USAA Study Reveals Taxpayers Expect Smaller Refunds in 2013

Taxes are a certainty, but for many Americans how much they will get back this year is less certain. According to USAA’s 2013 Tax Season Survey, American taxpayers are less optimistic about this year’s tax refund than they were last year, and more than half of those surveyed (53 percent) expect to receive a smaller refund than they did in 2012.

“It’s interesting – but not surprising – to see the negative sentiment among taxpayers,” said Scott Halliwell, CERTIFIED FINANCIAL PLANNER® at USAA. “With all that’s taken place in Washington over the past few months, a lot of people are confused and concerned about how it will impact their taxes. Continued economic volatility and ambiguity around the effects of sequestration have many confused and concerned about their tax refunds. Interestingly, Gen Xers appear to be much more skeptical about their refunds than their younger Millennial counterparts.”

According to the survey results, nearly 65 percent of Gen Xers (35-44) expect a smaller refund than last year, compared to 42 percent of their Millennial peers (18-34). In fact, more than half of Millennial taxpayers (56 percent) expect the same or higher refund this year. In addition to increased optimism about a higher return, the survey showed that 63 percent of Millennials who have not yet received this year’s refund plan on stashing their cash in savings – an 11 percent increase compared to how they allocated last year’s refund.

“Using your tax refund to shore up your emergency fund can be a great idea,” says Halliwell. “Typically, we recommend having an emergency fund of three to six months’ worth of committed expenses so that if an unplanned situation arises, you won’t have to go into debt to handle it.”

However, even with some survey respondents planning to make more informed decisions with their tax refund, seven percent fewer of those surveyed plan to pay down debt with their refund money compared to last year.

“A tax refund also presents a great opportunity to pay off some debt or even wipe the slate clean,” says Halliwell. “It’s okay to allocate a small percentage of your refund for travel or something on your wish list, but most of the money should be put toward savings or managing your debt.”

USAA commissioned the survey to determine taxpayer sentiment around this year’s tax refund.

About USAA

USAA provides insurance, banking, investment and retirement products and services to 9.4 million members of the U.S. military and their families. Known for its legendary commitment to its members, USAA is consistently recognized for outstanding service, employee well-being and financial strength. USAA membership is open to all who are serving or have honorably served our nation in the U.S. military – and their eligible family members. For more information about USAA, or to learn more about membership, visit usaa.com.

Survey Methodology

The 2013 Tax Season Survey was commissioned by USAA to provide information comparing consumer sentiment and tax refund spending habits between 2012 and 2013. ORC International conducted telephone interviews using a dual frame sampling design involving a combined sample of landline and cell households. A total of 658 interviews were from the landline sample and 350 interviews from the cell phone sample. Interviews were conducted during the period of Feb. 22-24, 2013, with 1,008 adults in a random sample of households (one interview per household). ORC weighted the survey results by four demographic characteristics – age, sex, geographic region and race – to ensure reliable and accurate representation of the total U.S. population 18 years of age or older. The raw data are weighted by a custom-designed program which automatically develops a weighting factor for each respondent. The report is based on a weighted total sample of 1,000 respondents. The sampling error associated with a sample size of 1,000 is plus/minus 3.1 percentage points at a 95 percent confidence level.

Certified Financial Planner Board of Standards, Inc., owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNERTM in the U.S. which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

The contents of this document are not intended to be, and are not, legal or tax advice. The applicable tax law is complex, the penalties for non-compliance are severe, and the applicable tax law of your state may differ from federal tax law. Therefore, you should consult your tax and legal advisers regarding your specific situation.

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