Ever wondered what the differences are among tax software programs?
Maybe that only keeps nerds like me up at night, but there are differences. Examples: The most popular tax software is also the most expensive. And some cheaper programs charge extra for support. You get what you pay for.
As part of our six-part series, the “No-Stress Guide to Filing Your Taxes”, we already ran a checklist of tax documents to collect and a post on the best method to file your taxes (by hand, with software, or with the help of a tax pro.)
Today, we take a look at three leading tax software programs—TurboTax, H&R Block at Home, and TaxAct—to help you better decide how to file.
TurboTax, H&R Block at Home and TaxCut Compared
| Software | Federal | State | Features |
TurboTax
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Start and file your simple federal return for free. | ||
| Basic Free Deluxe (w/ advanced features to help with itemized deductions) Premier (Investments & Rental Income) Home & Business |
State Return (Basic) $27.95 State Return (Deluxe +) |
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PRICNG:  |
USABILITY: |
SUPPORT: |
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H&R Block at Home
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Save 15% off list prices on H&R Block at Home. | ||
| Basic $19.95 Deluxe (Itemized deductions & investments) Premium (Self-employment or rental income) Premium & Business |
State Return One state return included with all federal products except Basic ($36.95 for first state with Basic or additional states). $19.95 per state for state e-file. |
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PRICNG:  |
USABILITY: |
SUPPORT: |
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TaxAct
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Start for free, pay only when you file. | ||
| Federal Basic Free Federal Deluxe (Itemized) |
State Return (w/ Basic) $14.95 State Return (w/ Deluxe) |
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| PRICNG: |
USABILITY: |
SUPPORT: |
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Explaining the Differences
Over the years, I’ve used each of these programs to file my taxes. (This year I hired a CPA to help with the increasing complexity of running a business.) But in years past these tax software programs handled made preparing my tax returns relatively easy if not entirely painless; after all they’re still taxes.
In comparing the best tax software programs, all three guarantee the accuracy of their calculations. The big differences among tax software programs lie in their:
- Intuitiveness/usability
- Pricing
- Support options
INTUITIVENESS
For the most part, all three programs are easy to use and provide intuitive navigation. I think TurboTax stands out in a bit when it comes to entering W-2s and walking you through questions for complicated credits and deductions. TaxAct, by contrast, does a fine job for simple returns but begins to get cumbersome when tackling advanced topics.
PRICING
Tax software prices can be misleading. TurboTax and TaxAct advertise that you can file your simple, federal tax return for free. And in many cases this is true. But with TurboTax, if you want to access certain features (detailed questions to guide you through deductions, for example), you’ll have to upgrade. And in every case, you will have to pay to file your state tax return with the software or if you tax situation ends up being more complex than you imagined. That’s why it’s a good idea to figure out exactly what you’ll need and how much you’ll pay before starting your return.
In most situations, TurboTax ends up being the priciest of the three packages. But after combing over 250+ online user reviews, most think that the quality of the software and the online help (user forums etc.) make the price worth it, especially for more involved returns. TaxAct, by contrast, is much less expensive: you can file a basic federal return and a state return for only $14.95…the least expensive way to file everything. But if you want phone support, it’s an extra $7.95 (phone support is included with TaxAct Federal Deluxe, so you can file federal, state, and get phone support for $17.95).
H&R Block at Home’s pricing falls in between. They don’t offer free filing of your basic federal return. If you purchase their Deluxe, Premium, or Business package, one state return is included (meaning you can prepare it, print it, and file by mail) but they’ll charge you $19.95 to e-file the state return.
Note: With the links in this article, you can save 15% off the listed prices of H&R Block at Home. *H&R Block, TurboTax, and TaxAct are affiliates, meaning if you decide to use them we get a little bit in our online tip jar. If you choose to support us in this way, thanks!
SUPPORT
I’m a figure-it-out-myself kind of guy, so I turn to online FAQs and forums before calling an 800 number; I can say both TurboTax’s and H&R Block’s knowledge bases are very good. From the 250+ online user reviews I read, most agree that their phone support is good, too. Reviews note that TaxAct’s phone support falls short with limited phone hours and less-helpful-than-desired responses. Again, TaxAct is a good choice for straightforward returns, but spending a bit more might be warranted for anything more complex.
H&R Block has the advantage of local offices around the country and offers a “best of both” program. For $79.95 you can begin your return online and have a professional sign your return as a professional preparer.
Both TurboTax and H&R Block include audit support in the event your return they prepared is audited. This support includes a professional to communicate with the IRS for you and explain the audit process, but may fall short of everything you might need to handle the audit (such as legal advice in some situations).
Recap
Due to the way different companies bundle and price their software, the best value for my return may not be the best for yours. TurboTax and H&R Block at Home both offer complete solutions, usable software, and full-featured support, but come at a cost. TaxAct provides an affordable option for simple returns.
What about you? Had good/bad experiences with these or other tax software programs? Need general tax advice? Let us know in a comment.
Next in the No-Stress Guide to Filing Your Taxes: Common Tax Schedules: How to Use Them and What They Mean.
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About David E. Weliver
What about some of the free online filers? I’ve been using the same one for a few years (www.freefillableforms.com) and have loved it. I think there used to be more? I use it to file my federal return, and then use my state’s (Nebraska) online filing system which is also free. I’m only filing the 1040EZ form, but I’ve learned quite a bit about some basic tax issues in the last few years through doing this. It’s mostly “by hand” on these sites, but they have some built in calculations to make sure you’re adding things up properly and have most of the right forms – they also make getting your refund quicker through direct deposit!
In the article, you make it sound like you can’t use the free TurboTax option if you plan on itemizing deductions. However, you can do pretty much everything in the free version as you can with the paid versions. The main difference is that the free version doesn’t ask you as many leading questions. You actually have to initiate the section to go through them. Also, the free version won’t bring in your electronic W-2s and such. You have to type everything in by hand, but how hard is that??? Just double-check for typos and you’re good.
I don’t have any investments, rental property, or my own business, but if I did, that’s about the only reason I would pay for any sort of “premium” level version.
Thanks for the clarification, Chase. I’ve updated the post to hopefully eliminate that confusion.
David,
Awesome post. I’ve been struggling with which program to choose and this article was helpful. Which TurboTax version would you suggest for me to use if I’m preparing two tax returns? One return for me (simple W-2 + 1099 for freelance writing) and one for my partner (owns her own business- will have typical income/expense reporting). Is the Home/Business version of TurboTax worth the extra upfront cash for the added guidance?
Hey Anne,
If your partner does have business expenses, that’s would put you into needing Home & Business I believe. If you only have 1099 income but aren’t going to deduct business expenses, then the free/basic options are fine. You can always do multiple returns by creating multiple free online accounts or when you download the software you can do up to 5 returns per purchase.
Thank you for your reply David. Keep up the hard work. Your blog is incredibly useful and I love your writing style!
Great article! Being a somewhat competent frugalisto, I may consider TaxAct at some point. This, however is my fourth year using H&R Block online and I love it, despite having to break away from the free file this year. I do appreciate not having to type in basic info now that I’m paying, so that’s a big plus.
I was a bit confused at pricing until I realized the difference between filing online and downloading software.
Thanks for doing the work for us!
I own MLPs and struggle to fill out the K-1 portion of my tax return. I’ve used HR Block online in the past, but often have to consult a local tax accountant afterwards for an additional fee. Do you have any idea if Turbo Tax or TaxAct makes this easier to do myself?
I’m not familiar with Tax Act. I’ve used both turbo tax and H&R Block. They both got the job done. I usually pick based on whatever deal is available.
THis is as good a review as any other I’ve read. But none of the reviews are very helpful for someone who has anything more than basic tax filing needs. If you have some investment real estate, maybe a trust or partnership, etc. then all these packages have significant short cuts that could have been resolved with very little SW effort. For example, Taxcut lets you enter itemized lists for most entries. Very useful for documenting multiple sources of rental income for one property or spreading out trip expenses used to visit multiple properties at one time. But, Taxcut doesn’t keep track of which form, line, or column these itemized lists are associated with and they don’t give you a preview of what’s in each list. So, if you need more than one column in schedule E, or if you have multiple schedule C’s, or 4562′s then you will need to keep a separate notes outside of the software to know what itemized list goes where and which one to open if you need to enter a new receipt or figure. THis is silly as TCut uses separate forms/tabs for these multiple properties/businesses/items. Why can’t it remember which one the itemized lists correspond to? I end up creating external spreadsheets to manage all my “itemized” lists, and only enter final, tallied-up numbers into the tax software. Takes a lot of the value away from the more expensive versions.
As someone who prepares taxes professionally I can say most of the software packages do a solid job filling out the forms. Unfortunately the area that causes confusion at times for people is how to answer questions in the interview. A question like “do you use your cell phone for business” often will not clarify IRS rules regarding the fact that a person can not deduct their main phone. (The IRS feels you have to have a phone and the first one is for personal). This is where if you are comfortable with the tax laws the software is great, but if you have questions a tax pro can come in very handy.
Check with your bank before filing, I know Bank of America offers a 35% discount on Turbo Tax to its customers if you use the link on their webpage and Capital One offers something similar.