TurboTax Vs. H&R Block: Which One Is Better For Your Taxes?

Tax season can be one of the worst parts of the new year. From the dread of filing to the fear of owing money, tax season can cause a LOT of anxiety. To make matters worse, deciding which tax service might work best for your specific financial needs can add additional stress. While there are a lot of different software, specialists, and brands out there, two of the most popular options for tax preparation are TurboTax and H&R Block.

If you're wondering why there are so many competing tax services, and/or why they are private companies, it traces back to the IRS Free File Program. In a 2002 deal, the IRS committed to not developing its own competing tax service so long as tax preparation companies agreed to offer free tax prep for low- and middle-income taxpayers. However, many of the companies participating in the program either left (H&R Block left in 2020) or were increasingly deceptive to filers. Intuit (which owns TurboTax) was actually accused of misleading taxpayers into buying paid software.

In 2019, the IRS changed the deal in order to create its own service, and in 2021, Intuit quit the program altogether. While the IRS has announced its intention to pilot a free direct e-file tax return system during the 2024 filing season, it's unclear how long it'll be until that program can be widely used. In the meantime, taxpayers are left to choose between private tax prep companies like, say, TurboTax or H&R Block.

TurboTax is seen, by many, as the pinnacle of DIY tax options, and as of May 2021, TurboTax maintained 73% of the market share in the tax prep industry. With a free tier offering an easy federal and state filing for those with simple returns (that is, no itemized or file schedules), it's easy to understand why so many people use its services. With that being said, TurboTax's free tier has come under a fair amount of scrutiny and is only available to limited eligible taxpayers. Those looking for more hands-on assistance from tax professionals have several paid-tier options with TurboTax depending on their needs.

TurboTax offers three paid tiers (Basic, Deluxe, Premium), with the option of adding live assistance from a tax professional for an added price. The Basic includes the free tax filing version plus live tax pro assistance. The Deluxe tier is for those who require itemized deductions and credits — this tier is great for business income but doesn't allow for expenses. The Premium tier allows for investment reporting, rental income from Schedule D, E, and K-1s, business income and expenses on Schedule C, and home office deductions for 1099 freelancers.

Adding live assistance to these tiers, meanwhile, can cost (as of November 2023) an extra $139 to $219 for federal returns and an extra $64 for state return filings on top of the tier's base price (which ranges from $69 to $129). TurboTax also offers Live Full Service, its more expensive service that allows you to have a tax professional put together your return for you.

H&R Block's free version allows for more complicated tax filing. You file a 1040, with schedules 1, 2, and 3 for free. For those looking for extra help or needing different options, H&R Block offers four different paid tiers depending on your tax needs. Their Basic Online Assistant gives you access to tax professionals for advice. Deluxe allows you to itemize and claim deductions and credits (this level allows business income reporting but not expenses). Premium is suited to investors and rental property owners who need to use Schedules D or E as well as K-1s. It also offers a Self-Employed tier that's suited to small business owners, freelancers, and independent contractors using 1099 who earned over $5,000.

H&R Block also offers some specific add-ons that can be useful for those who might not want to commit to entire packages. For instance, its Tax Pro Review allows you to have one-on-one reviews of your completed return. This allows H&R Block's tax pros to potentially find missed deductions, credits, or even inaccuracies (plus, your tax pro can sign and e-file your returns for you).

Perhaps one of the biggest things that separates H&R Block from other tax prep competitors is the fact that the company has over 10,000 physical brick-and-mortar officers located around the world. This allows filers the option of using either virtual or in-person appointments depending on their specific preference. While appointments, and full-service help, obviously cost more, the pricing is still generally more competitive than TurboTax rates.

The Federal Trade Commission (FTC) sued TurboTax in March 2022 over what it claimed were deceptive ads regarding just how "free" its "free" tax services were. TurboTax's free tier actually excludes many taxpayers — a good example being anyone filing 1099s (gig or freelance workers). TurboTax also doesn't allow you to itemize or file 1040 schedules 2 or 3. According to the FTC's complaint, approximately two-thirds of tax filers couldn't actually use TurboTax's free product in 2020. It's also worth mentioning that TurboTax's owner, Intuit, is the company that backed out of its partnership agreement with the IRS over deceptive free filing offerings as part of the IRS' Free File program. So, if you're looking to avoid paying for tax preparation software or services by using a free service, TurboTax isn't your best option.

TurboTax also has a generally higher price point for its paid tiers and add-ons than its competitors (namely, H&R Block). For instance, in order to get the full package, including unlimited live support and a final review from TurboTax's Live Assisted package, filers will end up paying over $400 for their combined federal and state taxes. Similarly, if you are a filer with a simple return, and you're not looking for tax professional support or final reviews, you have a much better chance of saving money on filing by using H&R Block instead of TurboTax.

Much like TurboTax was, H&R Block was similarly found to have been intentionally misleading potential tax filers into purchasing paid services. A ProPublica investigation found that H&R Block (along with TurboTax) had even taken specific measures to hide its free filing services from Google and other search engines. This necessitated some additional elements to the 2019 IRS agreement (that made it possible for the IRS to begin creating its own in-house free filing service). Specifically, the updated agreement included language that now prohibits tax prep companies from excluding their free filing services from search engines. Despite these new protocols, it's important to still be vigilant of any potentially misleading upgrades/service suggestions when using H&R Block's free filing services.

Beyond past behaviors, there's also the issue of price. While H&R Block is cheaper than TurboTax, it's still more expensive than many other tax prep services out there (including TaxSlayer, TaxAct, and Cash App Taxes). Not to mention, the limitations it intentionally places on its fee-filing services to get more people to pay to file. While some might be happy to have live assistance or extra help, the costs associated with many of these add-ons can make filing your taxes an expensive proposition that's simply not financially viable for many middle- and low-income people. It's also important to realize that H&R Block reported a full-year revenue of $3.5 billion for 2023.

If you're looking to avoid paying a private company (or tax preparer), you really only have two options and they both involve some tedious work on your part. For one, you could go the old route and either manually fill out your 1040 on paper or use the digital IRS Free File Fillable Forms to fill out your forms. Whether by hand or digital input, this process ultimately still involves manually inputting all of your W-2 information as well as determining deductions and credits on your own. This can not only be a frustrating process, but it can also be difficult to know exactly what forms you're are required to fill out.

A second option is available to filers earning less than $73,000 a year; if so, you can use the IRS Free File program to use private tax software for free. However, it is worth noting that almost all of the companies that participate in this partnership (remember: both TurboTax and H&R Block have exited the program) will attempt to upsell you to paid filing services. In fact, ProPublica found that 14 million taxpayers were charged for tax preparation services that should have been free in 2020 due to these tactics. The pilot of the free IRS filing program for the 2024 season could end up being a welcome way to file your taxes without the aggressive salesmanship of current tax prep companies. This can be especially relevant for anyone working gig, freelance, or contract roles who are usually left with only the most expensive package options available from tax preparation companies.