BankScoop
It seems everywhere you look there are ads for free tax filing. From “free, free, free…” to “we’ve got your back” to “yes, it’s really free” the happy message is that anyone can do their taxes for free. Well, the truth is not as rosy—there are limitations that will disqualify many people from actually filing for free. The truth is that free tax filing generally is limited to those with simple returns and relatively low incomes.
If you do not itemize and your annual W-2 income is below approximately $60,000 and your tax situation is simple, you may be able to use the free tax filing options from places like H&R Block, TurboTax, TaxAct, etc. But, if you have kids or student loans, own a home or have large medical expense or own your own business, you’ll have to pay for more capabilities. So, no, tax filing really isn’t free for many people.
Let’s take a look at the big three online filing options:
TurboTax
You may be able to use TurboTax’s “Free” online tax filing service if you only have the following:
- W-2 income
- Limited interest and dividend income reported on a 1099-INT or 1099-DIV
- Claim the standard deduction
- Earned Income Tax Credit (EIC)
- Child tax credits
If you have any of the following, you’ll have to pay:
- Itemized deductions (Schedule A)
- Business or 1099-MISC income (Schedule C)
- Stock sales (Schedule D)
- Rental property income (Schedule E)
- Credits, deductions and income reported on schedules 1-6, such as the Student Loan Interest Deduction
H&R Block
H&R Block takes it a little further by including student loan interest in their free online program. Here’s who may use the free version at their website:
- Earned Income Credit
- Child care expenses
- Student loan interest
- Retirement plan income
- Social Security income
- Child tax credit
But, you’ll have to pay for the non-free version of H&R Block if you:
- Own a home
- Made deductible contributions to charity
- Have a Health Savings Account
- Are self-employed
- Own a business
- Own rental property
TaxAct
TaxAct appears to be a bit more limited. With them, you can file for free if you:
- Have W-2 or some types of retirement income only
- Have no children
- Are a renter
If you have any of these more complex situations, you’ll have to pay for TaxAct:
- Have children
- Have college expenses
- Own a home
- Own investments
- Own a business
- Own rental property
Pricing
TurboTax
H&R Block
TaxAct
Summary
So, free really does mean free if your tax situation is simple. If you rent, have no kids and only W-2 income, you’ll probably be able to do your taxes for free. For everyone else, expect to pay between $30 and $130 for tax prep software and filing.
For help choosing the most cost-effective tax filing option for you, our friends at Dough Roller put together a great comparison of lowest cost tax software options. Check it out! Thank you for visiting BankScoop. We wish you well in preparing your taxes and hope you have a happy and prosperous 2019!
