Federal Free Edition is for people who have simple tax returns and don’t need much tax guidance. There is no income limitation to use this software. The TurboTax free version supports most common IRS Tax Forms and Schedules used to file simple tax returns. The free edition allows you to e-file your return free. But if you need to file a state tax return, then you will pay $27.95 per state tax return.
You can start preparing tax return by answering the interview questions and the software will prompt for upgrade to suitable versions depending on your answers to questions. e.g. If you need to report capital gain or loss or need to report stock investments, which require you to file Schedule D which is not available in Free Edition and you will be prompted to upgrade to Deluxe edition. Similarly if you have rental properties or business, you will be encouraged to use the appropriate versions.
Features
The free version also lacks the time saving features like the capability to import W2 data from payroll companies and the financial information from personal finance software like Quicken or Money. Most of the simple returns may not require these features and hence not a limiting factor for those taxpayers.