“Free Tax Software”… Is It Really Free at the End?

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💸 “Free Tax Software”… Is It Really Free at the End? — A 2025 Reality Checklist for DIY Filers Who Keep Seeing the Checkout Screen

“I started for free — why am I suddenly being asked to pay?” This is one of the most common frustrations for self-filers every tax season.
The short answer: some tax software is genuinely free, but many “free” options are intentionally designed to push you into a paid tier the moment certain income types, credits, state returns, or forms appear.


📌 Table of Contents

1️⃣ Why You Must Define “Free” First (IRS Free File)

The biggest mistake DIY filers make is assuming that “free” means the same thing everywhere. In reality, many commercial platforms use “Free to Start” as a marketing phrase, not a promise.

By contrast, the IRS Free File program has a much clearer definition. For the 2025 filing season (Tax Year 2024), the IRS Free File AGI limit is $84,000.
However, Free File primarily guarantees a free federal return. Whether your state return is also free depends entirely on the provider’s specific offer — and must be checked carefully.

EA Practical Insight

  • Making “staying free” the main goal often leads filers to skip or mis-enter key data — which can reduce refunds or trigger delays.
  • Third-party forms already reported to the IRS (W-2, 1099, 1095-A) are especially risky to gloss over.

2️⃣ When You Can Truly File for Free — Start to Finish

The closer you are to the conditions below, the higher the chance you can complete your return without upgrading — though “free” still varies by provider.

  • Simple income: primarily W-2 wages, little to no 1099 income
  • Simple deductions: standard deduction applies
  • Few additional forms: no self-employment, rentals, foreign income, or complex credits
  • State return included in the free offer you selected
Example (Likely Free Scenario)

A New York resident earns income from a single W-2 job, has no dependents, no investments or business income, and uses the standard deduction.
This profile is typically compatible with a truly free filing — but only if New York state filing is included, which should be confirmed before starting, not at checkout.

3️⃣ 8 Hidden Triggers That Send You to the Checkout Page (2025 Update)

These are the most common situations where self-filers suddenly encounter a payment screen.
The 8th item reflects recent 2025-era changes following OBBBA-related provisions.

  1. State tax returns charged separately
  2. 1099-NEC income (freelance or self-employment)
  3. 1099-K reporting for platforms and payment apps
  4. Multiple investment forms (1099-INT, DIV, B)
  5. Education credits (AOTC / LLC) requiring detailed 1098-T input
  6. Complex filing status issues (divorce, separation, shared dependents)
  7. ACA reconciliation using Form 1095-A
  8. New deduction categories (2025–2028): Qualified Tips / Qualified Overtime (if applicable)
Why #8 Often Becomes a Paid Feature

  • New deductions require eligibility testing, income thresholds, and phase-outs.
  • Many platforms bundle these calculations into “premium” tiers.
  • The real issue is not paying — but confirming eligibility and accuracy.
Example (Typical Upgrade Moment)

A filer has W-2 income plus platform earnings reported on a 1099. Many software tools automatically classify this as self-employment and require an upgrade.
The bigger concern is ensuring expense deductions, self-employment tax, and estimated tax exposure are handled correctly.

4️⃣ After OBBBA: How Higher Standard Deductions Affect “Free vs Paid” Choices

With rising standard deductions in recent years, more taxpayers are seeing software recommend standard deduction over itemizing.

For example, when the MFJ standard deduction approaches $31,500, many filers with SALT, mortgage interest, and charitable donations still end up better off using the standard deduction.

  • “Standard deduction is better” does not mean free filing is guaranteed.
  • Income types, credits, and state returns still matter.
  • Skipping itemized deductions just to stay free can backfire.
Real-World Shift Example

A married couple expected to itemize, but software shows the standard deduction produces a better result. The key check is not the deduction choice itself — but verifying all income, credits, and optional add-ons before final submission.

5️⃣ EA Checklist: 10 Questions to Answer Before You Click “Pay”

  1. Is federal filing truly free under your eligibility?
  2. Is state filing included or billed separately?
  3. Have all income forms (W-2, 1099, 1095-A) been entered?
  4. Is your filing status correct for your situation?
  5. Is self-employment tax calculated properly if applicable?
  6. Are child, education, and ACA credits fully captured?
  7. Have tip/overtime deductions been reviewed if eligible?
  8. Is your direct deposit information accurate?
  9. Are optional paid services unchecked before checkout?
  10. Have you saved a copy of your final return PDF?
🔎 Top 3 Google Questions

  • Q1. Does “Free to Start” mean free to file?
    A. Usually not. It often means data entry is free until certain forms or features appear.
  • Q2. Does IRS Free File include state returns?
    A. Not always. Federal filing is guaranteed; state inclusion varies by provider.
  • Q3. If I file for free and get an IRS notice, is the software responsible?
    A. Generally no. Accuracy remains the taxpayer’s responsibility.
References & Official Resources

Disclaimer

  • This article provides general information based on U.S. federal tax law.
  • State tax rules and filing fees vary.
  • For personalized advice, consult official guidance or a qualified professional.


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