Taxes are an entrenched part of our society. They’re the source of financial woes and fiscal headaches. What has been a traditionally bureaucratic and unpleasant part of our lives has garnered the attention of new do-it-yourself tax services. A market once dominated by the likes of H&R Block, TurboTax and your dad’s accountant, companies like Credit Karma have emerged to steal away part of the self-service tax market.
When and how you do your taxes is based on multiple factors, such as socioeconomics and demographics. If you’re a recent college graduate working in your first job that saw an ad for Credit Karma’s new self-service tax program while reading Mashable, you’re probably going to do your taxes at a different time and through a different platform than your 45 year old boss who has two kids.
Our data pulls are often motivated by two factors: current events, and the desire to quantify certain behaviors. Knowing that tax season has become increasingly sophisticated and competitive, we analyzed the market share of TurboTax, H&R Block, and Credit Karma. We then cross referenced this with the share of tax submissions each service received from Jan. 1 through April 10 to assess consumer behavior.
Overall market share:
While H&R Block is the oldest company, having started in 1955, it doesn’t lead in the market. That goes to TurboTax, which has become ubiquitous with doing your taxes online. During the 2017 tax season, TurboTax took 80 percent of online tax submissions market share. This trumps H&R Block by nearly 66 percentage points, which managed to take 14 percent. Credit Karma launched its free online tax service just in time for the 2017 season, and pulled in 6 percent.
Credit Karma is a new service, but one to watch for the 2018 tax season. It already has 60 million dedicated users that track their credit scores through its site, and had the largest month-over-month increase in market share when compared to TurboTax and H&R Block. In January, Credit Karma only had 4 percent market share, compared to TurboTax’s 84 percent and H&R Block’s 12 percent. By April though, Credit Karma has increased its overall market share to 9 percent, while H&R Block’s only increased to 14 percent, and TurboTax’s actually declined to 78 percent.
By no means does this indicate TurboTax isn’t performing well — it still ended with 80 percent of market share by the end of tax season — but its diminished share and H&R Block’s stagnant growth have made it clear that Credit Karma is to be taken seriously.
Breakdown of submissions by month:
Looking at overall market share reveals how each company is performing in comparison to one another, but looking at the breakdown of submissions by month can indicate behavioral trends. Through April 10, our data shows that more than 40 percent of online tax submissions occurred in February. The most popular day to start online submissions this year was January 30, which is consistent with last year’s starting date of February 1 (both days are Mondays in their respective years).
When looking at share of submissions for each service’s month-by-month breakdown, it’s clear that TurboTax was the preferred tax service for those who wanted to get an early start. Comparing January’s submission rates against one another, TurboTax received 24 of its overall submissions, compared to H&R Block’s 20 percent, and Credit Karma’s 15 percent. This flipped in February and March though, as Credit Karma received 44 and 27 percent, respectively, surpassing TurboTax and H&R Block’s share of submissions for each month.
Besides more submissions, what does this mean? The greater proportion of submissions in the second half of tax season indicates that users of Credit Karma’s services are more likely to procrastinate in filing, as opposed to users of TurboTax and H&R Block. Credit Karma has branded itself as a company made for and by millennials. Perhaps this younger demographic is waiting longer to file, and Credit Karma provides the perfect, albeit free, solution to get your taxes done.
Bottom line: Doing your taxes is complicated and time consuming, so it was an industry ripe for upheaval. While TurboTax had the stronghold for years (it was founded in 1993), new comers like Credit Karma and H&R Block’s online services are providing alternative ways for millions of Americans to file. The 2017 tax season was a glimpse of future trends to come, with 2018 sure to show a shift in service preference.