Cheapest Tax Software for 2020
Filing your taxes each year is never a fun task. To make things a little easier, a number of online tax preparation services have popped up on the market in recent years. Many of these providers charge fees for their services, but others allow you to file your taxes for free.
Since nobody is thrilled at the idea of spending money to pay their taxes, you are probably wondering which one of these services offers the cheapest tax software.
The first thing to remember is that the amount you pay (or don’t pay) depends on your tax situation and the type of service you’re comfortable using.
In many cases, if you have a simple tax situation, it’s possible to file your federal and state returns for free. At the same time, many services only offer free federal tax filing and charge you to file state taxes.
Without further ado, let’s take a look at the contenders.
Free Tax Software
There’s only one tax service I could find that is completely free for both federal and state taxes, with no additional upsells or more expensive plans.
Nothing is cheaper than free. Credit Karma Tax is the only service I reviewed that offers 100% free federal and state tax filing services.
How is this even possible? As a business motto, Credit Karma doesn’t charge fees to its customers. Instead, they monetize customer data on the back end by selling your data to other financial services companies, such as banks, insurance companies, credit card companies, loan companies, and more.
Credit Karma is the cheapest tax software I could find because most other services have fees hidden somewhere.
Read our full Credit Karma Tax Review.
Free Federal and State Tax Filing
The next batch of tax preparation services includes a few companies that offer free federal and state returns for simple tax situations.
They also offer more complex plans for those that need them, which you’ll have to pay for:
TaxSlayer is one of only three tax preparation services I have found that offers free federal and state returns. That said, if you have a simple tax situation, you probably want to check out TaxSlayer’s Simply Free plan, which costs nothing for federal and state taxes. Yipee!
TaxSlayer also covers more complex tax situations and usually at lower prices than the competition. If you want to take advantage of deductions or have dependents, you will probably want to upgrade to TaxSlayer’s Classic plan. This option costs $17 for federal returns and $29 for state returns.
TaxSlayer’s Premium Plan costs $37 for federal returns and $29 for state returns. This plan includes the benefit of one-on-one customer support over the phone, live chat, or through email.
TaxSlayers Self-Employment plan offers the most competitive price that I’ve seen for self-employed individuals. This plan costs $47 for federal returns and $29 for state returns. It’s not uncommon to see comparable services cost upwards of $100 or even more.
TurboTax is next in line when it comes to free federal and state filing. It’s worth noting that their services can get expensive for more complex tax situations. But as the saying goes, you get what you pay for, and TurboTax is a brand name that has very solid technology and offerings.
The TurboTax Free Edition allows you to file your federal and state taxes for free. The catch? Only very simple tax situations are covered. For example, if you own a home, have kids, or have investments, you probably won’t qualify for TurboTax free program.
If you want to itemize deductions or if you’re a homeowner, you may want to upgrade to the TurboTax Deluxe Online Edition. This plan costs $40 for federal taxes and $40 for state taxes.
For more complex tax situations, such as those that include investment income, rental properties, and cryptocurrency transactions, you’ll need to upgrade to TurboTax’s Premier Online Edition. This plan costs $70 for federal taxes and $40 for state taxes.
note: the prices above reflect discounts applied when you signup through millennialmoney.com ($20 off federal, $5 off state)
Free Federal Tax Filing and Additional Charges for State Taxes
Next, let’s take a look at several providers that offer free federal tax filing plans but charge for filing state taxes. These providers also offer more expensive plans than might be necessary depending on your tax situation.
FreeTaxUSA offers 100% free federal taxes and charges just $12.95 for state taxes. As you will see, $12.95 is significantly lower than what most other competitors are charging for state returns. So, while you may have to reach into your wallet a bit, the hit isn’t as bad as it might be elsewhere.
What’s more, customers can upgrade to FreeTaxUSA’s Deluxe Plan for a mere $6.99, which is also much lower than comparable plans from competitors.
While FreeTaxUSA isn’t 100% free (despite what their company is called!), they do offer very competitive pricing and account for more complex tax situations compared to the free offerings served up by Credit Karma and TurboTax.
Read our FreeTaxUSA Review.
TaxAct’s Online Free Edition is free for federal taxes but costs $19.95 for state taxes. Under this low-cost plan, only simple tax situations are covered.
If you want to deduct childcare expenses or mortgage interest, for example, you’ll have to upgrade to a more expensive plan such as their Online Deluxe+ Edition, which costs $23.96 for federal taxes and $31.96 for state taxes.
Finally, if you need to file paperwork related to stock investments or rental properties, you’ll need to upgrade to the Tax Act Online Premier+ Edition. This plan costs $31.96 for federal taxes and $31.96 for state taxes.
Read our TaxAct Review.
note: the prices above reflect discounts applied when you signup through millennialmoney.com (nearly 55% off in some cases)
H&R Block’s cheapest tax service is the Free Online Tax Filing plan. It’s free for both federal and state taxes. Similar to other providers, H&R Block’s lowest-cost plan only accounts for the most simple tax situations.
If you want to account for charitable contributions and have better customer support, you’ll have to jump up to the Deluxe Online Filing Plan: $37.49 for federal taxes and $36.99 for state taxes.
If you have to declare investment or rental property income, you may want to select H&R Block’s Premium Online Tax Filing plan, which costs $37.49 for federal taxes and $36.99 for state taxes.
Read our H&R Block Review.
note: the prices above reflect discounts applied when you signup through millennialmoney.com
eSmart Tax is a newer online tax service backed by Liberty Tax. Their cheapest option is the Free Edition, which is designed for simple tax situations. It’s free for federal taxes but costs $29.95 for state taxes.
If you have a family and want to itemize deductions, you’ll have to upgrade to eSmartTax’s Basic Edition, which costs $44.95 for federal returns and $39.95 for state returns.
If you’re an investor or would like to get one-on-one advice from an advisor, you’ll want to opt for the Deluxe Edition. This plan costs $44.95 for federal returns and $39.95 for state returns.
Last but not least, if you’ve sold a property, own a small business, or own a rental property, you’ll have to opt for eSmartTax’s Premium Edition. This plan costs $44.95 for federal returns and $36.95 for state returns.
note: the prices above reflect discounts applied when you signup through millennialmoney.com (a savings of 50% on its highest packages)
Paid Plans for More Complex Tax Situations
The only company in this post today that doesn’t offer free federal tax filing is Liberty Tax. That’s not to say that their services should be overlooked.
Again, it really depends on your tax situation and how much customer support you think you might need.
Liberty Tax does not offer a free edition. Bummer! Overall, it seems that their plans are more expensive but are also geared toward more complex tax situations.
The cheapest plan that Liberty Tax offers is the Online Simple Edition, which costs $27.96 for federal returns and $29.95 for state returns. If you have a simple tax situation and are looking for a free plan with some of the same features that Liberty Tax offers, take a look at their subsidiary eSmartTax (mentioned above).
If you want to itemize deductions with Liberty Tax or if you want to file a Schedule C form, you’ll have to upgrade to their Online Deluxe Edition. This plan costs $51.96 for federal returns and $39.95 for state returns.
Next, if you’re a small business owner or need to declare rental property income, you may want to sign up for the Liberty Tax Premium Online Edition, $71.96.
Read our Liberty Tax Review.
note: the prices above reflect 20% off discounts applied when you signup through millennialmoney.com
Which Is The Cheapest Tax Software?
If you’re looking for a 100% free tax service for federal and state returns with no upsells, you probably want to check out Credit Karma. But when a product is “free,” you’re actually the product (i.e., your data is what they sell).
If you’re looking for a free federal and state return option but also want the ability to upgrade your account or speak with an advisor (if the situation calls for it), you might want to look into services like TaxSlayer and TurboTax.
The tax preparation companies that don’t charge for federal taxes but charge money for state taxes are FreeTaxUSA, TaxAct, H&R Block, and eSmartTax.
Last but not least, Liberty Tax does not offer a free federal filing plan but they do accommodate more complex tax situations. They also have brick-and-mortar locations (as does H&R Block), if you’d like to meet with a real live person.
I hope this post has helped clarify the growing market of online tax software providers. Do your due diligence and research your options, and you shouldn’t have a hard time picking the service that works best for you.