Why is Tax Software So Expensive?

Professional tax software costs range from lower cost, a few hundred dollars, to very high cost, several thousands of dollars. Tax software costs stem from the extensive input from developers and total overall functionality of the program. Will you be paying thousands for no-cost unlimited e-filing or will you be paying hundreds for the program in addition to a per-return fee? If you are thinking about purchasing a tax program, let’s explore some of the ways to ensure that you do not pay for more than what you actually need. 

One large reason that tax software is expensive is because it’s a yearly expense. Not a single sunk cost, like purchasing a desk. Every single year tax software has to be recoded due to yearly tax law changes. Forms have to be updated. E-file capabilities have to be retooled to ensure proper return transmission. Because of this, you will have to pay for a new tax software license every single year. You will never find an all-years tax program because such a thing does not exist. You cannot use an old tax software program from 2007 to prepare a tax return for 2025. 

Another reason that tax software can get pricy is due to additional capabilities that you may not need or use. For example, if you are only looking to e-file current year tax returns, check to see if you are also paying for the ability to e-file prior year returns. Tax offices, with the appropriate technology, can e-file the most current 3 years’ returns (and amendments in most cases). This ability is very helpful when you have clients who failed to file prior years, but not every tax office wants to pay for back years tax software. 

Another cost-increasing factor is the ability to prepare more than just individual tax returns. The ability to prepare and e-file complex business tax returns, estate tax returns and other return types can add on costly modules to the software package. If you are only looking to file individual returns, be sure to ask if your program contains the 1040 series only. The individual tax return 1040 series will still give you the ability to prepare tax returns for self-employed individuals, those with rental properties and other unincorporated businesses, without adding additional expenses to the cost of your professional tax software package. 

Other items that increase the cost of all tax programs are functionalities that have been made industry standard. E-signature, for example, was not always included with your tax software but now, you would be hard pressed to find a professional tax program where it is NOT included to some degree. Some platforms even charge for multiple e-signature requests. Some platforms offer a mobile application to help you compete with DIY tax programs like turbo tax when it comes to allowing the taxpayer to get started on their tax filing on their own time. Some platforms offer in-software payment processes or even document management services. 

Also, be sure to ask about tax software training and tax support. Professional tax software providers range from very supportive to entirely lacking support. Where do your needs lie on this spectrum? If you have tough tax questions and don’t know how to complete this in the software, can you call up your tax software company to ask for one-on-one assistance in getting this tax matter handled in the program? Is it worth paying a little more for high-quality tax support? 

The bottom line is this, to pay as little as possible for your tax software, and get exactly what you need from your professional tax software, take some time to determine the functionality that you cannot operate without. When you speak to your tax software salesperson, be sure to ask about inclusions and exclusions in your professional tax software package.