Millennials and Gen Zers preparing to file their tax return for 2023, and many wonders if there are any changes they need to be aware of during the filing process.
Tax Changes Affect Gen Z and Millennials To Expect A Higher Tax Refund 2023 (PHOTO: Yahoo Finance)
Gen Z and Millennials To Expect A Higher Tax Refund 2023
A new study conducted by Qualtrics on behalf of Credit Karma found that 29% of American taxpayers expect higher tax refunds in 2023 compared to last. In particular, younger demographics were more likely to report higher anticipations: 45% of Gen Z and 44% of millennials.
Unfortunately, not everyone will obtain a tax refund in 2023 that aligns with their expectations. The average tax refund in 2023 is expected to be around 16% lesser this year.
Here’s Why Tax Refunds 2023 Are Getting Smaller
The financial devastation caused by the pandemic, several tax breaks were introduced to assist Americans with some relief. However, many of those valuable credits and write-offs are no longer available for the tax year 2022. The highest value of the credit in 2022 is $1,050 for one dependent and $2,100 for two or more vs. $4,000 and $8,000 for 2021.
Filers also could write off some charitable donations for 2021 $300 for single filers or $600 for married couples who filed jointly even if they weren’t itemizing taxes. This year, the rule has reversed. Additionally, taxpayers who did not obtain their third stimulus payment had the opportunity to do so on their 2021 returns. So this year’s refunds may be less without that extra padding.
Overall, according to a GOBankingRates survey about 18% of taxpayers don’t expect to get a refund at all. Another 17% expect their refund to be $500 or less, which is the highest percentage of those expecting refunds.
Tax Trends Among Gen Z and Millennials
The good news is that Gen Z and Millennials taxpayers who do obtain refunds will put the money to the right use. According to a survey found that the majority of those ages 18-24 33 percent plan to put refund money into savings, followed by 19 percent using it to pay bills and 15 percent to pay off debt. Similarly, 24 percent of respondents ages 25-34 were split between paying off debt and saving, while 22 percent followed by paying bills.
How To Increase Your Tax Refund
There are a few ways you can reduce your tax bill and increase the chances that you get a tax refund 2023.
Contribute to the retirement account
- You have until the deadline for tax filing makes 2022 contributions to a 401(k), IRA, or another tax-advantaged retirement account, up to the annual maximum. Contributions to these accounts decrease the taxable income. So if you haven’t maxed out your retirement savings for 2022 and have some extra cash to set aside, think of creating extra contributions before April 18.
Fund an HSA or FSA
- If you have a health savings account (HSA) or flexible spending account (FSA), you can also make 2022 contributions through April 18, 2023. Like retirement accounts, contributions to these types of accounts decrease your taxable income.
focus on the earned income tax credit
- This tax credit is developed to assist low- and moderate-income taxpayers save money. Depending on your earnings, marital status, and the number of children, you could be eligible for this valuable tax credit worth up to $7,000. A tax credit lowers your tax bill dollar-for-dollar and if you don’t owe any money, the IRS may refund some or all of the credit.
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