Tax time in America

Between all the confusing line items, exemptions, and deductions, it’s easy to see why there’s an entire industry dedicated to helping Americans file their taxes. How well-versed is the average person in tax filing? Do they expect to owe more taxes this season or get a hefty return? If so, how will they save or spend it? Empower surveyed more than 1,000 taxpayers to find out.
 

Tax refund amounts and expectations

Out of the 35% of people who filed their taxes as of February 2023, Gen Z was the most likely to have filed early (though that could be the result of delegation – 15% of Gen Zers said they are having their parents file their taxes for them this year). On average, those who have filed early are seeing smaller returns – the average refund so far this year is $1,016 dollars, $238 less than previous refunds. Those who have yet to file their taxes expect even less to come their way – on average, respondents who haven’t filed said they expected a tax refund of $792.
 

Tax refund spending plans

Across all generations, personal savings, credit card debt and groceries were the top ways respondents expected to use their tax refund, with 43% (and half of Gen Z) specifically saying they are saving their refund to prepare for a recession. Nearly one-in-five Gen Zers and Millennials said they planned to use their refund on rent, while 13% of Baby boomers and Gen Xers are planning to use the fund for vacation.

Investing for the future was also on the minds of respondents, with 20% saying they are investing in stocks, bonds or crypto currencies. 29% of Millennials and 23% of Gen Z said they planned to invest their refund, compared to just 14% of Baby Boomers and Gen Z.

Top 5 things each generation plans to spend their tax refund on:

Baby boomers

• Personal savings (33%)
• Credit card debt (31%)
• Groceries (20%)
• Retirement fund (15%)
• Vacation (14%)

Gen X

• Personal savings (37%)
• Credit card debt (36%)
• Groceries (23%)
• Vacation (13%)
• Car repairs/maintenance (10%)

Millennials

• Personal savings (37%)
• Credit card debt (33%)
• Groceries (21%)
• Rent (19%)
• Car payment (12%)

Gen Z

• Personal savings (35%)
• Credit card debt (24%)
• Groceries (21%)
• Rent (21%)
• Tuition/education expenses (13%)
   

Methodology

Empower surveyed 1,006 Americans about their taxes. This sample included 251 baby boomers, 254 Gen Xers, 259 millennials, and 242 Gen Zers. Of these respondents, 350 had already filed their taxes at the time of responding to the survey.

About Empower

Empower, a leader in financial planning, investing, and advice, is dedicated to creating financial freedom through people and technology.

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