When you pay taxes using a credit card, there’s no way to waive the credit card’s transaction fees. However, you can pay taxes and earn many credit card rewards, free nights, and elite status with hotels or airlines. These returns can potentially offset those credit card convenience fees.
Can You Pay Taxes with a Credit Card?
Yes. You can pay taxes with a credit card. However, there are credit card fees, known as convenience fees, you must pay on top of the tax payment.
According to the official IRS website, credit card fees can range anywhere from 1.85% to 1.98%, depending on the payment service you use.
Remember that there are no cash advance fees when you pay IRS tax using a credit card.
- payUSAtax charges 1.85% with a minimum fee of $2.69.
- Pay1040 charges 1.87% with a minimum fee of $2.50.
- ACI Payments, Inc. charges 1.98% with a minimum fee of $2.50.
Furthermore, credit card companies allow you to pay your taxes with a credit card. Chase Bank, for example, promotes paying taxes with a credit card below.
Chase: Can you pay your taxes with a credit card?
- Convenience: Paying taxes online can be a fast process, and you receive an automatic confirmation when your payment is received.
- More time to pay: Using a credit card to pay your tax bill would add it to your credit card balance, which you’re able to pay over time. You’re responsible for paying the minimum amount due on your credit card each month, not the whole balance. You might save money paying over time, as well. For example, paying your taxes on a credit card with an introductory APR — which may charge little to no interest — gives you time to pay over the introductory period.
- Sign-up bonus minimums: Sign-up bonus offers usually require spending a high dollar amount before awarding you rewards or points. Paying your taxes with a credit card may be worthwhile if the amount of the tax bill will help you meet the bonus offer requirement. However, if you don’t pay your unpaid balance each month, interest will likely offset the bonus.
How Does Paying Taxes With A Credit Card Work?
There are a few things you must understand when you pay your taxes with a credit card:
- Do not cycle through your credit card limits. If you do not have enough credit lines to cover what you owe in IRS taxes, consider paying your tax with multiple credit cards. Do NOT pay tax with a credit card, then pay off the balance quickly and repeat. Banks do not like that.
- There are no cash advance fees when you pay IRS tax using a credit card.
- When you pay IRS tax with a credit card, you do not need to send in the IRS payment voucher.
- Credit card fees are tax-deductible for business taxes, but individual or personal taxes are not eligible.
- If you overpay, the IRS will refund any overpayment.
- If you need to cancel any card payment, you must contact the card processor directly, not the IRS.
Maximizing Paying Taxes With Credit Cards
Despite the credit card transaction fees, paying IRS taxes with a credit card can be rewarding. Therefore, let’s look at each method to maximize your credit card earning potential for paying IRS taxes.
Credit Card Fees Are Tax-Deductible For Business
When you pay your business IRS tax with a credit card and pay the convenience fees, those fees are tax-deductible for your business. So, while it is not ideal to pay credit card fees to pay your business taxes, keep in mind that you can write those fees off as business expenses and earn any credit card rewards at the same time.
However, please note that credit card fees are not tax-deductible for individual or personal income taxes.
Earn Credit Card’s Signup Bonus Rewards
When you are in the miles and points hobby, you know that you have to spend thousands of dollars as part of the spending requirement to earn a big signup bonus on a credit card offer.
This is the most common reason most people are okay to pay credit card transaction fees to pay taxes. This allows you to meet the minimum spending requirement and receive massive welcome bonus points and miles. Those reward points can yield significantly more value that outweighs the credit card fees.
For example, you applied for the Capital One Venture X Credit Card, and it requires you to spend $4,000 to earn a 75,000 bonus Capital One miles. Suppose the credit card fee for tax payments is 1.87%. In that case, it would cost you about a $75 credit card transaction fee if you pay $4,000 in taxes with a credit card. But you will get:
- 150 Capital One Mile on the $75 credit card convenience fee (Venture X card earns 2 miles per dollar spent).
- 8,000 Capital One Mile on the $4,000 tax bill (Venture X card earns 2 miles per dollar spent).
- 75,000 signup bonus Capital One Mile.
In the end, you exchange $75 for 83,150 Capital One Miles. To simplify the math, let’s say the total is 83,000 miles. These miles are Flexible Points that you can either redeem for statement credits ($830), travel through Capital One travel ($830), or transfer to frequent flyer miles for much better values in return that can exceed $830.
Earn Bonus Miles and Points
Several credit cards offer rewards in cashback, miles, or points when you spend on the card. Paying taxes with that credit card will allow you to earn miles and points toward a dream vacation.
If you have a favorite rewards program, sometimes it makes sense to try to pay taxes with a credit card that earns you several more rewards. I prefer to use any card that earns me Flexible Points over a simple cashback card.
The gist of it is always aiming for the credit card that gives you a large percentage in return for each dollar spent and focusing on Flexible Points earning credit cards.
Furthermore, banks sometimes send out promotions when you register for an offer and spend X amount of cash to get bonus points. These promotions typically are targeted offers, but public offers are also available from time to time.
Earn Hotel Elite Status or Hotel Free Nights
Quite a few hotel credit cards offer opportunities to earn qualifying elite night credits towards the next elite status level or a free night after spending X amount in a year. Here are a few examples:
- Chase World of Hyatt Credit Card
- Earn two (2) qualifying elite night credits after each $5,000 spent.
- Earn Hyatt Category 1-4 Free Night Award after $15,000 spent in a calendar year.
- Chase World of Hyatt Business Credit Card
- Earn five (5) qualifying elite night credits after $10,000 spent in a calendar year.
- Chase Marriott Bonvoy Boundless Credit Card
- Earn one (1) elite night credit for each $5,000 spent on the card.
- American Express Hilton Honors Business Card
- Earn a Hilton Free Weekend Night Reward after $15,000 spent in a calendar year.
- American Express Hilton Honors Surpass Card
- Earn a Hilton Free Weekend Night Reward after $15,000 spent in a calendar year.
- Best Hotel Credit Cards That Offer Free Nights Every Year
Everyone values hotel elite status and free nights differently, but the World of Hyatt program is arguably one of the most favorable hotel programs among points enthusiasts. Many people are willing to spend on the World of Hyatt Credit Cards to achieve the valuable top-tier Globalist elite status level. The nice thing about this is that you can hit each Hyatt Milestone Reward and earn more free nights and points along the way to Globalist through elite qualifying nights via spending. Check out the following blog post:
Earn Airlines Elite Status
For this particular method, it’s infrequent to see an airline’s credit card that offers you to spend your way up to elite status for complimentary seat upgrades and priority boarding, to name a few.
- Alaska Airlines provides cardmembers of Alaska Airlines Credit Card with the opportunity to earn 4,000 elite qualifying miles (EQMs) up to a maximum of 20,000 EQMs for every $10,000 amount spent throughout 2024. This means that spending $50,000 on purchases with your card will earn you MVP status.
- Delta SkyMiles Credit Cards allow you to earn Medallion Qualifying Miles (MQMs) through spending. One example is the American Express Delta SkyMiles Reserve Card, which allows you to earn 15,000 Medallion Qualification Miles (MQMs) after you spend $30,000 in purchases on your card in a calendar year, up to four times for Delta’s elite status boost.
- American Airlines allows you to earn Loyalty Points towards the elite status level when you use one of the American Airlines Credit Cards. You earn 1 Loyalty Point per dollar spent. However, remember that this goes with the loyalty points earned, not AA miles earned.
- Master List of Airline Status Match & Challenge
