IRS Direct File set to expand availability in a dozen new states and cover wider range of tax situations for the 2025 tax filing season

The IRS has announced significant expansion of its Direct File service for the 2025 tax season, aiming to make free e-filing accessible to more taxpayers. Now available in 24 states, the service includes 12 new states such as Alaska, Connecticut, Maryland, and Pennsylvania, alongside the 12 states that participated in the 2024 pilot. Over 30 million taxpayers in these states will be eligible, with the possibility of more states joining in 2025 or 2026.

In addition to broader state availability, Direct File will now support a wider range of tax situations. Beyond the basic income reported on W-2 forms and limited deductions available in the pilot, the expanded service will now include more complex scenarios like 1099s for interest income over $1,500, retirement income, and special tax situations for Alaska Permanent Fund dividend recipients. Furthermore, new credits supported in 2025 will include the Child and Dependent Care Credit, Premium Tax Credit, Credit for the Elderly and Disabled, and Retirement Savings Contribution Credit. Additionally, deductions for Health Savings Accounts (HSAs), student loan interest, and educator expenses will now be supported, benefiting more taxpayers.

The Direct File system is designed to be user-friendly, accessible via mobile phones, laptops, tablets, and desktops, offering step-by-step guidance for filing federal tax returns. It also integrates state tax filing systems for seamless federal and state tax filing. Improvements for the 2025 filing season include a new chatbot for eligibility guidance, enhanced live chat support in both English and Spanish, and options for additional authentication to improve customer service.

IRS Commissioner Danny Werfel emphasized that improving the tax filing experience is the primary goal, ensuring that taxpayers can easily meet their obligations and claim the refunds they're entitled to. The IRS plans to continue expanding Direct File to cover more tax situations, particularly those that impact working families.

Following a successful 2024 pilot, where over 140,000 taxpayers across 12 states used Direct File, the IRS is committed to making it a permanent option. This service is part of a broader effort to offer more no-cost filing options in addition to Free File, Volunteer Income Tax Assistance (VITA), and Tax Counseling for the Elderly (TCE) programs, which also saw increased usage last year.

With Direct File becoming a permanent and expanding feature, it will complement other existing tax filing services, including commercial software providers and tax professionals, who remain key partners in supporting the U.S. tax system. The system will begin accepting tax returns at the start of the 2025 filing season.