IRS expands free Direct File to 24 states, helping millions with easier, no-cost tax filing.
The IRS and the US Department of the Treasury stated that by 2025, more than 30 million Americans in 24 states will be eligible for Direct File, the IRS' free tax filing option. This expansion is part of a national initiative to provide taxpayers with a free option for filing taxes.
During the 2024 trial program, taxpayers in 12 states, including Arizona, California, and New York, were eligible to use Direct File. For the 2025 filing season, the program will expand to 12 new states, including Connecticut, New Jersey, Pennsylvania, and Maryland. Additional states are likely to join by 2026.
The application initially supported simple tax returns, such as income from W-2 wages, Social Security, and unemployment. However, in 2025, the IRS will broaden Direct File to include more complex situations, such as interest income over $1,500, pension and annuity income, and Alaska Permanent Fund Dividends.
Direct File will also enable taxpayers to claim credits such as the child and dependent care credit, the premium tax credit, and the credit for the aged and disabled. Certain deductions, such as those for student loan interest and educational expenses, will also be allowed. Participants, however, must take the standard deduction and are not permitted to itemize their forms.
According to IRS Commissioner Danny Werfel, the plan is to progressively expand the program to accommodate more tax circumstances, particularly those affecting working families. During the trial, more than 140,000 people used Direct File, saving an estimated $5.6 million on tax preparation services.
This project represents the IRS's attempts to simplify tax filing and lower costs for millions of Americans.
