Matched dollar incentives for saving tax refunds

Several programs have piloted efforts to provide matched dollar incentives for individuals to place some or all of their tax refund in a savings account. These programs offer matching deposits up to 100% of the amount saved from tax refunds. Programs usually focus on low and moderate income individuals and families, require a minimum amount placed in savings, and a minimum time period before a deposit can be withdrawn in order to receive matching funds. Programs and matches are typically provided by government entities or nonprofit agencies (MDRC-Azurdia 2016, Tucker 2014*).

Expected Beneficial Outcomes (Rated)

  • Increased asset accumulation

Other Potential Beneficial Outcomes

  • Increased financial stability

Evidence of Effectiveness

There is some evidence that programs that encourage low and moderate income individuals and families to save tax refunds, such as SaveUSA and $aveNYC, increase savings amounts (MDRC-Azurdia 2016, Tucker 2014*, Key 2015*). Additional evidence is needed to confirm effects.

Assessments of SaveUSA and $aveNYC, matched savings programs for low and moderate income taxpayers implemented at Volunteer Income Tax Assistance (VITA) sites for several years around 2010, show greater savings among participants than non-participants. A majority of program participants kept deposits in specially designated accounts for at least one year, receiving a 50% dollar match for the pledged amount (Tucker 2014*, MDRC-Azurdia 2014, Key 2015*).

Specific effects varied from program to program and between tax years. In the first year of both programs, participants had more short-term (non-retirement) savings six months after receiving match dollars than non-participants (MDRC-Azurdia 2014, Key 2015*), and $aveNYC participants were more likely to have savings to cover one month of expenses than non-participating peers (Key 2015*). Participants in the second year of the $aveNYC program were less likely to have taken out loans or skipped bill payments, and more likely to have withdrawn money from savings than non-participants. However, there was no difference in savings amounts six months after receiving the program match in the second year of $aveNYC (Tucker 2014*). In the longer term, SaveUSA participants’ savings grew 30% more than non-participants (MDRC-Azurdia 2016).

A study of the first year of $aveNYC suggests that financial hardship and limited understanding of program requirements can increase the likelihood that participants close accounts early, withdrawing their money before receiving matched funds (Manturuk 2012*).

Assessments of the Refund to Savings initiative, which does not have a deposit match but uses savings messaging and choice architecture within tax software, suggest that prompts to save higher amounts may increase the amount saved from tax refunds (Grinstein-Weiss 2017*). Moreover, messaging around saving for emergencies combined with changes to the way refund deposit options are presented may increase the number of individuals that save part of their tax refund (Grinstein-Weiss 2017a).

Putting part of a tax refund into a savings account may decrease material and health care hardship (Grinstein-Weiss 2016*).

Impact on Disparities

Likely to decrease disparities

Implementation Examples

$aveNYC and SaveUSA were two large pilot matching programs. $aveNYC ran at several VITA sites in New York City in 2009 and 2010. Participants who direct deposited a minimum amount of their refund ($100 in 2009, $200 in 2010) into a designated savings account and maintained their balance for a year received 50 cents per dollar saved (up to $250 in 2009, $500 in 2010) (Tucker 2014*, Key 2015*). SaveUSA, based on the $aveNYC model, was piloted in New York City, Tulsa, San Antonio, and Newark from 2011-2013, and was replicated in Houston, TX (MDRC-Azurdia 2014).

Implementation Resources

CFEF-SaveUSA - Cities for Financial Empowerment Fund (CFEF). SaveUSA.

CSD-VITA Toolkit 2015 - Covington M, Oliphant J, Perantie D, Grinstein-Weiss M. The volunteer income tax preparer's toolkit. Washington University in St. Louis. 2015.

Citations - Evidence

* Journal subscription may be required for access.

MDRC-Azurdia 2016 - Azurdia G, Freedman S. Encouraging nonretirement savings at tax time: Final impact findings from the SaveUSA evaluation. New York: Manpower Demonstration Research Corporation (MDRC); 2016.

Tucker 2014* - Tucker JN, Key CC, Grinstein-Weiss M. The benefits of saving at tax time: Evidence from the $aveNYC evaluation. The Journal of Socio-Economics. 2014;48:50-61.

Key 2015* - Key C, Tucker JN, Grinstein-Weiss M, Comer K. Tax-time savings among low-income households in the $aveNYC program. The Journal of Consumer Affairs. 2015;49(3):489-518.

MDRC-Azurdia 2014 - Azurdia G, Freedman S, Hamilton G, Schultz C. Encouraging savings for low- and moderate-income individuals: Preliminary implementation findings from the SaveUSA evaluation. New York: Manpower Demonstration Research Corporation (MDRC); 2014.

Manturuk 2012* - Manturuk K, Dorrance J, Riley S. Factors affecting completion of a matched savings program: Impacts of time preference, discount rate, and financial hardship. The Journal of Socio-Economics. 2012;41(6):836-842.

Grinstein-Weiss 2017* - Grinstein-Weiss M, Russell BD, Gale WG, Key C, Ariely D. Behavioral interventions to increase tax-time saving: Evidence from a national randomized trial. Journal of Consumer Affairs. 2017;51(1):3-26.

Grinstein-Weiss 2017a - Grinstein-Weiss M, Cryder C, Despard M, Perantie D, Oliphant J, Ariely D. The role of choice architecture in promoting saving at tax time: Evidence from a large-scale field experiment. Behavioral Science & Policy Association. 2018.

Grinstein-Weiss 2016* - Grinstein-Weiss M, Despard M, Guo S, Russell B, Key C, Raghavan R. Do tax-time savings deposits reduce hardship among low-income filers? A propensity score analysis. Journal of the Society for Social Work and Research. 2016;7(4):707-728.

Citations - Implementation Examples

* Journal subscription may be required for access.

Tucker 2014* - Tucker JN, Key CC, Grinstein-Weiss M. The benefits of saving at tax time: Evidence from the $aveNYC evaluation. The Journal of Socio-Economics. 2014;48:50-61.

Key 2015* - Key C, Tucker JN, Grinstein-Weiss M, Comer K. Tax-time savings among low-income households in the $aveNYC program. The Journal of Consumer Affairs. 2015;49(3):489-518.

MDRC-Azurdia 2014 - Azurdia G, Freedman S, Hamilton G, Schultz C. Encouraging savings for low- and moderate-income individuals: Preliminary implementation findings from the SaveUSA evaluation. New York: Manpower Demonstration Research Corporation (MDRC); 2014.

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