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Credit Karma Tax Review: File Your Taxes for Free

Credit Karma Tax lets you file your federal and state returns without spending a dime. But there are a few catches to this free tax software.

Our Verdict

If you don't mind a flawed interface and don't need any advice from a tax pro, Credit Karma's free tax software gets the job done without costing you anything.

For

  • Free to file both federal and state returns
  • Handles a wide variety of tax situations
  • Can file directly from a mobile device

Against

  • Interface lacks the refinement and friendliness of competitors
  • No help from tax pros
  • Limited help and guidance

Credit Karma is known as a resource for personal finances, from its advice on loans and bank products to its free tools for checking and monitoring credit scores. Credit Karma Tax — now in its third tax season — is just a logical extension of that focus, and like everything else the company does, its service for filing a tax return is free.

Other tax prep providers — including H&R Block and TurboTax — have free tiers, but Credit Karma's free product covers a wider swath of tax circumstances. As a result, more people will be able to file their federal and state returns for free by using Credit Karma Tax.

Cost

While Credit Karma Tax is considered a separate business entity from Credit Karma, you must first sign up with Credit Karma to use the tax product. Membership in Credit Karma is free — the service makes its money from banks and lenders when you use it to sign up for one of those companies' products.

Filing a tax return is free, too, with no gotchas in sight if you fit the parameters of what's included in the free service. (Basically, Credit Karma can handle nearly everything other than estates and trusts or nonresident returns.) Unlike other tax prep services we've reviewed, there are no efforts to get you to uprade to paid products along the way.

State Filing

As with your federal return, state tax filing is free for one state with Credit Karma. (The service handles only single-state residency returns.) Most competitors charge between $36 and $40 per state, though the free tiers at H&R Block and TurboTax include free state returns.

Features

Credit Karma Tax's free service means you don't have to worry about step-up requests or additional costs as you move through the return. We found no hidden costs as we tested the service — you can even include Schedule C deductions and 1099-MISC self-employed or freelance income without paying extra, which you would have to do if you used H&R Block, TaxAct or TurboTax. And at the end, you can export a PDF copy of your taxes for your offline records.

The app lets you import W-2s from ADP or Equifax; you can also take a picture of your W-2 and upload it. Currently, this feature is limited to W-2s; you can't take a photo of other tax documents and import them, for example. You can also import an image via the desktop browser.

MORE: H&R Block vs. TurboTax: Online Tax Services Compared

For this 2018 tax year, Credit Karma added an Accurate Calculations Guarantee and free Audit Defense, should the IRS decide to do an audit based on the tax return you filed through Credit Karma. You can also now file directly from a mobile device; previously, you could start a Credit Karma Tax return on mobile device, but you had to file from a computer.

Available Help

Even free products have their trade-offs, and helping you through your return is where Credit Karma falls flat. The company provides web-based email support for using the tax product, but no support from tax professionals.

At the bottom of the screen, an ever-present question-mark icon can call up a help pane with pointers or links to related FAQs that may or may not actually answer your question. Clicking the icon also sometimes pushes the screen you were looking at off to the side, which won't help you figure things out. The same thing happens with pop-up help screens at times, where we would click on a circular information graphic, only to have the pop-up answer cover nearly the entire screen.

Ease of Use

Credit Karma is clearly built and optimized for mobile use. The responsive mobile design has a center-weighted main screen and large, card-style modules that work well in vertical environments like on a smartphone or tablet. Credit Karma also has an app (Android and iOS) that draws on elements of the mobile website.

After signing up for Credit Karma, we selected the Tax option from the upper navigation bar. To get started, we first added a contact phone number and received a verification code. Once verified, we began navigating the return, starting with basic questions about our tax situation — marital status, whether we lived in more than one state, had any dependents, and if we owned or rented a home.

The second screen goes deeper, asking if we lived in one state and worked in another; what we did in 2018 (employed and receiving W-2s, a student or self-employed); and if we had any additional income from investments, rental property, bank account interest or other sources. The third step asked for payments we've made this tax year, separated by Personal, Government and Medical.

Credit Karma adheres to its mantra of clear, plain-English language about finances, even in handling tax questions. The approach here seems more direct and holistic than it does with competitors, perhaps because the service isn't trying to sell a higher level to you.

From here, we got confirmation that we could proceed with a free federal and state return. Credit Karma claims it can do a free return for 95 percent of tax situations, including S-corporations and partnerships. It can't handle estates and trusts, and it can't handle part-year or nonresident returns.

Starting the return is straightforward, with simple graphical buttons and a card-style interface that's clearly optimized for use on mobile devices. While that's great if you're preparing your tax return on a mobile, it doesn't look as good when you take a look at it on your laptop.

Along the very top, we found a way to navigate back to Credit Karma and to view our federal and state refunds, which updated as we moved through the return. Beneath that, Credit Karma has five core tabs, under which data entry gets grouped: Info, W-2, Life Events, State and Review.

Under Basic Info, we could sync up our tax info to our Credit Karma account — one of several opportunities the service takes to link its tax product with the rest of its offerings. We skipped this option, however, and proceeded to the next screen, which has fields for such basic information as name, address, phone and birthday. All of this autofilled from our Credit Karma sign-up. Next, we added our social security number, confirmed our filing status and dependents, and filled in our profession. And, we confirmed that we needed to file state taxes.

Some of this seemed to duplicate our answers to earlier questions, but we had to step through it and confirm collected info to move through to the next step. This is where Credit Karma puts together a customized "tax packet" that includes cards for all of the tax items that apply for the year. And, you'll have a chance to add additional forms as you move through the return.

Scroll down to Life Events (an odd moniker) to enter income and business deductions. Credit Karma gets a bit obtuse here: For example, when establishing our personal business, our business type was not represented in the drop-down menu. It also gave us a chance to deduct certain home expenses for our personal business, but this information lacked the additional guidance and perspective that competing products offer.

The deeper we dug into using Credit Karma, the more frustrating we found its simplified interface. For example, when entering business info, there is an option to view the form, but that just shows everything in a single page view, instead of a broken-up view that's optimized for smaller screens and above-the-fold design. Under Gifts to Charity, we had to enter a value first, before going through to itemizing donations; the two screens prior to itemizing could have been condensed. To add expenses in a Schedule C form, we literally had to press a button to add a new expense, each represented in its own field, so we couldn't easily cut and paste from another source (such as a spreadsheet). This interface idiosyncrasy alone could be a deal breaker for self-employed tax filers with numerous expenses to enter; for others, the lack of guidance on available deductions and how to consider asset depreciation might be enough for them to take a pass.

To its credit, Credit Karma Tax does have a range of options for self-employment or side gigs (including Lyft, Uber and Etsy). It also has sections for retirement contributions, donations to charity, investment income (including support for cryptocurrency) and medical expenses. On the whole, Credit Karma is surprisingly robust, given the fact that it's free. And, the interface's lack of finesse may not matter to you if you are looking for a no-cost way to handle your taxes.

Bottom Line

Credit Karma Tax is the best free option for filing federal and state taxes, as it's more extensive than the limited free tiers offered by competing services. The interface lacks the visual refinement and conveniences of H&R Block and TurboTax, however; and the service lacks the guidance and assistance you can find with those paid services.

Still, since Credit Karma covers people in most tax situations — including those who are self-employed as well as small business owners —  using this free service means that the only money you'll be paying out at tax time is what you owe Uncle Sam.

Credit: Credit Karma