The Child Tax Credit, administered by the Internal Revenue Service (IRS), plays a crucial role in helping families with children lower their tax burden. In 2025, the IRS announced significant updates to its tax assistance programs, which include the expansion of the Child Tax Credit and the free tax filing tool known as Direct File.
These changes aim to provide millions of taxpayers with increased access to credits and deductions, allowing them to receive larger refunds and pay less in taxes. For the 2025 tax season, the IRS has revealed that more than 30 million taxpayers will be eligible to use its free tax filing software, Direct File. This program allows taxpayers to file their taxes easily and at no extra cost, and it has undergone a significant expansion.
Child Tax Credit: Expansion of the IRS Direct File program
In 2024, Direct File was available in just 12 states, but in 2025, it will be accessible in 24 states. With this expansion, the government estimates that Americans could save millions of dollars in tax preparation fees.
Direct File is a software tool developed by the IRS that enables taxpayers to file simple tax returns, such as those involving wages (W-2 income), Social Security income, or unemployment payments. During the pilot season in 2024, more than 140,000 people used it to file their returns, and on average, it took less than an hour to complete the process.
The tool clearly displays the calculations to the taxpayer, allowing them to confirm that everything is accurate and that they are getting the largest refund possible.
In addition to expanding the number of states where it’s available, the IRS has also improved Direct File by adding more options for tax credits and deductions. For the 2025 season, users can now claim the Child and Dependent Care Credit, the Credit for the Elderly or Disabled, and the Premium Tax Credit.
Additionally, deductions related to Health Savings Accounts (HSA), educator expenses, and student loan interest will be available. These updates aim to ensure that more taxpayers can benefit from Direct File and the full range of tax benefits they are entitled to.
Who can benefit from the Child Tax Credit and other deductions?
The Child Tax Credit is designed to offer tax relief to families, helping to offset some of the expenses associated with raising children. With the expansion of Direct File to more states and the addition of more credits and deductions, more families will be able to take advantage of this benefit without needing to pay for tax preparation services.
It’s important to note that taxpayers who itemize their deductions, such as those with medical expenses exceeding 7.5% of their adjusted gross income, large charitable donations, or significant property tax payments, will not yet be able to use Direct File. However, the IRS has indicated that its long-term goal is to continue expanding the program to cover more common tax situations, especially those that impact working families.
Improvements in customer service for Direct File
The IRS has also announced upgrades to its customer service for Direct File users. In 2025, taxpayers will have access to a live chat feature, available in both English and Spanish, which will provide real-time assistance.
The process for authentication and verification will also be enhanced, enabling customer service representatives to offer more detailed help with specific tax questions. If necessary, taxpayers can request a callback for technical support or to resolve basic tax-related inquiries.