Most Americans can file federal taxes for free — but only about 3% used this option last season

If you’re eager to save money filing your taxes this season, there’s a free option that’s used by only a fraction of eligible taxpayers.

Established in 2002, the program, known as IRS Free File, is a public-private partnership between the agency and the Free File Alliance, a nonprofit coalition of tax software companies. There are eight partners for 2023 filings.

Free File offers guided tax software for federal returns for taxpayers below a certain income and some partners also offer state filings. Some 70% of taxpayers — roughly 100 million Americans — are eligible for Free File, according to Tim Hugo, executive director of the Free File Alliance. But only about 3% of filers used the program last season.

While the IRS is launching its Direct File software pilot this season, the agency said in a January press release that Free File is still a “great way to claim valuable tax credits,” such as the child tax credit and earned income tax credit.

“Through the years, Free File has helped millions of taxpayers, and it remains an important option for people to consider using to quickly and easily file their taxes,” IRS Commissioner Danny Werfel explained in the release.

For 2023, you can use Free File with an adjusted gross income of $79,000 or less, which is up from $73,000 in 2022. Free File also offers Fillable Forms for all income levels, which is the electronic version of a paper filing, Hugo said.

You calculate adjusted gross income by taking your total earnings and subtracting “adjustments,” such as certain pretax individual retirement account contributions and student loan interest. Pretax 401(k) contributions also reduce your total income.

While there are software options for anyone who made $79,000 or less, each partner has different eligibility requirements, based on age, income and residency. You can use this tool to find the best software partner.

While complicated filings may need professional guidance, Free File can handle more tax situations than you may expect.

“Free File is not just for simple returns,” Hugo said.

Free File partners aren’t required to cover all federal income tax forms and schedules. But the software will include the “most commonly filed,” according to the IRS.

For example, you can file Schedule B for interest and dividends or Schedule C for self-employment, contract or gig economy work, Hugo said. There’s a full list of available forms and schedules here.

You can also file for an extension through Free File, which moves your filing deadline to Oct. 15. However, most filers still must pay taxes owed by the original deadline of April 15.

Don’t miss these stories from CNBC PRO: