By 2025, more than 30 million Americans will be able to file their tax returns for free through the IRS’s Direct File program. This program was originally launched as a pilot in 2024 and is expanding to 24 states, with more expected to join in the future.

The IRS aims to simplify tax filing with Direct File and says the program is simple, secure and free for eligible taxpayers. Here’s what you need to know if you’re wondering if you qualify and what income types qualify.

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Who can use Direct File?

Only those who have lived in the eligible 24 states for all of 2024 can use Direct File. Participating states include:

• Alaska
• Arizona
• California
• Connecticut
• Florida
• Idaho
• Kansas
• Maine
• Maryland
• Massachusetts
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• Oregon
• Pennsylvania
• South Dakota
• Tennessee
• Texas
• Washington State
• Wisconsin
• Wyoming

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This program expansion was made possible by the Biden-Harris administration’s Inflation Reduction Act, which provided a significant boost to working-class and middle-income families. According to a press release from the U.S. Department of the Treasury, Americans spend an average of $270 and 13 hours on tax preparation. The IRS aims to help individuals and families avoid these costs.

What types of income are eligible?

With the expansions of the Direct File program, there will be more options for different types of income, credits and deductions in 2025. Here is an overview of the income categories eligible for free direct file filing:

• W-2 Wage Income: This includes most employees.
• Income from social security: If you receive Social Security retirement benefits, you can file for free.
• Unemployment compensation: For those who received unemployment benefits in 2024, this income type is also eligible.
• Interest income: In 2025, the program will expand to allow interest income above $1,500, making it easier for taxpayers with savings or investments to qualify.
• Pension and annuity income: This includes non-IRA retirement income, a common source for retirees.

If your income comes from gig work, contract work (Form 1099-NEC), rental property, or self-employment, you should explore other filing options as Direct File does not yet support them.

See also: IRS Finalizes 10-Year Rule on Retirement Withdrawals, Making Things ‘Even More Insanely Complicated’

Tax credits and deductions you can claim

In addition to free filing, Direct File users can take advantage of several tax benefits and deductions. For the 2025 season, the program supports the following credits:

• Earned Income Tax Credit (EITC): An essential credit for low- to moderate-income workers.
• Child tax credit: For those raising children under the age of 17.
• Credit for the elderly or disabled: This credit may provide relief to eligible seniors and individuals with disabilities.
• Pension savers credit: This credit is intended for those who contribute to retirement savings plans such as 401(k)s or IRAs.

Additionally, taxpayers can claim the standard deduction and certain “above the line” deductions, including student loan interest and contributions to health savings accounts. However, Direct File does not support itemized deductions.

See also: How do billionaires pay less income tax than you? Tax deferral is their main strategy.

Why you should check your eligibility

For eligible taxpayers, Direct File offers a free and time-saving alternative. The program has no hidden costs, is available in Spanish and works seamlessly on smartphones, tablets and computers. For many, this could mean significant savings, both financially and in terms of time spent on tax preparation.

The comprehensive Direct File program can provide a practical alternative to traditional tax preparation methods. As tax season 2025 approaches, it’s worth checking whether you can take advantage of this no-fee filing option, especially if your income falls into one of the supported categories. Stay up to date with the latest developments and see if this streamlined process could work for you.

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