Tax Survey 2024: Millennials Score Highest on Tax Knowledge Quiz

Money Done Right worked with Google Consumer Surveys to test 1,500 American adults on a 9-question quiz on federal income tax basics.

The result?  Well, most Americans get an “F” when it comes to tax knowledge with the average score on the quiz being less than 50%.

Our key findings, survey data, and methodology are below.

Key Findings

Millennials Scored Highest Overall

Interestingly, the millennials in our survey scored highest with an average score of 45.9%, Gen Xers came in at 45.4%, and baby boomers ranked third with an average score of 44.3%.

Most Don’t Know How Many Tax Brackets There Are

Respondents performed poorest on our question about the number of tax brackets.

Only 19% of baby boomers, Generation Xers, and millennials correctly identified seven as the current number of federal income tax brackets.

Credits vs. Deductions: Millennials Know the Difference

The kids have it when it comes to knowing the differences between tax credits and deductions.

More millennials (39%) than Gen Xers (34%) or baby boomers (30%) correctly identified a tax credit being more valuable than a tax deduction or write-off for most taxpayers.

Millennials Know Their Roth IRAs

53% of all millennial, Gen Xer, and boomer respondents didn’t know that the benefit of contributing a Roth IRA is that contributions grow tax-free.

Millennials were the only generation where a majority of respondents (coincidentally, also 53%) answered this question correctly.

Gen Xers got this question correct 47% of the time and baby boomers only 41% of the time.

Gen X Tops at Child Tax Credit

Not surprisingly, Gen X was tops when it came to correctly identifying the maximum Child Tax Credit per qualifying child as $2,000.

35% of Gen Xers got this question correct as opposed to 33% of baby boomers and 32% of millennials.

This makes sense since many Gen Xers still have children living at home, while many baby boomers are empty nesters, and many millennials are delaying parenthood.

Millennials Relatively Familiar with Student Loan Deduction

Again not surprisingly, millennials outperformed other generations when identifying $2,500 as the maximum student loan interest deduction.

31% of millennials answered this question correctly as compared to 28% of Gen Xers and 26% of baby boomers.

The dropoff with age is understandable given that millennials are the hardest-hit generation when it comes to student loans.

Gen X Smart About 401(k) Plans; Millennials Not So Much

A majority (51%) of Gen Xers — many of whom are in their peak earning years — correctly identified a decrease in taxable wages as a benefit of contributing to a traditional 401(k) plan.

47 of baby boomers and only 43% of millennials got this question correct.

Millennials Unsure About Tax Extensions

Less than 1/3 of respondents correctly identified October 15 as the extended tax filing deadline for Form 1040 returns.

33% of both boomer and Gen X respondents got this question correct, as opposed to only 29% of millennials.

Boomers Know Filing Statuses

A whopping 65% of baby boomers correctly identified “single with dependents” as a fictitious filing status, compared to only 59% of Gen Xers and 56% of millennials.

Men Scored Higher than Women

While the gap wasn’t huge, men scored an average of 46% while women scored an average of 43% on the quiz.

This is perhaps because the majority of married women leave financial decisions to their husbands, according to a recent UBS study.

Midwesterners Scored Highest by Region

Here’s the breakdown of average score by geographic region:

• Midwest: 47%
• West: 46%
• South: 44%
• Northeast: 42%

Survey Questions

Q1: Tax Credits vs. Deductions

Question: For most taxpayers, which is most valuable?

1. A $1,000 tax deduction.
2. A $1,000 tax credit.
3. A $1,000 tax write-off.
4. They are all equally valuable.

Answer: b. A $1,000 tax credit.

Tax deductions and write-offs are the same thing, and both merely reduce your taxable income on which your ultimate tax liability is based on, while a tax credit directly reduces your tax liability.

Q2: Standard vs. Itemized Deductions

Question: Most taxpayers:

1. itemize their deductions.
2. take the standard deduction.
3. itemize and take the standard deduction.
4. take no deductions.

Answer: b. take the standard deduction.

Most taxpayers take the standard deduction.  This is especially true since tax year 2018, which is when the Tax Cuts & Jobs Act effected standard deduction amounts for all filing statuses that were nearly double what they were in tax year 2017.

Q3: Roth IRAs

Question: Which is a benefit of contributing money to a Roth IRA?

1. You get a tax deduction.
2. Your standard deduction increases.
3. Your contributions grow tax-deferred.
4. Your contributions grow tax-free.

Answer: d. Your contributions grow tax-free.

You don’t get a tax deduction for contributions to a Roth IRA, but your contributions grow tax-free.  Taxpayers pay no income tax on Roth IRA distributions taken out after age 59.5.

Q4: Child Tax Credit

Question: What is the maximum child tax credit per qualifying child?

1. $500
2. $1,000
3. $2,000
4. $3,000

Answer: c. $2,000

The Tax Cuts & Jobs Act increased the maximum child tax credit per qualifying child to $2,000 from $1,000 under the old tax law.

Q5: Student Loan Interest Deduction

Question: What is the maximum student loan interest deduction?

1. $500
2. $1,500
3. $2,500
4. $3,500

Answer: c. $2,500

The maximum student loan interest deduction is $2,500 and has been since the 2001 tax year.

Now, I know what you’re thinking: millennials may be more knowledgeable than their more senior counterparts about this deduction, and this fact could sway our findings that Millennials scored highest overall.

But even when this question is removed from the results, the millennials in our survey would still outperform with an average score of 47.8% compared to 47.5% for Gen Xers and 46.6% for baby boomers.  Nevertheless, a sub-50% score is nothing bragworthy, and more financial literacy, particularly surrounding taxes, is desperately needed across all age groups.

Q6: Traditional 401(k)s

Question: Which is a benefit of contributing money to a traditional 401(k)?

1. Your taxable wages decrease.
2. Your standard deduction increases.
3. Your itemized deductions increase.
4. Your contributions grow tax-free.

Answer: a. Your taxable wages decrease.

Contributing to a traditional 401(k) plan reduces your taxable wages reported in Box 1 of your Form W-2.

Q7: Tax Extensions

Question: You’re unable to file your Form 1040 tax return by April 15, so you get an extension. By when do you have to file your tax return?

1. August 15
2. September 15
3. October 15
4. November 15

Answer: c. October 15

Individual taxpayers may extend their tax return for six months using Form 4868, and six months after April 15 is October 15.

Q8: Tax Filing Statuses

Question: All of the following are tax filing statuses except:

1. Single
2. Single with dependents
3. Married filing jointly
4. Married filing separately

Answer: b. Single with dependents

The five tax filing statuses are single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child.

There is no single with dependents filing status.

Q9: Tax Brackets

Question: How many federal income tax brackets are there currently?

1. 5
2. 6
3. 7
4. 8

Answer: c. 7

There are currently seven federal income tax brackets and have been since tax year 2013.

There were also seven federal income tax brackets in tax year 1913 when the modern federal income tax structure in the United States was born thanks — or no thanks — to the 16th Amendment.

That didn’t last though, because in tax years 1918 – 1921 there were 56 tax brackets — the most in our history — ranging from 6% to 77% to 1918 and from 4% to 73% in 1919 – 1921.

The fewest number of tax brackets came during the tail end of the Reagan years.  From 1988 – 1990 there were only two tax brackets: 15% and 28%.

Methodology

Survey Sampling

Between February 19 – February 22, 2020, Money Done Right surveyed 1,500 Americans representative of the entire U.S. population using Google Consumer Surveys to examine Americans’ tax knowledge by generation.

Generation Definitions

Generations are defined as follows:

• Baby boomers were born in 1946 – 1964.
• Gen Xers were born in 1965 – 1980.
• Millennials were born in 1981 – 1996.