Paying Taxes with a Credit Card
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EDITORIAL DISCLOSURE:
Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
*Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more.Did you know you could pay your taxes with a credit card? 👀 Are you asking yourself, “why would I want to do that?”
Two words for you: welcome offer.
Think of all the points you could earn with that (not so fun) tax payment each year! So let’s break down how to do this, the pros, the cons, and some card recommendations for you.
How to pay your taxes with a credit card
First things first: the IRS does not directly accept credit card payments, but there are approved third-party payment processors (like Pay1040 or ACI Payments, Inc.) that you can use to make this transaction. When you’re paying your taxes with a credit card, you’ll want to pay close attention to the processor you choose and ensure that payment method is accepted by the IRS.
Here is a chart from the IRS.gov website that outlines the fees when paying through these approved processors:
Image courtesy of IRS.gov.
Do the math
💰It’s important to factor in the processing fee you’ll be paying when paying your taxes with a credit card. In my experience though, the fee has always been worth it!
Let’s say you owe a tax bill of $6,000 and you opt to pay with a credit card through Pay1040. The fee is 2.89% of the amount you are charging which means you will be paying $173.40 for that processing fee.
$173 is no small amount, so I always recommend doing what is best for your own financial situation, BUT lets consider the welcome offer value.
If we were to open the Ink Business Unlimited® Credit Card, and charge this payment to this card, you would meet the welcome offer with that one payment and earn $750 cash back! And if you combine these points with a card like the Chase Sapphire Preferred® Card, you’ll end up with 75,000 flexible points that can be transferred out to airline and hotel transfer partners for ✨maximum value.✨
You could book three off-peak nights at the Hyatt Regency Maui for 25,000 points per night. The cash rate for those same three nights would be $1,953. 🤯 So was the processing fee worth it in that case? I would say YES.
Make the most of your tax payment
So now that we know how to actually pay your taxes with a credit card, the most important question is, which card will you choose? đź’ł This is a time when I consider a credit card with a higher minimum spending requirement since I will most likely be able to meet that spend pretty quickly with a large tax payment. I typically plan to open that new card at least 2-3 weeks before I plan on paying my taxes so I can allow plenty of time for the new card to arrive in the mail! đź“«
A few cards I recommend with a higher minimum spending requirement:
💳Ink Business Preferred® Credit Card or Ink Business Unlimited® Credit Card
đź’łCapital One Venture X Business
đź’łCapital One Spark Cash Plus
💳The Business Platinum Card® from American Express
*All information about the Ink Business Preferred® Credit Card and the Ink Business Unlimited® Credit Card has been collected independently by Packed with Points. The card details on this page have not been reviewed or provided by the card issuer.
Bottom line
There can be HUGE benefits to paying your taxes with a credit card when you know how to maximize those welcome offers and your earning potential. As always, you’ll want to weigh those pros and cons to ensure that you are doing what is best for your finances and your travel goals. For us, even though it’s no fun to have to pay all those taxes, earning more points for steeply discounted vacations is the silver lining. 🌟
*I am not a tax professional and this is not financial or tax advice, so please refer to your tax expert for financial questions and tax assistance.
Side note: I cannot say thank you enough for using my links to apply! I earn a commission for those applications at no cost to you, and it helps keep all the free resources and support coming! đź©·
EDITORIAL DISCLOSURE: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
