The U.S. Department of the Treasury and the IRS have announced that the number of states offering Direct File will double in Filing Season 2025 to 24, covering more types of income, credits, and deductions. This expansion means that 62% of Americans will live in states offering Direct File. It is estimated that more than 30 million taxpayers will be eligible to use Direct File in the upcoming filing season.
Direct File is driven by the Inflation Reduction Act (IRA), which tasked the IRS with delivering a report on the cost of developing and running a free direct e-file tax return system. The IRS released the report to Congress in May 2023, which outlined how an IRS-run free direct e-file tax return system might work. Most taxpayers surveyed by the agency expressed interest in using an IRS-provided tool to prepare and file their taxes.
As part of a pilot program in 2024, eligible taxpayers in 12 states could file their federal tax returns for free directly with the IRS using Direct File. The pilot was deemed successful, with several hundred thousand taxpayers across 12 states signing up for direct file accounts, and 140,803 taxpayers filing their federal tax returns using the new service. In May 2024, it was announced that the program would be permanent and available to all 50 states and the District of Columbia for the 2025 filing season.
Direct File provides a free and secure option for taxpayers with simple tax situations in participating states. The program will now support additional income types and credits for individuals who meet certain eligibility requirements, including the Credit for Other Dependents, Child and Dependent Care Credit, Premium Tax Credit, Retirement Savings Contributions Credit, and the deduction for Health Savings Accounts. In the 2025 filing season, Direct File will offer a new chatbot for guidance on the eligibility checker, as well as live chat support in English and Spanish.
During the pilot, four states built companion state tax filing tools that allowed Direct File users to file their state returns. Code for America has announced collaborations in New Jersey and Idaho to make FileYourStateTaxes available to Direct File taxpayers in those states. The average American spends $270 and 13 hours filing their taxes. With Direct File, eligible Americans can file their taxes online for free, saving potentially hundreds of dollars.
Moving forward, Treasury and the IRS are already looking ahead to the next-next filing season, securing commitments from additional states to join Direct File in Filing Season 2026. The program has the potential to save Americans tens of millions of dollars in filing fees, aligning with the Biden-Harris Administration’s goal of reducing costs for American families.
