H&R Block vs. TurboTax
The start of a new year means it’s time to file your federal tax return. Many people stress about filing taxes but there are a number of tax filing services nowadays to make the process easier. Two of the most well-known services are H&R Block and TurboTax. They both offer a friendly user-experience. They provide information along the way so you understand what you’re doing. And perhaps most importantly, they both offer affordable filing options. But which of these services should you use when you file this year?
A Quick Look at H&R Block
H&R Block has provided consumer tax filing service since 1955. It’s become one of the most popular filing services since then because it combines simple tools and helpful guidance. That’s useful whether you’ve never filed taxes or whether you’ve been filing for decades. Of course, tools and guidance come at a price. H&R Block currently offers four digital (online) filing options. You can see the options and pricing in the table below.
H&R Block Filing Options Filing Option Costs Features H&R Block More Zero Federal: Free
State: Free Best for new filers and simple tax returns, including filers who itemize. Supports 1040 with Schedule A, 1040EZ and 1040A. H&R Block Deluxe Federal: $34.99
State: $36.99 Best for maximizing your deductions. Includes all More Zero features, plus software for choosing deductions. H&R Block Premium Federal: $54.99
State: $36.99 Best for investors and rental property owners. Includes all Deluxe features, plus Schedule C-EZ, Schedule D and Schedule E. H&R Block Self-Employed Federal: $74.99
State: $36.99 Best for small business owners. Includes all Premium features, plus Schedule C.
The cheapest filing option is the free option, called More Zero. It lets you file your federal return and one state return for free. The catch is that this service doesn’t support all the documents you might need. The major forms that it supports are the 1040A, 1040EZ and 1040 with Schedule A. Filing other forms will require you to upgrade to a paid plan.
Paid plans range form $34.99 to $74.99 for federal filing. All state filing costs $36.99 per state. Most filers can get away with the Deluxe option, which costs $34.99 and includes software for maximizing tax deductions. If you do freelance work or own a small business, you’ll likely need to upgrade to the Self-Employed plan, which costs $74.99.
One standout feature for H&R Block is its physical stores. If you don’t want to file your return online, stop by one of its 10,000+ tax offices in the U.S. The tax professionals there will be able to walk you through your filing.
A Quick Look at TurboTax
TurboTax has been around since the mid-1980s. Part of its popularity is due to the fact that it’s owned by Intuit. Intuit also makes a software called Quickbooks, which millions of companies use to manage their accounting. But TurboTax is also popular because it offers a user-friendly design and straightforward step-by-step guidance.
Like H&R Block, TurboTax has a free filing option that allows you to file your federal return and one state return at no cost. However, the free option only supports forms 1040EZ and 1040A. If you want to itemize your deductions with schedule A (or if you need to use any other forms), you will need to upgrade to a paid plan. There are four paid plans that run from $39.99 to $149.99 for federal filing. State filing is always $36.99 per state.
TurboTax Filing Options Filing Option Costs Features TurboTax Absolute Zero Federal: Free
State: Free Best for new filers and simple tax returns. Supports forms 1040EZ and 1040A. TurboTax Deluxe Federal: $39.99
State: $36.99 Best option for maximizing your deductions. Includes all Absolute Zero features, plus additional software. TurboTax Premier Federal: $59.99
State: $36.99 Best for investors and rental property owners. Includes all Deluxe features, plus focus on investment and rental property income, accurate stock reporting, refinancing deductions TurboTax Self-Employed Federal: $89.99
State: $36.99 Best for self-employed filers, independent contractors, freelancers and consultants. Includes all Premier features, plus access to self-employment tax experts, maximizing business deductions TurboTax Live Federal: $149.99
State: $36.99 Best for filers who have complex finances and want expert advice. Includes all Self-Employed features, plus access to tax experts
The Deluxe option will be enough for most filers. It costs $39.99, which is $5 more than the Deluxe option from H&R Block. You get slightly more features for that additional costs. Small business owners and self-employed individuals will need to upgrade to the Self-Employed option, which costs $89.99 for a federal return.
TurboTax doesn’t have any physical locations like H&R Block, but it uses an interview style to walk you through your return one step at a time.
H&R Block vs. TurboTax: Cost
Cost is always a consideration when you choose a tax filer. Tax filing services know that and the result is that both H&R Block and TurboTax charge similar prices.
As mentioned, both services offer a free option, covering simple returns and allowing you to file with the most basic tax forms. However, H&R Block has a slight advantage in that its free option supports one additional form. (You can read more about the free options in the next section.)
It’s great if you can file your taxes for free, but the average filer will need to upgrade to another option. The Deluxe options is enough for many filers. Both Deluxe options include deduction-finding software, help with charitable donations and access to tax financial experts through online chat.
There are a couple of big differences between the options in the forms that they support. TurboTax’s Deluxe option supports Schedule SE, which allows you to file self-employment taxes. It also allows you to file Schedule C and Schedule C-EZ.
The cheapest H&R Block option that supports Schedule SE and C-EZ is Premium. That will cost $54.99 (versus TurboTax’s Deluxe option which is $39.99). In order to file Schedule C with H&R Block, you’ll need to upgrade to the Self-Employed option, which costs $74.99 for a federal filing.
So H&R Block is cheaper than TurboTax. The lower prices can be misleading, though. You may need to upgrade to a more expensive plan to file certain forms through H&R Block. This is especially true if you have any income from freelance work, contract work or any other where payroll taxes weren’t removed.
If price is your primary concern, you may want to consider a cheaper service like TaxAct. TaxAct is well-known for being affordable but it doesn’t quite provide the same level of simplicity and educational material that other services offer.
H&R Block vs. TurboTax: Comparing Free Options
TurboTax’s Deluxe option is the more comprehensive option for the average filer, but let’s briefly consider the free options again.
H&R Block and TurboTax both offer a free option for filers who use either 1040EZ or 1040A. You can often use those forms if you have less than $100,000 in taxable income, you aren’t claiming dependents, you have no investment income other than simple dividends or interest and you don’t have rental properties or business expenses.
You cannot use either form if you itemize deductions but H&R Block’s free option also supports 1040 with Schedule A. Schedule A is for itemizing deductions. It can be helpful to filers who want to maximize mortgage and property tax deductions.
So if your finances are simple, the biggest consideration is whether or not you want to itemize deductions. (It’s useful that H&R Block includes Form 1040 with Schedule A but that might be less useful in 2019 when you file taxes for the first time under the new Trump tax plan.)
H&R Block vs. TurboTax: User-Friendliness
Both of these services are known for their ease of use but TurboTax is generally the more user-friendly of the two – whether you’re talking about mobile or desktop.
TurboTax’s interview-style approach will guide you through the filing process with simple and straightforward questions. There is minimal tax jargon. H&R Block is also user-friendly but its questions and explanations are not always as clear as you would hope.
The filing process with TurboTax also includes encouraging phrases throughout. This isn’t a necessary feature but taxes are stressful for many people. Seeing, “You can do this,” throughout the process may help to reduce some anxiety.
Another important consideration is how easy it is to upload documents. Both services do well on this front. H&R Block and TurboTax both let you upload your W-2 by taking a picture of it. Both services allow you to import your previous returns no matter which tax service you used (as long as you have a PDF version of the return). They also make it easy to fill out your state return after going through your federal return. Your information quickly transfers so you don’t waste time retyping everything.
The Bottom Line
So, who wins? Well, it depends what exactly you’re looking to do. H&R Block covers more people with its free option because it allows you file Schedule A for free. The two Deluxe options are only $5 different (H&R Block’s is cheaper) but TurboTax’s Deluxe option supports more forms that self-employed, freelance and contract workers may need. Both services are user-friendly but TurboTax is slightly simpler with more straightforward language.
Ultimately, which tax filing service you use comes down to personal preference. Some people prefer one over the other because they simply like the way it looks. Of course H&R Block and TurboTax are not the only two tax filing services. You may want to consider other options like TaxAct, TaxSlayer or Credit Karma.
Photo credit: ©iStock.com/AndreyPopov, ©iStock.com/Xesai, ©iStock.com/mediaphotos
The post H&R Block vs. TurboTax appeared first on SmartAsset Blog.