Credit Karma Tax: Free Federal and State Tax Software, What’s The Catch?

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Credit Karma is expanding beyond free credit scores and free credit monitoring. Beginning in January 2017, they will offer completely free Federal and State tax preparation software with free e-File and no income restrictions. You must first join and then you can reserve a spot for when it opens. The tagline is “$0 Federal, $0 State, $0 Always. Truly Free Tax Returns.” Here’s an overview of what is and isn’t included in this offer.


Is this legit? Yes. Credit Karma purchased AFJC Corporation, which was a private-label software provider and previously supplied the online tax software for Jackson Hewitt. They use your personal information to show you targeted ads. They used to do this with your credit report data, and now they want to do it with your tax return data.

What’s included.

  • Free Federal filing with free e-File for 90%+ of filers with no income restrictions.
  • Free State filing with free e-File for 90%+ of filers with no income restrictions.
  • No upsells, no upgrades, no “premium version”.
  • You can print and snail mail if you choose not to e-File.

Here are some popular forms included by Credit Karma Tax that the download edition of TurboTax Deluxe 2016 will require you to upgrade to Premier (~$20 extra) or Home & Business (~$30 extra).

  • Schedule C – Profit or Loss from Business (Sole Proprietorship)
  • Schedule D – Capital Gains and Losses (Stock Sales)
  • Schedule E – Supplemental Income and Loss (Rental property)
  • Schedule SE – Self-employment tax

What’s NOT included. Credit Karma will NOT support the following forms this year:

  • Filing multiple state or non-resident state returns
  • State filings without a federal return
  • Non-resident federal filing – 1040NR (non-resident tax return)
  • Foreign earned income credit
  • Non-dependent earned income credit
  • Married filing separately (MFS) in common law states
  • Estate and Trust income from K1 forms

No business tax returns. Credit Karma Tax supports Sole Proprietorships and income reportable on a Schedule C/E/SE, but does NOT yet support business tax returns for an S corporation, C corporation, partnership or multi-member LLC.

Credit Karma Tax does NOT support importing tax return information from other providers this year. There is no download version. There is no app version.

How does Credit Karma make money then? Quoted from their site:

When you visit Credit Karma, we show you offers and recommendations (like credit cards or loans) that could save you money. If you take one of these offers, the bank or lender usually pays us. We never charge you a dime. And we never sell your info to marketers.

My take? They should say they won’t sell your information to other marketers. They are the marketers, and now they’ll know more about your financial situation than anyone else besides you. On top of your credit report data, they’ll have income and expense data. For example, if they know you have a 4% rate mortgage, they could sell you a 3.5% refinance mortgage. If they know you are older and have a paid-off home (i.e. you pay property taxes but no claim no mortgage interest), they could sell you a reverse mortgage. If they know your income, they can estimate the amount of life insurance you need. You could actually like this customization, be creeped out completely, or simply plan to ignore the ads.

What could go wrong? The most common drawbacks mentioned are the idea that (1) “you are the product” and (2) what if they get hacked and you lose your personal information?

  1. Well, yes you are the product. Google and Facebook work the same way. You use their free service, they show you targeted ads and hope to extract money from you indirectly.
  2. If you really are worried about your personal information, you should buy tax prep software on physical CDs so that nothing is stored on anyone’s cloud servers. Don’t use any online tax prep software, including that of TurboTax/H&R Block/TaxACT.

I would say a less-mentioned drawback is lack of customer service or support. If there is a bug or tax question that I need help on and I have to spend an hour to fix it, then I’d rather have just paid upfront for better service. Other providers advertise human phone support and/or unlimited live chat.

Bottom line. It’s a pretty simple deal. Credit Karma will give you free Federal and State tax returns. You let them show you ads based on your financial data. Is this a good deal? For most people that have straightforward taxes and don’t usually need support, then quite possibly yes. If you do Federal + State + e-Files with TurboTax or H&R Block, the total cost can be $100+. If you have a complicated tax return or can get value from the conveniences offered by competitors (import last year’s data, unlimited phone support for weird situations, import of 1099-B tax lot data), then it may be worth paying extra elsewhere. I signed up on the waiting list and hope to compare the accuracy early next year.


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  1. Hmm. I don’t know if I would try this out, but it’s a good deal if you aren’t privacy-centric and looking to save a few bucks. I think TurboTax is $40 or so, so if you have pretty simple taxes I could see how this could work.

  2. Those with AGI of <62k can file for free using H&R Block software on

    No providing your information to marketers.

    • Looking4Bargain says:

      Actually, that’s not completely true. H&R Block will add on for quite a few things. I have to pay extra to file solely because I bought my house in 2008 and eligible and took the repayable credit. Really simple basic form that require me to pay $29.95 for H&R Block and all the other “free” tax returns.

    • nobargain says:

      not if you used your HSA

  3. Thanks for another useful article. I am so conservative that I use downloadable software and print and mail my return. I also use Quicken on my computer, rather that online services that would have my data and passwords out on the cloud.

    Free always looks good, but paying for downloadable tax software might be a cheap insurance premium against data theft.

    • may i ask which downloadable software you use? I’m planning on doing my own next year, God willing. Thanks

      • Christiana,
        I used H&R Block basic last year. For several years before, I used TaxAct. Last year, TaxAct included the state tax return in the package and upped the price considerably. I live in a state with no income tax, so changed to H&R Block Basic.
        If you are new to buying tax software, be careful to buy what you need. Go to the three different sites for the providers of downloadable tax preparation software and carefully review the different packages to see how they match up with your tax filing requirements. The software that is the best price and meets my needs may not be the same package that will be right for you. Just don’t spend money on a package with features you don’t need.

      • Christiana,
        Last year, I used H&R Block Basic. After having used TaxAct for several years, I switched to H&R Block because TaxAct changed the tax software package to include the state tax return and increased the price. I don’t file a state return, so I changed to H&R Block because it met my needs at a cheaper price.

        I have not used TurboTax for a long time, because TaxAct and H&R Block met my needs at a better price.

        You need to go to the three tax software provider sites and see how the packages offered meet your needs. What is best for me may not be the best for you. What was the best software for me in 2014 was not the best software for me in 2015.

        Good luck.

  4. No K-1 support = not working for me.

    • CK Tax explicitly states that “Estate and Trust income from K1 forms” is not supported. However, there are other types of K-1 income like those from partnerships and S-Corp (and many commodity and currency ETFs) that it is not clear if they are supported or not. Even TurboTax Deluxe lets you just enter K-1 information (but does not provide guidance). I’m just waiting until January to see.

  5. I signed up. Not sure if I will use it. TaxAct has been jacking up the prices and TurboTax has gotten into the bait and switch business with Schedule D filers. I noticed CK has a data aggregation service similar to Mint (owned by Intuit, maker of Turbotax and Quicken) – any one know if it is any good? Mint just integrated its billpay service which is disappointing to me since I liked at a safe data screener, not a potential opportunity for the bad guys to access my money (just data about my money). Maybe I am safe since I have never paid a bill with Mint Bills so the systems are not in place. Not sure.

    Was also debating Yodlee or Personal Capital to use as a screener.

  6. I usually use m&m tax I’m a little on the fence about if I want to do it or not this year…

  7. Since I am a senior citizen & don’t work anymore Tutbotax is getting too expensive for me. I only have social security & my IRA. Which tax program would be the best for me, in your opinion? (No H&R Block!!)

  8. Tameka Stuckey says:

    do credit karma tax help with my credit

  9. Angela M Cable says:

    Tried the Credit Karma Tax “service” this evening. It requires a password reset. The old password is evidently fine for everything except this. Whatever. It then *requires*your cell phone number. I have no idea what valid reason they could possibly have for requiring this information aside from selling it somewhere down the road. There’s a link on the page for “help” if the text message they want to send fails. This takes one to a help center that doesn’t address the question. Nowhere on the site is a phone number to contact customer support. Nowhere on the site is an email address to contact customer support. Found one anyway. Not impressed.

  10. NunyaBiziness says:

    Being a Turbo Tax user for several years now, I cannot find anything wrong with what Credit Karma is asking. As far as the password reset, intuit is known for piss poor security as millions of tax returns are hijacked each year via turbotax. A password reset is quite honestly, a smart move for security purposes. As for the phone #, this is to establish you are able to verify you are a real person and not an automated script. It further estalishes and protects you as well as Credit Karma. I am not sure any site impresses me as far as filing taxes. Every tome I am doing mine, I have used TurboTax and I feel I am exposing detailed financial info to them, wishing I did not have to, as well as feeling like they have me cornered because I require additional forms for tax deductions which always push my fees to the next version costing more. And, I have to say intuit, given all the money they make and how long they have been doing this, should have one of the best customer service departments around. However, they are the worst. The promote chjeap pricing for turbotax versions, I even take pictures of the screen showing it, and then at the end of doing my taxes, after investing many hours to enter ALL that data, and THEN they sticvk me with the full price on a product that I was supposed to get a discount on. After all my attempts to contact intuit, they have only one way which involves their online portal which guides to chat option “IF someone is available” or, I end up being pushed to the stupid communicty which might not get a response for days or even weeks or months. Oh and Intuit goes overboard to promote free or discounted fees for federal tax and so many times people fall for it and then, on top of everything, adding insult to injury, they tack additional fees for e-filing, state tax returns, and some specific forms and that is all part of their gag. Not impressed with what Credit Karma is offering? Well, I’d gladly choose to use Credit Karma, or even H&R Block over what Intuit has to offer with any of their turbotax offers. Why? Because they are borderline liars. At least these new comers offering tax filing services for free have simplified to process and what they are offering and do not appear to be sucker punching people when they least expect it. If I did not have 7 years of taz service history in the database of intuit, I’d make the choice to walk away immediately. But if I can download the information in PDF format for all the prior years and access on my hard drive, I’ll gladly givwe Credit Karma a shot. Not sure what people need customer service for. If people need tax advice or help understanding how to do their taxes, then maybe they should pay someone to do them. The only reason I ever needed to contact intuit for was to get the money they overcharged me and they STILL never replied to me. Not even a sympathetic apology withsome policy mumbo jumbo to jusitfy why they will not refund me the difference. They just blew me off. I hope alot of sites spring up wanting to promote completely FREE federal and state tax filing so turbotax loses a sizable chunk of their client base. They are losing me this year. I only hope more will follow. I’ve read many angry customer messages in the forums and it’s no joke. Intuit has been a big let down. They were lucky no real competition existed over the years or else they would have been gone years ago. I think it’s time to kick them aside and show them what FREE actually means.

    Thanks Credit Karma. Thanks H&R Block. And thanks to all the others who are “honestly” offering free electronic filing of federal and state tax returns

  11. Thanks Jonathan for this article. I started using CK Tax but didn’t get too far when I read your article that it doesn’t support multi-state tax returns – that’s a real deal breaker for me. I was hoping to avoid all tax prep fees this year – oh well, there’s always next year.

    Let’s hope they upgrade this for more functionality next year.

  12. Joe E in Sunny SoCal says:

    Ran Credit Karma Tax and TurboTax in side-by-side Firefox tabs. Married couple, single income, filing jointly, not much income outside of W-2s.

    Entered data repeatedly into both, going over every entry with a fine-toothed comb. Both Federal and State refund counters spun to the same exact amount.

    Reset TurbotTax (so they won’t hammer me with emails telling me to finish up) and filed with CKT.

  13. Why as credit karma tax been down for two days? What is the issue with it?

  14. I just tried on Credit Karma and found a bug. I have HSA distribution which is used as qualified medical expense. It should be all deductible. But CK has nowhere to ask about it. It just counts the HSA distribution as our income! It makes us owe more more tax for the Federal and the state. So I had to go to TurboTax and fill out same information. TurboTax asks the question and didn’t count as our income…

  15. AVOID CREDIT KARMA TAX. I tried it this year, had a technical glitch with Fed e-file and needed technical support. First support message sent on Feb 3rd, and FOURTEEN emails back-and-forth later, I still got a canned response that totally ignored my question. Meanwhile, I tried, had the same technical glitch, sent ONE message for help, and got an actual response to my question in less than 24 hours.

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