Ben Franklin reminded us years ago that there are only 2 certainties in life and 1 of them is taxes — we have to pay them.
How often you have to deal with this inevitability depends on your situation. If you have income tax withheld from your paycheck by your employer, you may seldomly think of taxes until you file that annual tax return and either receive a refund, break even, or have to pay the IRS an additional amount.
Those who are self-employed, run a business, or pay quarterly estimated income taxes may deal with taxes on a more consistent basis.
There are also property taxes with which to contend. You may have yours deducted when you make your mortgage payment or perhaps you send a check once or twice a year.
Regardless of the type of tax you have to pay, one thing for sure is that tax payments fall firmly into a major expense category. And, as usual here at Upgraded Points, we’re thrilled if we can find a way to earn credit card rewards on any major expense.
The fact that you can pay your taxes with a credit card and earn rewards, however, begs the question of whether you should. Does it really make economic sense to do so?
That’s the topic on our agenda today. We’re going to explore the options you have for paying your taxes with a credit card and discuss when you might benefit from actually doing so.
Why Pay Your Taxes With a Credit Card?
Paying your taxes with a credit card normally involves paying an associated processing fee. For this reason, it only makes sense to pay your taxes with a credit card if you are receiving value beyond the cost of those fees.
For example, if you are paying a 2% processing fee to make your $3,000 tax payment, you will be paying $60 in fees in addition to the $3,000 payment. If you were to make the payment using a credit card that earns 2% cash-back, you would simply break even and not realize any additional value for making the transaction.
So, when does it make sense to pay your taxes with a credit card? There are several situations — here are a few:
Qualify for a Welcome Bonus
Welcome bonuses are offered as an incentive by credit card issuers to apply for a particular credit card. These welcome bonuses can be valued at hundreds, even thousands, of dollars.
In order to receive the welcome bonus, however, you must meet minimum spending requirements within a specified period of time, such as 90 days, 6 months, or in the first 12 months after card approval. Paying your taxes using your credit card during this time frame could allow you to qualify for the welcome bonus and receive value far beyond the cost of the processing fee.
If you have a card that earns 1.5 points per dollar spent and each point is worth 1.5 cents at redemption time, you are effectively receiving 2.25 cents in ultimate value for every dollar spent on the card.
If you are charged a 1.87% fee for paying your taxes with that credit card and receive 2.25% in rewards value, you could come out ahead.
Meet Specific Spending Tiers
Many credit cards offer incentives when you reach certain spending thresholds. For example, an airline-branded card may offer a companion airfare certificate after reaching certain spending levels, or a hotel-branded card could offer a free hotel night.
If your credit card has one of these spending tiers, the value you receive by reaching it could outweigh any tax payment processing fee.
Delay the Actual Cash Outlay
Perhaps it would be beneficial to avoid paying your taxes on April 15th because you do not yet have the cash available. Depending on your credit card statement cutoff date, making the payment using your credit card could grant you the additional time needed to gather the cash.
Paying a payment processing fee may well be worth the added convenience, especially if you’ll also be earning rewards.
Bottom Line: Paying your taxes with a credit card only makes sense if you receive value that is greater than the cost of the processing fee.
Which Taxes Can Be Paid With a Credit Card?
You can pay nearly every type of tax with a credit card. Here are a few examples:
Federal Income Taxes
- Any 1040 owed taxes for the current year, prior years, existing installment agreement payments, or penalties
- Any 1040-ES estimated taxes
- Any series 940, 941, 943, 944, 945, 1041, 1065, and 2290 required payments
State and Local Income Taxes
Most states allow you to pay your state and city income taxes with a credit card for a fee.
Property taxes can normally be paid with a credit card through a service provider, but some jurisdictions take credit card payments directly and charge a fee.
Other Taxes and Payments
It is possible to pay court fines, tickets, utilities, and other local payments with your credit card. Before using a service provider that charges a fee, however, you might want to contact your local authority or visit their website to see if they take credit cards directly without a fee or for a lower fee than the service providers.
Bottom Line: You can pay your federal, state, and local income taxes, property taxes, and more with a credit card.
The Best Personal Credit Cards for Paying Your Taxes
Let’s first reiterate why you’d want to pay your tax obligations with a credit card. It makes sense to use a credit card when you’ll receive value that is greater than the cost of the payment processing fee.
Here is just a sampling of cards that could reward you nicely when paying your taxes.
The Platinum Card® from American Express
Hot Tip: Check to see if you’re eligible for a huge welcome offer of up to 150,000 points with the Amex Platinum card! (The current public offer is 100,000.)
This premium travel rewards card, loaded with luxury travel benefits and perks, is a must-have for the frequent traveler.
We generally value Membership Rewards points at about 2.2 cents per point, which means that 100,000 Membership Rewards points are worth ~$2,200. Welcome bonuses vary, so check our table above for the most current welcome offer.
The card will earn 1 Membership Rewards point per dollar spent on taxes.
While redeeming points on Amex Travel yields a value of just 1 cent per point, transferring Membership Rewards points to airline or hotel partners can yield far greater value. Check out some inspiring ways to maximize your Amex points in our guide.
Hilton Honors American Express Aspire Card
In addition to great benefits, the card will earn 3 Hilton Honors points for each dollar spent paying your taxes.
The welcome bonus varies, but you could receive up to 150,000 Hilton Honors points after meeting minimum spending requirements in the first 3 months after card approval. Check out our card table above for the most current welcome bonus.
The card comes with a free Weekend Night Reward each card anniversary year and an additional free night after spending $60,000 in a calendar year.
Chase Freedom Unlimited®
The Freedom Unlimited card will earn 1.5 Ultimate Rewards points per dollar spent on your taxes.
If you have a premium Chase Ultimate Rewards-earning card such as the Chase Sapphire Reserve®, you can transfer your Freedom Unlimited card points to that card and receive 1.5 cents in value per point when redeeming for travel. This results in a 2.25% return, which can exceed a tax payment processing fee.
You can receive potentially more value when transferring Ultimate Rewards points on either the Chase Sapphire Preferred® Card or Chase Sapphire Reserve card to airline and hotel partners.
You’ll also receive a modest welcome bonus after approval and meeting (also modest) minimum spending requirements.
Chase Sapphire Reserve Card
Additionally, the Chase Sapphire Reserve card and the Freedom Unlimited card make a nice pairing. While the Chase Sapphire Reserve card earns just 1 Ultimate Rewards point per dollar spent on taxes, the Freedom Unlimited card earns 1.5 points per dollar spent.
You can use your Freedom Unlimited card to pay your taxes then transfer the points to your Chase Sapphire Reserve card to redeem for 1.5 cents in value per point or greater when using travel transfer partners.
Learn more about redeeming Ultimate Rewards points for maximum value in our guide.
Chase Sapphire Preferred Card
Aside from the welcome bonus, the Chase Sapphire Preferred card earns just 1 point per dollar spent on taxes. You can redeem your points for 1.25 cents each on the Chase travel portal but you may still not receive value beyond the cost of the processing fees.
You could receive greater potential value when transferring your Ultimate Rewards points to airline and hotel partners.
Capital One Venture X Rewards Credit Card
When a premium credit card earns 2x miles per dollar spent on every purchase, aside from bonus-category earnings, you stand up, pay attention, and consider that card for paying your taxes.
Paying your taxes with the CapOne Venture X card to earn the generous welcome bonus may give you the most value for the expense.
We estimate Capital One miles to be worth approximately 1.8 cents each, however, so it’s possible to come out ahead when paying your taxes with the card, especially if you consider transferring rewards to airline partners to achieve even greater potential value.
Citi® Double Cash Card
Earning 2x points — 1x when you spend and an additional 1x when you pay off your balance — makes the Double Cash card a strong contender for paying your taxes.
You can convert your points to cash-back, use them in the Citi Travel Portal, or transfer them to select partners.
Bottom Line: To determine whether you should use a credit card to pay your taxes, first calculate the associated fee you’ll have to pay. Then determine the value of the rewards you will earn and compare the 2. When calculating the value of the rewards, consider how many rewards points you earn per dollar spent and the potential value of each reward based on your redemption preference.
The Best Business Cards for Paying Your Taxes
Any business credit card will work to pay your taxes if it results in you earning more than the cost of the processing fee.
Here are just 2 examples of some of the best cards for making those payments:
Ink Business Unlimited® Credit Card
Thanks to the straightforward earning, you’ll earn 1.5% cash-back; all without an annual fee. Similar to the Freedom Unlimited card, Ultimate Rewards can be transferred to premium Ultimate Rewards-earning cards and redeemed for up to 50% more value.
The Business Platinum Card® from American Express
Hot Tip: Check to see if you’re eligible for a huge welcome offer of up to 150,000 points with the Amex Business Platinum! (The current public offer is 120,000.)
The Amex Business Platinum card is always a good card to consider, especially if you’re making large payments. This card earns 1.5x points for each eligible purchase of $5,000 or more and every dollar spent on eligible U.S. purchases in select business categories. Note that your 1.5x earning is up to $2 million of purchases per calendar year. So if you’re going to have a larger tax payment, this card earns an easy 1.5x.
Hot Tip: As a business, the processing fees you pay to the service provider may be deductible as a business expense. Ask your tax professional for more information and to find out if your business qualifies.
How To Pay Income Taxes With Your Credit Card
The IRS does not take credit cards for direct payment of your taxes. It does, however, issue a list of authorized vendors that will facilitate your federal tax payments and assure that these payments are deposited with the IRS.
These approved service providers accept most credit and debit cards and digital wallet payments, but they also charge a payment processing fee.
To pay your federal taxes with a credit card, you simply visit the site of your choice, select the type of payment (personal or business) you want to make, then the category (1040, 1040-ES, etc.), and finally the type of card you wish to use.
You’ll be asked for your Social Security number and additional information. Once your payment is submitted, you’ll receive immediate confirmation for your records.
Federal tax payments are limited to 2 payments per quarter, per vendor.
State and Local Taxes
You can pay your personal state income taxes, business taxes, or local income taxes online, or if you prefer, over the phone. Mastercard has published a helpful list of approved payment service providers for each state. You do not need to use a Mastercard to pay with these providers.
Additionally, you can pay your taxes via a payment service such as Plastiq. Service fees can be as much as 2.85%, but there are opportunities to earn fee-free transactions.
Bottom Line: Visiting the website of the entity you’re trying to pay, reviewing the actual invoice (property taxes), or calling directly can yield more information on how to pay a particular tax or payment obligation with a credit card.
When it comes to paying taxes with your credit card, there’s math involved. You’ll need to determine if the value you receive by doing so exceeds the cost of the processing fees.
Qualifying for a credit card welcome bonus is a valid opportunity for paying your taxes with a credit card. You can also come out ahead when earning rewards that have value exceeding the fees.
Another important aspect of paying your taxes with a credit card is that you must pay off the card statement balance in full in order to reap any benefit from the transaction. Interest rate charges negate the value of any rewards received.
Nearly any credit card can be used to pay your taxes, but the best card for paying your taxes is the one that delivers the highest value beyond the cost of the processing fees.
The information regarding the Hilton Honors American Express Aspire Card, Chase Freedom Unlimited®, and Capital One Venture X Rewards Credit Card was independently collected by Upgraded Points and not provided nor reviewed by the issuer.
For rates and fees of The Platinum Card® from American Express, click here.
For rates and fees of The Business Platinum Card® from American Express, click here.