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What Credit Card Should I Use To Pay My Taxes Off With?

by on April 13, 2014 · 10 comments

in Sunday Reader Questions, Taxes, Video Blog Post

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Tax time is upon us this week and TPG reader Vick tweeted me asking me what credit card I would recommend to use to pay my taxes.

Here is his question: @thepointsguy If I’m going to pay my taxes is it better to pay with Amex Premier Rewards Gold, Chase Sapphire Preferred or Chase United Presidential Plus Card?”

First off, when paying taxes with your credit cards, you’re going to incur fees of around 1.87% and upwards of 3% if you’re using your American Express card, so I don’t recommend using an Amex to pay taxes in general as the fees are higher. At ValueTaxPayment.com you can use a Visa, Mastercard or Discover and pay only 1.87% which might make sense if you value those miles more than the 1.87 cents apiece.

The Chase Sapphire Preferred earns you 1 point per dollar spent plus an annual 7% dividend so you’re getting 1.07 points for every dollar spent. I value my Chase Ultimate Rewards at around 2 cents per point or more and you can transfer to 10 partners like Hyatt or United and get valuable redemptions, but it really depends. If you just redeem those points for travel through Ultimate Rewards, you’re only going to get 1.25 cents apiece, so in that circumstance, it wouldn’t make sense to pay taxes with that card and incur that fee.

The Chase Sapphire Preferred is a great all-round credit card for anyone interested in travel and to pay taxes with too.

The Chase Sapphire Preferred is a great all-round credit card for anyone interested in travel and to pay taxes with too.

The Chase United Presidential Plus Card is interesting as Chase no longer issues it (it was a legacy Continental card), and the thing here is you only earn 1 mile per dollar spent, so you’d want to use the Chase Sapphire Preferred as you’re earning more and you can have the flexibility to transfer to the 9 other partners. The kicker here is that you get 1,000 flex elite-qualifying miles for every $5,000 spent on the Presidential Plus card, so depending on how big your bill is and how much you value elite status, it can make sense to use that card.

In general, when paying taxes I prefer to use my Delta Suntrust Debit Card as it only has a $2.49 per-transaction fee through Value Tax Payment, and you earn 1 mile for every dollar spent. I did that last year on my taxes and I raked in a bunch of SkyMiles, and even though they are not the most valuable currency, at that ratio, the small fee totally makes it worth it. As Delta is now partners with Virgin Atlantic and Virgin Australia, they’ve got some pretty sweet redemption opportunities as well.

The Delta Suntrust debit card.

The Delta Suntrust debit card.

So again, it depends on how savvy you are and how much value you’re going to get out of your miles. As we’ve seen this week and all year long, airline miles always get devalued. So, before you incur that fee and pay to accrue the miles, make sure you’re going to get enough value out of them.

For more information, see my recent post on Tax Time Pointers: Earning Points on Taxes.

Let me know if you have any other questions by messaging me on Facebooktweeting me or emailing me at [email protected]

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • Blk Betty

    https://payusatax.com only charges 1.87% for American Express.

  • beachfan

    Are these categorized as purchase or cash? Don’t some banks not credit miles on cash? It’s that uncertainty that kept me from doing it – I would make my minimum spend on my Citi Executive quicker that way.

    If this works, I assume it would also work on paying estimated taxes for the 2014 year.

  • Graydon

    I used my new Citi AA Exec card to pay my taxes and I got credit for the transaction. I paid $10K and have already received my 110K+ miles in my AA account. Not treated as a cash advance at all. In fact I paid the balance of my tax due as an AU on my wife’s new AA Exec card and her miles have posted as well.

    These cards were a blessing this tax season. Was wondering what the best option to pay Uncle Sam and earn miles and Citi stepped up!

  • Bart

    I will never do business with
    Taxact again. I really wanted to pay my state taxes with a credit card, but it was not very clear at all how to do it. Right before actually submitting the E-file, I backtracked throughout the whole return to see where I might have missed something that I was so eagerly searching for. I suspect that, since I am getting a refund on my federal return and had to enter my bank account for direct deposit, my state return used that bank account to draw out my state taxes. Never again will I do business with Taxact.

    Just my PSA for you. Contine.

  • AnotherFatJoke

    Tax payments earn points-miles as do tax payment fees.
    Best strategy for those wanting quick easy results, IMO:
    pay taxes with cc’s ONLY when achieving spend bonuses,
    e.g., citi AA Exec = $450 – 200 + 187 = $437/110K AA miles;
    $437 is business tax deduction so ultimately ~$325/110K;
    $325 + airline taxes for numerous rt international busn class trips
    = great deal IMO; no advanced time-consuming strategies required…

  • Vapers

    How about Barclaycard Arrival. You get 2.27% back and pay 1.87% in fees so you are making .4% . I did that (in addition to 10k for the Citi AAdvantage Executive 100k bonus) this year. Suntrust Delta may be something worth looking into for next year if they haven’t gotten rid of it by then.

  • Storewars News

    Nice
    read! Very informative. Did you know that? Wal-Mart Cries Foul on China Fines. Full
    story here: http://bit.ly/OZJFtf

  • Justin

    I wrote a check from Bluebird (dwindling down my VR balance) for state and went with Chase Ink Bold for fed taxes as I just got it and this earned me the 50k UR bonus. Perfect timing for the Ink Bold to show up.

  • didit

    just confirming what Graydon said.

    I was hesitant also, so today I did a test estimated tax payment ($175 via payusatax. com ) on my new Citi AA World Exec card, and it was categorized as a regular charge (not a cash advance). payusatax is one the IRS approved payment portals — and has the lowest fee (1.87%)

  • funkiehouse

    Anyone know if you can you pay smaller tax bills using Amazon Payments?

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