The recently passed Republican tax bill, valued at $3.8 trillion, includes a provision that threatens the existence of the IRS Direct File program, a popular free service that allows individuals to file their federal income tax returns online.
If the bill is approved by the Senate and becomes law, the Direct File program could be terminated within a month of the law's enactment.
According to American Military News, the bill also mandates the U.S. Treasury Department to establish a task force responsible for developing a partnership between the IRS and private-sector tax service providers.
This task force would be tasked with identifying alternatives to "free file programs and direct e-file tax return systems," including the IRS Free File program, a current public-private collaboration.
The IRS Direct File program, distinct from the Free File program, is a widely used free service that provides guidance and support for individuals completing their federal income tax return and filing their taxes directly with the IRS.
The program has received high praise from most taxpayers, with approximately 90% rating their experience as excellent or above average, as per a General Services Administration survey of around 11,000 Direct File users in 2024.
Moreover, the program's popularity is evident, with about 73% of taxpayers expressing some or significant interest in using Direct File, as reported by a Tax Policy Center report in March, based on a survey of taxpayers aged 18 to 64.
The Direct File program has been a target of Republican lawmakers for some time. In December, nearly 30 Republican lawmakers penned a letter to President-elect Donald Trump, urging him to terminate the Direct File program on his first day in office. Legislation to end the Direct File program was introduced in the U.S. House of Representatives last July.
Elon Musk, the unofficial leader of the "Department of Government Efficiency," or DOGE, has also expressed his disapproval of the program. In February, he announced on social media that the government tech office responsible for developing the Direct File program had been "deleted."
Despite these challenges, the IRS's Direct File page remains operational. The program expanded its reach to 25 states for the 2025 tax season, up from 12 states in 2024, its pilot year. The IRS estimates that 30 million taxpayers qualify for the Direct File program in 2025. In 2024, over 140,000 taxpayers filed their federal tax returns through the Direct File program.
The Direct File program also broadened its scope to accommodate more types of tax situations for the 2025 tax season. While taxpayers who used the system in 2024 could claim a few tax credits, including the earned income tax credit and the child tax credit, the list of eligible credits expanded for the current filing season to include the child and dependent care credit, among others.
However, taxpayers wishing to claim other tax credits, such as the American Opportunity Tax Credit for higher education costs, or the tax credit for adoption expenses, will not qualify for Direct File. Similarly, those hoping to deduct IRA contributions will find that Direct File does not support this.
Now in its second year, the Direct File program enables taxpayers to electronically file their federal tax returns with the IRS. This free tool guides taxpayers through every aspect of their federal income tax return, and can be accessed via a smartphone, computer, or tablet.
One of the program's benefits is the availability of live support directly from the IRS via chat or phone. IRS representatives can provide answers to basic tax questions and assist with technical issues in both English and Spanish.
The Direct File program does have income limits, as well as restrictions on the types of income, deductions, and credits that can be included on your tax return.
For the 2025 tax season, the income limits are as follows:
- Your income must be less than $200,000 (less than $168,600 if you have more than one employer), and if youre married filing jointly, your spouses income also must fall below these limits.
- If youre married filing jointly, your combined income must be less than $250,000.
- If youre married and file separately from your spouse, your income must be less than $125,000.
To be eligible for Direct File, your income can come from the following sources:
- W-2 wages
- Social Security income
- Unemployment compensation
- Interest income
- Retirement income (reported on a 1099-R limited eligibility starts March 2025)
However, if youre self-employed, or have business or rental income, you cant use Direct File. The same applies for IRA contributions or distributions: If you have either, you cant use Direct File.
You can use the IRS Direct File program only if you claim the standard deduction the program isnt available to people who itemize.
But you can claim certain above-the-line deductions: student loan interest, educator expenses, and health savings account contributions.
You cant use Direct File if you want to deduct your IRA contributions.
The Direct File program supports the following tax credits in 2025:
- Earned income tax credit
- Child tax credit
- Credit for other dependents
- Child and dependent care credit
- Premium tax credit
- Credit for the elderly or disabled
- Retirement savings contribution credit
However, if you want to claim education credits, credits for energy efficient home upgrades or the adoption expense credit, you cant use the Direct File program.
More taxpayers will have access to the IRS Direct File program in 2025. In 2024, the IRS kicked off the program with only 12 states; that number has expanded to 25 states for the 2025 tax season.
For some of the states that participate in the IRS Direct File program, your federal return information will be transferred automatically to the state tax website, but in some cases youll have to re-enter your information. Visit this IRS Direct File page to get the details for your state.
Here is a list of the participating states:
Alaska, Arizona, California, Connecticut, Florida, Idaho, Illinois, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin, and Wyoming
If you dont qualify for the IRS Direct File program, you may have other options to file your tax return for free.
In addition to Direct File, the IRS offers the Free File program, in which it partners with online tax software providers to provide free federal income tax return filing. Some providers also allow you to file a state income tax return.
For the 2025 tax season, your adjusted gross income must be $84,000 or less to qualify for the Free File program. That AGI applies to any filing status: married filing jointly, single, head of household, etc.
The IRS also offers the Volunteer Income Tax Assistance (VITA) program, which provides certified volunteers to prepare basic tax returns if you earn less than $67,000 a year, are disabled, or speak limited English. You can find a site near you by visiting this IRS page.
Login