U.S. Tax Software Industry Set for 9.3% CAGR as Cloud Adoption and AI Innovation Intensify

NEW YORK - EntSun -- According to the latest market research study published by P&S Intelligence, the U.S. tax preparation software market is experiencing a period of accelerated transformation, fueled by cutting-edge technologies and shifting regulatory dynamics. Valued at USD 6.4 billion in 2024, the market is projected to nearly double, reaching USD 12.9 billion by 2032, registering a robust CAGR of 9.3% between 2025 and 2032.

AI & Automation Are Revolutionizing Tax Management

Artificial intelligence (AI) and machine learning (ML) technologies are at the forefront of innovation in tax preparation software. These capabilities simplify tax filing for both professionals and individual taxpayers by offering:

• Automated document scanning and data extraction
• Real-time error detection using analogy-based logic
• Personalized financial recommendations
• Deduction optimization and compliance guidance

Key Market Trends and Growth Drivers

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Surge in Self-Employment and Small Business Filings

The expansion of the gig economy and independent businesses is a major contributor to market growth. Self-employed workers—required to manage quarterly tax payments, deductions, and recordkeeping—are increasingly adopting specialized tax software for:

• Automated expense categorization
• Tax liability forecasting
• Income-based deduction recommendations
• Integrated accounting and banking functions

Browse detailed Report Analysis on "U.S. Tax Preparation Software Industry Growth and Forecast Report, 2032 (https://www.psmarketresearch.com/market-analysis/us-tax-preparation-software-market)"

Frequent Regulatory Updates Create Demand for Automated Compliance

Constantly changing tax laws leave many taxpayers struggling to stay compliant. Modern software now:

• Automatically updates with the latest regulations
• Notifies users of new tax-saving opportunities
• Provides guided, step-by-step filing instructions

Market Segmentation Highlights

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Deployment

• On-Premises (60% share, 2024) — Largest segment; preferred for enhanced data control and security.
• Cloud (Fastest Growing) — Favored for flexible access, automatic updates, and scalability.

End Users

• Individuals (55% share) — Prefer affordable, easy-to-use digital tax solutions.
• Commercial Users (Fastest Growing) — Businesses and freelancers increasingly adopt advanced platforms for complex filings.

Competitive Landscape

The U.S. tax preparation software industry remains highly fragmented, with both large tech firms and specialized providers offering tailored solutions for different tax categories.

Leading Companies Include:

• Intuit Inc.
• H&R Block
• Thomson Reuters
• Wolters Kluwer N.V.
• Avalara Inc.
• Jackson Hewitt Inc.
• TaxAct
• TaxSlayer LLC
• Drake Software
• TaxHawk Inc.
• Liberty Tax Service
• Column Tax

Recent Industry Developments

• January 2025: Pathward finalized partnership agreements with major third-party tax software vendors for the 2025 tax season.
• January 2025: Thomson Reuters Corporation acquired cloud-based tax automation provider cPaperless LLC (SafeSend) in a USD 600 million all-cash deal, expanding its digital tax ecosystem.