Tax day is here, but should you pay taxes with your credit card?
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As Benjamin Franklin famously declared, “In this world, nothing is certain except death and taxes.” His words are as true today as when he wrote them over 200 years ago — and as Tax Day officially arrives, you might have a large bill due.
Perhaps you’re wondering if it’s worth it to charge your taxes to a rewards credit card so you can earn cash back or points toward travel as you pay your due to Uncle Sam. Although you will generally get dinged with service charges and other fees for using a credit card to pay your taxes, it can still be worthwhile for a few reasons.
For instance, you might need to hit a minimum-spending threshold to earn the welcome bonus on a new card or to score a spending-based perk like elite-qualifying miles with an airline card or a free night award with a hotel card. Or maybe you have a card that’s offering 0% APR on purchases for a certain time frame, so you have some breathing room to pay off your tab.
There are plenty of reasons why you might want to pay your taxes with a credit card, but also several caveats. Here’s what you need to know as you consider your options.
The best credit cards for paying your taxes
- The Business Platinum Card® from American Express: Best for earning a large welcome offer.
- The Blue Business® Plus Credit Card from American Express: Best low-cost option for small businesses.
- Chase Freedom Unlimited: Best for consumers with an Ultimate Rewards-earning card.
- Ink Business Unlimited Credit Card: Best for businesses with an Ultimate Rewards-earning card.
- Discover it Miles: Best for cash back during the first year.
- Chase Sapphire Preferred Card: Best starter travel rewards card.
- Capital One Venture Rewards Credit Card: Best personal card for straightforward rewards.
- Capital One Venture X Rewards Credit Card: Best premium card for straightforward rewards.
- Capital One Spark Miles for Business: Best business card for straightforward rewards.
The information on the Discover it Miles has been collected independently by The Points Guy. The card details on this page have not been reviewed or approved by the issuer.
Here’s what you need to know about paying your taxes in 2022 with a credit card.
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Different ways to pay your taxes
If you owe taxes to the IRS, there are several ways to make your payments. Most people opt for one of the following:
- You can make a direct payment from your bank account, and there are no fees imposed for the transaction.
- You can wire the money from a bank account, although this option usually incurs a fee.
- You can mail a check or money order to the IRS.
If you need a little more time to pay your taxes, you can file an extension with the IRS or set up an installment agreement that includes a payment plan. You will, however, be expected to pay penalties and interest on that payment plan.
You can also pay your taxes with a debit card. While the fee for that is minimal, you generally won’t earn valuable travel rewards or cash back unless you have a product like the new Amex Rewards Checking debit card, which earns 1 point for every $2 spent on eligible debit card purchases. That spend rate plus other conditions might mean it’s better to use another Amex Membership Rewards-earning card.
The information on the Amex Rewards Checking debit card has been collected independently by The Points Guy. The card details on this page have not been reviewed or approved by the issuer.
Fortunately, the IRS lets you pay your tax bill with a credit card through several third-party payment processors. But be warned — these companies are allowed to tack on their own fees to your payments. You can see a list of these companies and their convenience fees at this link to the IRS website.
The cost of paying taxes with a credit card
When you use a credit card to pay your taxes, the fee is calculated as a percentage of the amount paid. Currently, those fees range from 1.87% to 1.98%. So let’s say you owed $10,000 and wanted to pay via credit card. You’d be on the hook for an extra $187-$198 in fees, depending on the service you use.
Reasons to pay your taxes with a credit card
Despite those surcharges, there are still plenty of reasons to pay your taxes with a credit card.
Charging your taxes to a credit card can help you earn valuable rewards. Using a credit card for your taxes can also give you more time to pay off a high tax bill. While this method can certainly be a costly way to pay your taxes, it can also be a rewarding approach for some people.
Here are some of the times it makes sense to use a credit card for your taxes.
Earning a big credit card sign-up bonus or welcome offer
The fact that you can earn a points windfall from your initial spending with a new card is the single most significant reason to use a credit card when paying a sizable tax bill. That’s because the value of the points you earn can help offset the cost of fees for using your card for your taxes.
Some travel rewards cards have especially high minimum spending requirements for earning a bonus, so a tax payment might be just the thing to put you over that threshold.
For example, The Business Platinum Card from American Express is currently offering 120,000 Membership Rewards points after you spend $15,000 on eligible purchases with the card within the first three months of card membership. For its part, the Ink Business Preferred Credit Card offers 100,000 Chase Ultimate Rewards points after you spend $15,000 on purchases within three months of account opening.
Spending $15,000 in three months might be tough for some small business owners. But if you put your tax payment on your card to earn 120,000 points on the Amex Business Platinum or 100,000 points on the Ink Business Preferred, you could pay as little as $280.50 in fees (through Pay1040.com).
According to TPG’s latest valuations, American Express Membership Rewards are worth 2 cents apiece if you maximize your points via Amex transfer partners, so you’d be earning up to $300 in potential travel rewards (15,000 points times 2 cents apiece) on your $15,000 tax bill payment — a slight profit when compared to the fees you pay. Chase Ultimate Rewards are also worth 2 cents apiece according to our valuations, so the 15,000 Ultimate Rewards points you’d earn from paying with your Ink Business Preferred would also be worth $300.
That said, you usually only come out ahead using a card to pay taxes when you’re attempting to qualify for a large welcome offer at the same time as you are earning rewards at everyday rates. And if you can otherwise hit the minimum spending requirement without paying taxes with the card (and incurring those fees), it’s better to simply cut a check to the IRS.
Before you choose this option, make sure you can pay your card balance off in full since, if you don’t, you can get hit with interest charges and late fees that quickly wipe out the value of any rewards you might earn.
Meet a credit card spending threshold
Many credit cards offer benefits that trigger after you reach a particular spending threshold. These might be based on the calendar year or your cardmember anniversary, but in either case, making large tax payments could help you earn these rewards when that amount of spending might be out of range otherwise. For example:
- Spend $15,000 on eligible purchases with the Hilton Honors American Express Surpass® Card or The Hilton Honors American Express Business Card in a calendar year to earn a complimentary weekend night certificate.
- Earn an additional free night award good at any Category 1-4 property after you spend $15,000 on your World of Hyatt Credit Card every year after your cardmember anniversary.
- Earn 500 Premier qualifying points (PQPs) for every $12,000 in card spending on the United Business Card, up to 1,000 PQPs in a calendar year, that can be applied up to Premier 1K elite status.
Basically, spending large amounts (responsibly) on the right credit cards can nab you valuable extras like a boost toward elite status, free night awards and more.
Use multiple cards to maximize earnings
If you have a large tax bill, you don’t have to put the entire spend all on one credit card, either.
The IRS page explaining credit card payments says you can only use debit or credit cards to make up to two payments per tax period (year, quarter, or month, depending on the type of taxes you’re paying), but that means you could use two different cards to make two different payments.
For example, say that you have a $30,000 tax payment due. You could apply for both The Business Platinum Card from American Express and the Ink Business Preferred Credit Card. By putting $15,000 on the Amex Business Platinum Card, you’d have spent enough to earn the 120,000-point introductory offer. Plus, since the purchase is more than $5,000, you could earn 1.5 points per dollar (up to 1 million additional points per calendar year), which means you’d earn 22,500 points on the purchase itself. Then you could charge the additional $15,000 balance due on the Ink Business Preferred to earn its 100,000-point sign-up bonus.
All told, you’d end up with more than $5,000 in travel rewards, per TPG valuations.
Buy some extra time to pay your taxes
One of TPG’s 10 commandments for earning credit card rewards is never to pay interest charges. It’s paramount that you never bite off more than you can chew. When paying your taxes with a credit card, make a note of when the first day of your new statement period begins on the card you’re looking to use. This way, you may have up to 30 days until your statement closes and nearly 60 days until you need to pay off your balance in full.
Some credit cards even offer 0% APR for an introductory period on new purchases, which can provide you with 12-18 months of interest-free payments on your tax bill. Note that you must pay off the entire balance in full before the promotional period ends or risk exorbitant interest charges.
The downside of using a credit card to pay your taxes
Despite the benefits listed above, using a credit card to pay your taxes can be a reckless strategy, as the interest rate on most rewards credit cards can severely hurt your finances should you end up having to pay it. If you will be unable to pay your statement balance in full after charging your taxes to your credit card, you probably shouldn’t even think about doing so.
Instead, consult your tax professional about your options. The IRS offers payment plans with lower interest rates than most credit cards would extend.
Comparison of the best credit cards for tax payments
Below, you’ll find the general earning rates for the top credit cards to pay your taxes, along with TPG’s valuations of the rewards you can earn.
These include the general earning rates for the best credit cards to pay your taxes. The potential return is the potential earnings based on TPG valuations and maximizing the earning through the method mentioned in the “Caveat” section — though it doesn’t include the value of any welcome offer you could earn.
|Card||Earning Rate||Potential return||Net after fee||Caveat|
|The Business Platinum Card from American Express||1 Amex point per dollar. Terms apply.||3%||1.13%||50% points bonus on transactions over $5,000 (up to 1 million additional points per calendar year).|
|The Blue Business Plus Credit Card from American Express||2 Amex points per dollar (on the first $50,000 in purchases each calendar year; then 1 point per dollar). Terms apply.||4%||2.13%||Earning 2 points per dollar is limited to $50,000 in purchases per calendar year, then 1 point per dollar.|
|Chase Freedom Unlimited||1.5% cash back.||3%||1.13%||Potential value calculated by combining with points from an Ultimate Rewards-earning card.|
|Ink Business Unlimited Credit Card||1.5% cash back.||3%||1.13%||Potential value calculated by combining with points from an Ultimate Rewards-earning card.|
|Discover it Miles||1.5 miles per dollar.||3%||1.13%||After first-year cardholder earnings match.|
|Chase Sapphire Preferred||1 Chase point per dollar.||2%||0.13%||n/a|
|Capital One Venture X Rewards Credit Card||2 Capital One miles per dollar.||3.7%||1.83%||n/a|
|Capital One Venture Rewards Credit Card||2 Capital One miles per dollar.||3.7%||1.83%||n/a|
|Capital One Spark Miles for Business||2 Capital One miles per dollar.||3.7%||1.83%||n/a|
If you’re able to claim your convenience fees as a tax deduction on your business (speak with your tax advisor about this possibility), your gains would be even greater.
Now for the details on each of these cards.
The Business Platinum Card from American Express
This card earns 1.5 Membership Rewards points on purchases that exceed $5,000 (up to 1 million additional points per calendar year). Based on TPG’s valuations of 2 cents per Membership Rewards point, this equals 3 cents in value per dollar spent, for a net gain of 1.13 cents after the 1.87% convenience fee.
But considering the card is currently posting a welcome offer of 120,000 points after you spend $15,000 on eligible purchases in the first three months you have the card, the advantages of using the Amex Business Platinum on your taxes this year could outweigh the higher returns from other cards. The card has a $695 annual fee (see rates and fees).
The Blue Business Plus Credit Card from American Express
The Amex Blue Business Plus card earns 2 points per dollar on all purchases on the first $50,000 spent each calendar year, then 1 per dollar thereafter. Since TPG values Membership Rewards points at 2 cents each, this works out to a fantastic 4 cents in value per dollar, for a strong net gain of 2.13 cents per dollar charged. Pretty incredible for a card with no annual fee (see rates and fees).
Chase Freedom Unlimited
The Chase Freedom Unlimited earns 1.5% cash back on purchases, so it wouldn’t seem to make sense to pay a 1.87% fee to pay taxes using this card.
However, new applicants will earn an additional 1.5% cash back on all purchases (up to $20,000 in spending in your first year). This bumps your cash-back rate on your tax payment to 3% — or an effective return of 1.13% after considering the fee you’d incur.
As an alternative, suppose you (or your spouse or domestic partner) have an Ultimate Rewards-earning Chase credit card such as the Chase Sapphire Preferred Card, Chase Sapphire Reserve or the Ink Business Preferred Credit Card. In that case, you can convert these cash-back earnings to Ultimate Rewards points. Then, you can transfer points from these accounts to over a dozen different travel partners.
TPG pegs the value of Ultimate Rewards points at 2 cents each. The ability to earn 1.5 points per dollar means that you’ll get 3 cents in value per dollar spent on purchases. This is a net gain of up to 1.13 cents per dollar paid — though if you’ve recently applied for the Freedom Unlimited (and are earning that extra 1.5% cash back in your first year), this climbs to a net return of 4.13 cents per dollar.
Alternatively, you can use these points toward travel reservations through the Chase travel portal. Points redeemed through the Chase Sapphire Reserve are worth 1.5 cents apiece toward travel reservations. Since you earn 1.5 points per dollar spent through the Chase Freedom Unlimited, that means you can get 2.25 cents per dollar spent toward travel reservations through the portal. That’s a net gain of 0.38 cents per dollar paid after subtracting the 1.87% fee.
Points redeemed from the Chase Sapphire Preferred and the Ink Business Preferred are only worth 1.25 cents each toward travel reservations made through the Chase travel portal. Multiplying this redemption rate by the 1.5 points earned with the Freedom Unlimited, you’ll earn on purchases only nets 1.875 in value per dollar spent. That means you’d only be about breaking even after paying the 1.87% transaction fee.
Ink Business Unlimited Credit Card
The Ink Business Unlimited is practically the small-business version of the Chase Freedom Unlimited. It also earns 1.5% cash back, which you can then convert to Ultimate Rewards points if you carry another Chase card that lets you do so. Like the Chase Freedom Unlimited, it has no annual fee. It is currently offering a sign-up bonus of $750 cash back (or 75,000 Ultimate Rewards points) after spending $7,500 on purchases in the first three months of account opening.
Discover it Miles
This card earns 1.5 miles per dollar spent, and miles are worth one 1 cent each toward travel statement credits or as a direct deposit in your bank account. However, Discover will match your first year’s rewards after your account anniversary. This equates to a total potential of 3% back in value for the first year, although you will have to wait a year for the cash-back boost. Still, good things come to those who wait.
Chase Sapphire Preferred Card
While you’ll only earn 1 point per dollar spent when paying your taxes with the Chase Sapphire Preferred, this popular card makes the cut because of its long-term value and decent sign-up bonus. You’ll earn 60,000 bonus points after you spend $4,000 on purchases in the first three months from account opening. The sign-up bonus alone is worth a $1,200 return in travel rewards, per TPG’s most recent point valuations.
Related: Chase Sapphire Preferred card review
Capital One Venture X Rewards Credit Card
This card from Capital One marks the issuer’s first steps into the premium cards market, and it comes with a significant sign-up bonus to match those ambitions: 75,000 bonus miles when you spend $4,000 on purchases in the first three months from account opening.
Those miles are worth $750 toward travel, but closer to $1,388 based on TPG’s valuations (not provided by the issuer) thanks to Capital One’s phenomenal roster of travel transfer partners. It also earns 2 miles per dollar on purchases, so that equates to a 3.7% return on your spending, decently outpacing the 1.87% surcharge you’ll pay for using a card to cover your taxes.
Capital One Venture Rewards Credit Card
Now that Capital One has tons of travel transfer partners, the value of the miles you earn with the Capital One Venture has vaulted to 1.85 cents each based on TPG valuations (not provided by the issuer). And since you earn 2 miles per dollar on all purchases with this card, that equates to a return of 3.7 cents in value per dollar spent. Plus, the Capital One Venture Rewards currently offers 75,000 bonus miles after you spend $4,000 on purchases within the first three months of account opening.
Capital One Spark Miles for Business
Like the Capital One Venture card, this small business product earns 2 miles per dollar on all purchases, which you can redeem for travel statement credits or transfer to mileage partners. Therefore, the Capital One Spark Miles for Business offers the same return as the Venture card of up to 1.83 cents per dollar spent in net value after the convenience fees.
Other cards to consider
While there are plenty of great choices above, these are a few alternative cards that might work well for your situation.
Bank of America® Premium Rewards® credit card
The Bank of America Premium Rewards card earns 2 points per dollar on travel and dining purchases and 1.5 points per dollar spent on all other purchases, including taxes. Points are worth 1 cent each toward travel statement credits, so paying taxes with this card is a money-loser for most people. But if you’re a Bank of America Preferred Rewards member, you can earn a 25% to 75% rewards bonus on every purchase. That means Preferred Rewards clients could earn between 1.875 and 2.625 points per dollar spent on your taxes, for a net gain of up to 0.755 cents per dollar spent.
Citi® Double Cash Card
The Citi Double Cash card earns 2% cash back (1% cash back on all purchases at the time of the purchase and another 1% cash back when you pay your balance). Earning a total of 2% cash back means that you’re sure to get a slight cash profit no matter which payment provider you use. Even better, this card doesn’t have an annual fee.
The cash back this card earns now comes in the form of Citi ThankYou points. That means if you’ve got either the Citi Premier® Card or the Citi Prestige® Card (not available to new applicants), you can transfer your points to the program’s various travel partners. Citi ThankYou points are worth 1.8 cents each per TPG valuations — meaning you’ll earn an effective 3.6% back, netting you a value of 1.73 cents per dollar after the 1.87% transaction fee.
The information for the Citi Prestige has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
Related: The best cash-back credit cards
Paying your taxes with a credit card can be a lucrative way to earn points and miles as part of a large welcome offer or on an everyday basis. But do your own math and make sure the cost is worth the benefit, especially if you have a large bill to pay off today.
Additional reporting by JT Genter, Madison Blancaflor, Joseph Hostetler and Benét J. Wilson.
Featured photo by PeopleImages/Getty Images.
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