Fund

The active military’s 3.8% pay raise in 2026 came in a percentage point higher than retirees and disabled veterans received, meaning troops “should be able to afford the market basket of goods that the average American is afforded,” said Michael Meese, a retired Army brigadier general and president of Armed Forces Mutual.

While the veterans’ lower rate relies exclusively on the rate of inflation, Congress has the option to offer more; and in doing so is making up for recent years when the pay raise didn’t keep up with unusually high inflation, Meese said.

“So this is helping us catch up a little bit.”

He also speculated that the government shutdown “upset a lot of people” and that widespread support of the 3.8% raise across party lines and in both houses of Congress showed “that it has confidence in the military and wants to take care of the military and restore government credibility with service men and women,” Meese said.

His suggestion for managing pay raises: 

“If you’ve been living already without the pay raise and now you see this pay raise, if you can,” Meese advised, “I always said … you should save half and spend half,” Meese said. “That way, you don’t instantly increase your spending habits just because you see more money at the end of the month.” 

A service member who makes only $1,000 every two weeks, for example, gets another $38 every two weeks starting this month. Put $19 into savings, and you can put the other $19 toward “beer and pizza or whatever you’re going to do,” Meese said.

“That way you’re putting money away for a rainy day,” he said — to help prepare for a vacation, for example, “so you’re not putting those on a credit card.” If you set aside only $25 more per pay period, “at the end of the year, you’ve got an extra $300 in there, and that may be great for Christmas vacation or Christmas presents or something like that.”

Retirement Strategy

Brian Luther, retired rear admiral and the president and chief executive officer of Navy Mutual, recognizes that “personal finance is personal” — in other words, “every situation is different.” Nevertheless, he insists that “everyone should have a plan” that includes: 

• What your cash flow is
• Where your money is going
• Where you need to go in the future

But even if you don’t know a lot of those details, Luther said, the most important thing:

Luther also advised an approach based on cutting the 3.8% pay raise in half, keeping half for expenses and putting the other half into the Thrift Savings Plan. Then “that pay will work for you until you need it in retirement,” Luther said. With every subsequent increase, put half into the TSP until you’re setting aside a full 15% of your pay. 

For a relatively young service member, “Once you hit 15%, and [with] the 5% match from the government, that’s enough for your future,” Luther said. 

Previously in this series:

Part 1: 2026 Guide to Pay and Allowances for Military Service Members, Veterans and Retirees

Part 2: Understanding All the Deductions on Your 2026 Military Leave and Earnings Statements

Part 3: Should You Let the Military Set Aside Allotments from Your Pay?

Get the Latest Financial Tips

Whether you’re trying to balance your budget, build up your credit, select a good life insurance program or are gearing up for a home purchase, Military.com has you covered. Subscribe to Military.com and get the latest military benefit updates and tips delivered straight to your inbox.

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