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Bumping this post due to Tax Day relevancy.
It’s that time of the year – when millions of us cringe and cover our eyes, then write Uncle Sam a check for those taxes. So, instead of sending a check which doesn’t earn points, can you instead use a points/miles earning credit card for those pesky payments? Yes. Is it worth it? It depends.Chase Sapphire Preferred® Card Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
There are a bunch of sites that will process your tax payment, but they all charge fees that can negate the value of any miles earned. In general, these fees make the cost of getting miles slightly cheaper than buying miles directly from the airlines, but still not a real bargain. Where this can make sense is:
1) When you can write off the cost of the processing fees as a business expense (I am not a tax professional, so please consult one before doing this)
2) You need to hit a spend threshold on your credit card and the additional benefits you receive outweigh the cost of making the charge. For example: attaining Hilton Diamond status after $40,000 spend on Hilton Surpass Amex or spending on an AA card to reach lifetime elite status or getting Delta MQMs and threshold mile bonuses after $30,000/$60,000 spend on the Delta Amex Reserve.
3) You have a cash back card, like the Schwab 2% (which, by the way is no longer open to new applications and you are barely coming out ahead) or the Travelocity Amex which gives a 4% return on spend to be used for travel.
Link to the official government list of approved tax payment vendors.
Payusatax.com: 1.9% for Mastercard and Discover card payments
Choice Pay: 1.9% fee when using Mastercard.
OfficialPayments.com: Generally 2.3% when using American Express, Mastercard, Discover or Visa. So a $1,000 tax bill will net you 1,000 miles and cost you $23. 2.1% when using an Amex to pay a federal tax of $100,000 or more.
Pay1040.com 2.35% when using Mastercard or Discover.
You can also use your Amex Membership Rewards points to pay taxes, but they don’t list a rate, so I bet it would be at a very unfavorable ratio. I’d only recommend this if you are in a poor financial situation and have no other way to pay your taxes.
Can you earn miles from using the debit card option? Possibly, but some specifically prohibit earning miles from tax payments, like the US Airways and Alaska Airlines Bank of America debit cards. Most of the companies charge the same rate for a Visa debit card as a credit card. Payusatax allows Mastercard debit card payments for only a $3.98, but to my knowledge there aren’t any debit Mastercards that will allow lucrative mileage accrual. I initially thought I’d use my Chase Continental Mastercard debit cards, but I’ve heard those cards are not accepted/eligible for tax payments. Another wrench is that the IRS only takes two forms of payments, so your debit card may not have the spending limit to cover your tax burden in two payments.
Overall, paying your taxes with miles/points earning credit cards is generally expensive, but only you can decide whether it’s worth it based on the value you place on credit card spend and whether you can write off the transaction fees.
If anyone has any great ways to get miles for tax payments at a low cost, feel free to comment below!
The Platinum Card® from American Express
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