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Credit Karma Tax review

Credit Karma Tax offers completely free-to-use tax return software that will suit all but the most complex tax returns.

Our Verdict

Credit Karma Tax has one great selling point that sets it out from the crowd, it’s completely free. It also has a host of tools and the catches are relatively minor. For most people, assuming their tax return demands are fairly straightforward, it’s well worth considering.

For

  • Completely free
  • Intuitive interface
  • Doesn't sell customer data to third parties

Against

  • Some paid services offer more features
  • Not suitable for complex returns (investment portfolios, dual state taxes etc)

If you're looking for the best tax software, then Credit Karma Tax should be on your list. Credit Karma was founded in San Francisco in 2007 and immediately looked to disrupt the tax filing software industry by offering a free service. It initially offered a free way to secure ongoing access to an individual’s credit score and credit reports from companies such as transUnion and Equifax, before quickly adding a tax filing service for members. The company ethos is transparency and, of course, offering a free service aimed at making credit scores and tax filing much easier and less opaque for its members.

Potential customers may question how Credit Karma is able to offer these services for free and one could reasonably assume that the company is selling data as a revenue stream. However, the company insists that this is not the case and states that it makes a profit by selling very specific, targeted ads on their software. This seems to work for everyone, especially the users, although it depends on tolerating the adverts that they will be exposed to. But if that’s not an issue then there’s no reason not to take advantage of the free service. 

Credit Karma report that they have seen 85 million users in the United States (as of 2019) and their website has a wealth of online tools that these members can use to keep tabs on their credit score and also, of course, to file their taxes.

Credit Karma Tax review: Cost

Key features

Federal and State tax filing
Online ‘knowledge articles’
Free audit protection
Credit Karma: Free Federal and State tax filing
Completely free
Can be used across all 50 states

  • Free to use
  • Does not sell customer data to third parties

As a result of their advert-driven business model, Credit Karma are really the only company offering a completely free service when it comes to submitting tax returns. Users will notice the advertisements and Credit Karma use the data they have about each user to show them specific credit-related products offered by third parties such as banks. Credit Karma makes money on matching leads to the products most likely to tempt their users, but users are very much aware that this is the model. 

Credit Karma does a good job on holding up their promise of transparency and the philosophy is that while the company makes a profit, the customer saves money and the third parties are nudged into making their credit deals as competitive as possible. If you'd rather go down the paid route, we'd recommend TaxSlayer as your first call, as its rates are very competitive.

Credit Karma Tax review: Products

  • Free to file State and Federal taxes
  • Refund offered if alternative services yield better results
  • Customers will need to sign up for full service to submit return

Credit Karma offers a completely free way to file State and Federal taxes but there are some limitations, which we’ll get into below. Also there are a couple of catches worth mentioning with this free service, but for most potential customers these are not likely to be deal breakers. 

First of all, as mentioned, the service does entail being exposed to a number of adverts targeted at getting users to buy into third party credit products, such as credit cards offered by banks and the like. Secondly, if you’re looking to submit your taxes via Credit Karma, you do need to sign up for their full service, which includes signing up for credit reports (which are also free). Credit Karma say that they do not sell on your data to the third party advertisers but use their own, in-house, powerful algorithms to create the targeted ads that appear as their customers log on and use their services. 

Credit Karma have recently introduced a guarantee to sweeten the deal even further. If a customer receives a larger federal tax refund amount or if the customer ends up owing less in federal taxes using another online tax filing service (obviously the tax return must be filed using the exact same information), then that customer may be eligible to receive the difference in the refund or tax amount owed, up to $100 (minimum $25). This refund comes in the form of a gift card.

Credit Karma’s website has many tools related to tax filing and credit scores. There are tools to help users find credit cards, loans, auto insurance and savings accounts as well as resources for identity monitoring and ways to check on unclaimed money. The company also offers a free mobile app that has garnered very good reviews online. 

Credit Karma Tax review: Online ‘knowledge articles’ and audit protection

  • Robust online help function
  • Free audit defense

As customers use the software to work on their returns, small information bubbles known as ‘knowledge articles’ are available at almost every step. These contain further information about specific parts of the return so that users know what they are doing at all times, there is also a robust online help/search function if further advice is needed. Credit Karma provides a free audit defense, saving users potentially hundreds of dollars in hiring professionals to help with the audit process. Instead, the service will link users up with said professionals and foot the bill. 

Credit Karma Tax: Usability / User reviews

  • Intuitive and easy to use
  • Multi-factor authentication process

The Credit Karma filing process is relatively straightforward and is skewed toward people perhaps filing their taxes by themselves for the first time. The process begins with a friendly-worded survey to gather information about the user’s income. The answers are collated and analyzed and take the user through to a menu of the sections on the return that need to be filled in - this is customized based on the information given and is a real time saver. After each section is completed in more detail, a summary is shown for the user to review and correct any mistakes they may have made. The process isn’t quite as intuitive as H&R Block or TurboTax but it’s pretty close and, for a free service, it’s impressively easy to use. 

There are built-in calculators to use and the program allows you to, for example, import W-2 forms. Again, the mini knowledge articles are there to help with any of the more involved sections. For security, all users set up a multi-factor authentication process and Credit Karma do not show any of this data to any third parties, though they do use it to power their own algorithms. Although Credit Karma is not accredited with the Better Business Bureau (BBB), the organization still gives them a very high A rating.  

Should you choose Credit Karma Tax?

The biggest selling point by far for Credit Karma is that it is a completely free service, and that includes free auditing protection, which is a great added bonus. The filing process is relatively straightforward, though in terms of robustness, some of the paid services offer more. For instance, Credit Karma is not suitable for anybody filing two sets of state taxes and it’s not really suitable for any especially complex tax returns, such as those filed by people with investment portfolios or property investments, though it is suitable for self-employed people. Put simply, for a service that doesn’t charge beyond exposing the user to a series of targeted advertisements, it’s very impressive.