The Best Tax Software Values for 2020

Liberty Tax

• Value Ranking: 9 of 9
• Pros: Same price for all editions (as of press time)
• Cons: Functionality and tax help are limited
• Website: www.libertytax.com

Liberty Tax offers three versions of their online tax software: Basic, Deluxe and Premium. Which one you use depends on the complexity of your return. When we road-tested their products at the end of January 2020, all three editions were the same price—$45. However, we don't expect that pricing scheme to last until April 15. At some point we expect prices for the Deluxe and Premium versions to go up to $65 and $90, respectively (and maybe higher).

Those prices are pretty high considering that you don't get much in terms of additional features. It's a stripped-down product when compared to its competitors. For example, unlike some other tax prep software programs, you can't import information from a W-2 or 1099 form. Likewise, we were never asked if we wanted to import information from a prior-year return when starting returns for our hypothetical taxpayers. Liberty Tax does offer audit assistance and ID theft restoration services, but that costs an extra $30. Although the software was generally easy to use, navigation options were minimal.

Tax advice is very limited, too—and in some cases outdated. At the end of our test run, we were advised to "double check" our return because we might qualify for job search or moving expense deductions. However, these deductions were eliminated or restricted to military personnel by the 2017 tax reform law. Unlike some other programs we tested, you can't get advice from a tax professional, either. So, if you don't have a good feel for the tax code, maybe Liberty Tax isn't the software for you.

Efile

• Value Ranking: 8 of 9
• Pros: Multiple state tax returns for one price
• Cons: Functionality and tax help are limited
• Website: www.efile.com

EFile's Basic edition offers a free federal tax return for taxpayers with W-2 income only and no dependents. However, if your return is even slightly more complicated, you'll be bumped up to the Deluxe edition ($25 for one federal return). Our single taxpayer, for example, was pushed up to the Deluxe edition for claiming deductions for student loan interest and IRA contributions. If you have self-employment income or, like our hypothetical married couple, contribute to a health savings account (HSA), you'll need to jump up to the Premium edition ($35 for one federal return). For an additional $29, you can file an unlimited number of state returns. That's a real money-saving feature for people who moved last year.

If you're not sure which package is right for you, just start your return using any edition. If you select a version that is more expensive than the one you actually need, the "auto-downgrade" feature will move you to the best service for you—even if it is to a less-expensive edition.

While the price won't break the bank, you don't get a lot of bang for the buck. In fact, the software is exactly the same as what you get from Liberty Tax. That means no importing of information from a W-2, 1099 form, or prior-year return. It also means there isn't much in the way of tax advice, either. So, you probably ought to have at least some familiarity with the tax laws if you're going to use an eFile product.

Efile also offers an audit assistance and ID theft restoration service (just like Liberty Tax). It will put you back an additional $30 if you select this option.

Jackson Hewitt

• Value Ranking: 7 of 9
• Pros: W-2 information can be imported
• Cons: Limited functionality and tax help
• Website: www.jacksonhewitt.com

The online tax filing software you'll find on Jackson Hewitt's website is almost the same software being used by Liberty Tax and EFile customers. One important difference is that you can import information from certain W-2 forms into the Jackson Hewitt product (depending on the employer or payroll processor). That can be a huge time-saver, especially if you have multiple jobs.

Unfortunately, however, the rest of the program is as vanilla as what you'll find on the Liberty Tax and EFile websites. There isn't professional tax advice available, either. (Although with Jackson Hewitt's "Tax Pro From Home" service, you can upload your tax information and have a tax professional complete your return within 24 hours—but it will cost you a lot more than if you finish the return yourself using their online tax prep software.)

Jackson Hewitt's pricing scheme is at least comparable to what you'd pay Liberty Tax or EFile for the same software—and in some cases, it's better. The Basic edition is free (and includes a free state return), but you can only use this for very simple returns (e.g., income below $100,000, no kids or dependents, and just the standard deduction). The Deluxe edition is only $30, but a state return will cost you an extra $37. Our single taxpayer, with deductions for student loan interest and an IRA contribution, had to use this edition, which is likely to be the right version for many families and retirees as well. For more complicated returns—self-employed, income over $100,000, rental properties, itemizers, etc.—you'll have to upgrade to the Premium edition. It comes with a $50 price tag, plus an additional $37 for each state return. This is where our hypothetical couple landed.

TaxAct

• Value Ranking: 6 of 9
• Pros: Imports W-2s and previous-year tax returns
• Cons: Limited help
• Website: www.taxact.com

In years past, TaxAct was popular with budget-minded taxpayers who didn't need a lot of handholding. The program still doesn't provide much in the way of help, but it's no longer a bargain.

Our fictional single taxpayer, who claimed the standard deduction, was required to upgrade to TaxAct Deluxe because he deducted interest on his student loan. That means he would need to shell out nearly $70 to file a federal and state return. It's also worth noting that, with only $30,000 in income, he would be eligible to use several free tax software programs, including one from TaxAct, through the IRS's Free File program. (Any taxpayer with 2019 income of $69,000 or less can file for free through the IRS program.)

Likewise, our hypothetical married couple was required to upgrade to TaxAct Premium because they had a modest amount of investment income.

TaxAct does allow users to import W-2s from participating payroll providers, which saves time and reduces errors. It will also import prior-year returns filed with TurboTax and H&R Block. Live chat for tax-related questions is limited to customers who purchase TaxAct's Premium or Self-Employed+ versions. There is a help section where users can post questions, but the responses are boilerplate references to the tax code.

TaxAct no longer guarantees that prices won't change between the time you start your tax return and file it. As is the case with most other providers, it reserves the right to increase its prices at any time.

H&R Block

• Value Ranking: 5 of 9
• Pros: Free multiple state returns on the free file version
• Cons: Cost
• Website: www.hrblock.com

In the past, you could always count on H&R Block to offer value at a reasonable price when it comes to tax preparation. This year, not quite so much. While our single taxpayer was able to stick with the free online version, our couple was forced to upgrade to another version for an extra $30 (plus an additional $37 per state return filed). The reason why: health savings account contributions. And that was on the lower end of the price scale.

Block now offers eight online tax preparation services that range from free to $150. And the higher costs aren't just tied to whether or not you need certain forms, such as our couple did, but also help. For example, our single taxpayer had the option to choose Block's "basic online assist" version for $40 if he wanted access to help from a certified public account from the beginning. However, if you start the completely free version without help, you can upgrade to its assisted counterpart without a hitch, and the price is clearly displayed.

Outside of sticker shock, Block provides what you need with little hassle. The software tracks your refund as you complete your return, you can easily review for errors and navigating each section is a breeze. Plus, as a bonus for taxpayers with only W-2 income and no HSA contributions, you can file up to three state returns for free along with your federal return. And the software has a smartphone or tablet friendly approach with its ability to snap a photo of your W-2.

TaxSlayer

• Value Ranking: 4 of 9
• Pros: Classic version supports all returns
• Cons: Limited tax help
• Website: www.taxslayer.com

Year after year, TaxSlayer Classic provides great value for people who don't need a lot of handholding when it comes to filling out their tax return—and this year is no exception. For only $17, any taxpayer (including both of our hypothetical taxpayers) can complete their federal 1040 using the software, since it can handle all types of income and every tax break.

There's some basic written tax guidance available if you're a Classic user, but you'll have to move up to TaxSlayer Premium and pay an extra $20 if you need more tax help. With Premium, you can get unlimited access to one-on-one help from a tax professional. You get three years of audit assistance, too…which could be very helpful if the IRS comes knocking on your door. Premium users also get "priority" phone and email support, as well as access to live chat for technical questions.

Self-employed people can also upgrade to a special version designed specifically for them. Jumping to TaxSlayer Self-Employed will put you back an additional $30 over the cost of Classic, but it includes professional tax help, tax payment reminders, and other enhanced features.

Navigating through the TaxSlayer products is easy and there are enough bells and whistles to satisfy most people. For instance, you can import information from your W-2 form from your payroll provider to your tax return (although you can't do the same for 1099 forms). You can also save time by importing information from last year's return—even if you used a competitor's product last year. Taxpayers who know their way around the tax code will also appreciate the Quick File option, which allows you to go straight to the relevant tax forms and fill them in.

On the downside, you're going to have to pay extra to file your state taxes whether you're using TaxSlayer Classic, Premium or Self-Employed. The cost is $29 per state return. That brings the overall value of TaxSlayer's products down a bit, but you're still going to save money in the end when compared to some of the more expensive tax software products in our rankings.

TurboTax

• Value Ranking: 3 of 9
• Pros: Superior navigation and help features; imports most W-2s and 1099s
• Cons: Free edition is extremely limited, and upgrades are expensive
• Website: www.turbotax.com

TurboTax excels in providing smooth navigation and loads of support. Explanations are clear and TurboTax goes the extra mile in pointing out tax breaks you might overlook. TurboTax will import data from more than 150 million W-2s and will also import information from hundreds of financial institutions, which saves time and reduces the potential for error.

For an additional charge (an extra $50 for Deluxe; $70 for Premier), users can have a certified public accountant review their return and point out any deductions they may have missed. But unless you have a complex return or are a really nervous filer, this seems unnecessary, since the program does such a good job of highlighting tax breaks and alerting you to possible errors. TurboTax provides clear and understandable answers to questions, as well as videos and live help from a large community of users.

All of these bells and whistles come at a cost, though. TurboTax offers a free version to taxpayers who have W-2 income and claim the standard deduction, but even someone with a seemingly straightforward return can quickly become ineligible. For example, our fictional single filer was required to upgrade to Deluxe in order to deduct interest on a student loan.

If our single taxpayer had self-employment income, even if it's just a side gig, he would probably need to upgrade to TurboTax Self-Employed ($90 federal/$40 state). However, if he had self-employment income but no deductible expenses, he could use TurboTax Deluxe. It's worth noting that our single filer would be eligible to prepare and e-file his federal tax return for free through IRS Free File, which is available to any taxpayer with 2019 income of $69,000 or less. Even better, he could use the TurboTax Free File offering, which is available to anyone with adjusted gross income of $39,000 or less, even if they have more complex returns (private tax prep companies that participate in Free File are permitted to create their own criteria).

Meanwhile, our hypothetical married couple would need to use TurboTax Premier because they had investment income in 2019. On the plus side, though, the program did a nice job of explaining why they're better off itemizing, and also provided easy-to-understand explanations of credits for child care costs and deductions for contributions to their IRAs.

Free Tax USA

• Value Ranking: 2 of 9
• Pros: Free federal return
• Cons: Still needs some navigation improvement
• Website: www.freetaxusa.com

Free Tax USA pulls itself out of the navigation gutter. Last year the program came off clunky and somewhat hard to navigate, but this year we breezed through both of our hypothetical taxpayers' returns just fine, with just a tiny hiccup. (The program doesn't let you skip sections even if you know certain credits or deductions don't apply.) However, as an added bonus, the program handled all of the same forms that Credit Karma did. Free Tax USA asked us to upgrade in hopes of selling us some of its services, such as the professional tax help and audit defence, but it wasn't a necessity. However, if an upgrade was wanted, it would have cost both taxpayers only $7, which is one reason it takes our number two spot. The second is that the cost to file a state return was just $13. So while the program may not be technically free, it's still very cheap.

Free Tax USA also sets itself apart with its alerts. For example, after inputting the various W-2s, we were told we may have paid too much in Medicare tax. Many of the other programs we tested didn't give such alerts. Another bonus is its direct access to customer service. So let's say you had a question about price or were experiencing technical difficulties, you could contact Free Tax USA without needing the deluxe version.

Credit Karma Tax

• Value Ranking: 1 of 9
• Pros: Free with no exceptions, even complex returns
• Cons: One state return
• Website: www.creditkarma.com/tax

Free is always good, and Credit Karma doesn't disappoint. The credit monitoring and credit card recommendation site has vaulted itself to the top of our value rankings thanks to its no-cost tax preparation. Even for our hypothetical couple, Credit Karma was easy and fast and supported all the forms they needed without a hiccup.

Credit Karma also allows a true import of your W-2 if it's generated by payroll processor ADP. All you have to do is input a little information from the top of your W-2, and viola. The rest of your W-2 is imported. (If your W-2 isn't supported by ADP, you can snap a photo to upload.)

Another stand-out feature is Credit Karma's ability to auto populate information. For example, if you already have a profile on the website, the tax program will pull some of your personal information such as name and address from there. If you filed your 2018 tax return with Credit Karma, it pulls even more information, as it assumes you may take some of the same deductions or credits for the 2019 tax year. And even if you didn't file with Credit Karma, you can upload a PDF version of your 2018 tax return from H&R Block, TurboTax or TaxAct. Plus, if you need help, help is always a chat box away for, you guessed it, free.

The one disadvantage that Credit Karma has is its inability to process multiple state returns. And while that doesn't sound like a huge deal breaker to some, for others it is, especially if you relocate sometime during the tax year.

Methodology

To create our "best value" rankings, we completed two fictional tax returns for each tax software program on our list. The hypothetical taxpayer profiles are based on common tax situations faced by U.S. taxpayers. One of our made-up taxpayers is single, rents an apartment, received one W-2 form for 2019 (his only income), has a student loan, contributed to an individual retirement account in 2019, and has no dependents. He also took the standard deduction. The other return was for a married couple who owns a home, has a young child, received investment income in 2019, donated to charity, and contributed to a health savings account last year. In addition, they both received a W-2 form for earned income and contributed to separate IRA accounts (along with contributing to their 401(k)s).

As stated earlier, we ranked the programs based on cost, navigation (ease of use), functionality, the availability of tax help and the number of state returns included in the base price. We deducted points if upgrades were needed, added points if tax help was free, etc.