Presented by Axial Financial Group. 

After wrapping up your 2025 tax return, now is a great time to revisit your financial strategy for the year ahead. One area getting renewed attention is paycheck withholding — and whether adjusting it could improve your cash flow in 2026.

Recent public commentary has encouraged workers to consider updating their tax withholding elections to increase take-home pay throughout the year. While that may sound appealing, financial professionals caution that it’s not a one-size-fits-all move — and getting it wrong could create problems later.

What Changing Your Withholding Actually Does

Your paycheck withholding is essentially a prepayment toward your annual tax bill. If too much is withheld, you’ll receive a refund. If too little is withheld, you could owe money — potentially along with penalties.

Adjusting your withholding can shift when you receive your money:

• Lower withholding → more money in each paycheck, smaller (or no) refund
• Higher withholding → less take-home pay, but potentially a larger refund

The key is finding the right balance based on your individual situation.

Why Caution Is Important

While increasing your take-home pay now might feel like a win, under-withholding can lead to an unexpected tax bill when you file next year. That’s why financial professionals recommend avoiding quick or generalized changes.

Withholding calculations are influenced by several factors, including:

• Income level and multiple income sources
• Filing status
• Dependents
• Tax credits and deductions

Even small changes in any of these areas can affect your overall tax liability.

A Smarter Approach to Adjustments

Instead of guessing, a more thoughtful strategy starts with reviewing your most recent tax return. Your total tax liability from 2025 can serve as a helpful baseline for 2026 — assuming your financial situation hasn’t changed significantly.

From there, you can:

• Estimate your expected income for the current year
• Divide last year’s total tax by your number of pay periods
• Compare that figure to what’s currently being withheld from each paycheck

If there’s a noticeable gap, it may be worth making an adjustment.

Use the Tools Available to You

The IRS offers a free Tax Withholding Estimator that can help you calculate a more precise withholding amount and generate an updated Form W-4 for your employer. This can take much of the guesswork out of the process.

In addition, working with a financial professional can help ensure your withholding strategy aligns with your broader financial plan. Your Axial advisor can provide guidance around tax planning, help you stay organized throughout the year, and make strategic adjustments based on your unique situation — rather than relying on general rules of thumb.

When You Should Revisit Your Withholding

Even if you don’t adjust it now, it’s wise to review your withholding whenever you experience a major life or financial change, such as:

• A new job or additional income
• Marriage or divorce
• Having a child
• Significant changes in deductions or credits

The Bottom Line

Adjusting your withholding can be a useful tool — but it’s not simply about increasing your paycheck. It’s about aligning your tax payments with your actual liability to avoid surprises.

Taking a measured, informed approach can help you make the most of your income while staying on track at tax time.

Axial Financial Group. All Rights reserved. 1 Van de Graaff Drive, Suite 500Burlington, Massachusetts. 781.273.1400

This content was created using generative artificial intelligence. Output used in this material has been verified by the author/advisor.