TurboTax, TaxCut, and TaxACT Compared Side By Side
Over the President's Day long weekend, besides reading the book A Fool and His Money, I also did my taxes.
In a previous post Free E-File Is NOT Free, I said I'm going to try TaxACT this year because it's substantially cheaper than TurboTax and TaxCut. A couple weeks ago, I got TaxCut Standard for $1 at Dollar Tree. TurboTax also sent me a trial CD some time last year. With all three major tax prep software on hand, I was able to do a side-by-side comparison.
The tested versions are (all on Windows): » Read more …
TaxCut 2008 on CD for $1 at Dollar Tree Stores
Thanks to a post by Big Al on Bogleheads forum, I bought TaxCut 2008 on CD for $1 plus tax at a Dollar Tree store near me. This is the Standard version, which does not include state return. Some states don't have income tax. If your state has income tax, you can upgrade and get state return for $19.99, but I will not. State return is really simple for me once the federal return is done: copy over some numbers and make a few adjustments. I will just do it with pen and paper or fill-in PDFs. The software also includes a key for one federal e-file, which I will not use either, for reasons I stated before. This is desktop software installed on your own computer. You don't have to enter your data on anybody's web site.
This TaxCut Standard version is not limited in the kind of forms it can handle. It has Schedule C for business income and Schedule SE for self-employment tax. It probably doesn't have the fancy help videos in premium versions. I don't watch those anyway. Although I don't have a Mac, the CD jacket says it also works on Mac OS 10.4 or higher.
I was planning to use TaxACT this year. With TaxACT Free Edition, I can do my federal return for free and do the state return with pen and paper. I actually already downloaded and installed TaxACT Free Edition. I haven't done anything with it yet because I was waiting for my W-2 and 1099s. I was planning to write a review and compare TaxACT with TurboTax when I'm done, like I did last year between TurboTax and TaxCut. For $1, the price is right for TaxCut. TaxACT does not import my data (in TurboTax format) from last year. TaxCut does.
$500 Or $1,000 Property Tax Deduction for People Who Don't Itemize Deductions
Although I said it doesn't make sense, Congress passed a law last year and gave an extra deduction for property tax to people who don't itemize deductions. Kaye Thomas at Fairmark also thought it was bad tax policy and not justified. Of course what we say don't count. Congress makes laws however it likes. Taxpayers in single, head of household, or qualifying widower filing status, who don't itemize but pay property tax, get up to $500 extra deduction; married filing jointly get up to $1,000. This was initially good for only one year (2008). Then it was extended in the bailout bill to also include 2009 tax year. There is no income limit for this extra deduction.
To claim the extra deduction, check box 39c on Form 1040 and add up to $500 or $1,000 to your regular standard deduction on line 40 (or box 23c and line 24 on Form 1040A). You cannot use Form 1040EZ. Nonresident aliens filing 1040NR or 1040NR-EZ don't qualify.
ItsDeductible vs DeductionPro for Valuing Donations
If you donate clothing and other household items to places like Salvation Army or Goodwill, the tax law says you can deduct the fair market value of your donated items. The IRS places the responsibility for coming up with a fair market value on you, the taxpayer. The places that accept your non-cash donations only give you a receipt for what you donated. They don't tell you how much the items are worth.
If you use the standard deduction, you don't have this headache. Charitable donations are included in the standard deduction. You don't have to separately track and value your donations. If you use itemized deductions because you have more deductions than what the standard deduction allows (state income tax, mortgage interest, property tax, etc.), or because you are subject to the AMT, you must estimate the value for your donations.
The two major tax preparation software TurboTax and TaxCut both bundle a deduction estimate module that attempt to solve this problem. The program for TurboTax is called ItsDeductible. The one for TaxCut is called DeductionPro. They both do pretty much the same thing: they put an estimated value on your donated stuff based on price information they gathered from various sources. When you say you donated a sweater, they tell you how much it's worth.
Free E-File Is NOT Free
The tax preparation software companies already started selling their packages for 2008 tax year. The two major players Intuit and H&R Block both advertise that they include free federal e-file in their software this year.
From Intuit (maker of TurboTax):
Goodbye TaxCut, Hello TurboTax
I figure you all have read enough about the stock market yo yo these days. It's time for something else.
I wrote a mini-series on tax preparation software last year:
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