Credit Karma Tax Is 100% Free. But You Pay With Your Privacy

Credit Karma Tax allows you to file state and federal taxes free.  It’s 100% free – there are no upsells or gimmicks. But you do give up some privacy by sharing your personal information with Credit Karma. Credit Karma does not give you the option to opt-out of sharing your data.

Credit Karma Tax – Is it worth it?

100% Free Federal and State Taxes, No Gotchas

Instead of buying Turbo Tax or H&R Block software, you can use Credit Karma to file both federal and state taxes for free. There is no fee for e-filing either. Unlike some programs, there is no income limit at Credit Karma to file for free.

How does Credit Karma make money?

In life, nothing is free. There are always trade-offs. To file taxes with Credit Karma, you have to create a Credit Karma account by providing your name, Social Security Number, date of birth, and other personal details. Credit Karma makes money by advertising financial products and getting a commission if you buy the products it recommends.

Works With Most Forms, Not All

Credit Karma works for about 95% of scenarios. Some forms such as schedule K-1, non-resident tax returns (1040-NR), and Earned Income Credit with non-dependents are not supported. You can see the full list of forms not supported here.

Easy to Use, Mobile Friendly

Credit Karma is very easy to use and offers guides you step by step just like H&R Block and Turbo Tax. It is mobile-friendly but you can use it on a computer if you prefer that route.

You can take a picture of your W-2 and the software will enter your W-2 information in the software for you to verify.

If you used Turbo Tax or H&R Block last year, you can import them into Credit Karma and avoid re-entering your personal information and carry-over items from last year.

Users who have tried Turbo Tax or H&R Block and Credit Karma tax say that the results are comparable.

Where does Credit Karmax Tax fall short?

Credit Karma doesn’t have a good knowledge base for users to refer to, in case they have questions. H&R Block and Turbo Tax do a much better job in this area.

You get free audit defense, which basically means that Credit Karma will help you discuss your issue with the IRS. But it is not legal advice and you are on your own.

Recent Developments – Intuit acquires Credit Karma but Credit Karma’s Tax Business Sold To Square

In February 2020, Intuit, which owns Turbo Tax, Quickbooks, and Mint, agreed to buy Credit Karma for over $7 billion. As a condition for the acquisition, the Department of Justice required the divestiture of Credit Karma’s tax business. In November 2020, Credit Karma announced that it will be selling its tax business to Square, a financial services company known for its mobile payments.

It is unclear how Square’s acquisition of Credit Karma Tax will impact Credit Karma in the future. How will square monetize the tax business without the rest of Credit Karma, which is owned by Intuit?

One thing we know for certain. You can file your 2020 taxes for free.

Decent Trade-Off

Tax filing should be free. H&R Block and TurboTax have lobbied Congress for years to keep free tax filing just a dream because they make billions of dollars from their tax business. Credit Karma Tax is 100% free with no upselling but you do give up your personal data and privacy. So it’s not for everyone. If you are comfortable with how Credit Karma is monetizing your personal information, Credit Karma tax is worth giving a try.

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