Guide to Paying Your Taxes With a Credit Card

Paying taxes with a credit card can be a great way to earn extra points and miles. A large tax bill could earn you thousands of points that you wouldn’t otherwise be able to earn. But before you jump into paying your taxes this way, it’s important to weigh the benefits with the cost.

While paying taxes with a check or bank draft is free, using a credit card incurs processing fees. These fees might not be worth it, but in some cases they are–especially if you’re able to earn a large signup bonus for a credit card that you otherwise wouldn’t be able to meet the minimum spend on.

In this post, I’ll break down everything you need to know to figure out when it’s worth it to pay your taxes with a credit card, and when it’s not.

Why Pay Taxes with a Credit Card

To Earn Points

Paying a large tax bill with a credit card can earn you thousands of credit card points. If you’re using the bill to meet a minimum spend on a new credit card, that could easily turn into tens of thousands of points.

Those points can then be used to book flights, hotels, and other travel expenses for a steep discount.

To Meet a Minimum Spend

One of the best ways to earn a lot of points and miles quickly is to sign up for a new credit card with a welcome offer.

For example, a card might offer an 80,000 point welcome offer once you spend $5,000 in 3 months. Once you meet the minimum spend, you earn the welcome offer.

Some new card offers have high minimum spends that you might not be able to meet with your normal spending habits. In this case, paying your taxes with a credit card can help you earn a welcome offer that you wouldn’t have been able to otherwise earn.

Is Paying Taxes with a Credit Card Worth it?

That all depends. In many cases, the fee you pay ends up costing more than the reward is worth. In that case, you’re definitely better off NOT using a credit card to pay your tax bill.

But if you’re able to earn a lot of points and you know how to maximize the value you get from those points, it could be well worth spending some money on fees.

For example, paying a tax bill with $100-$200 in fees could help you earn a signup bonus worth 80,000 points or more. With that many points, you could fly a family of 3 roundtrip to Europe, a family of 4 roundtrip to Hawaii from anywhere in the U.S., book up to 16 nights at a Hyatt category 1 hotel, plus many more options!

With so many great options for redeeming your points, a $100-200 processing fee could easily earn you over $1,000 in free travel. Here’s some examples of what that could get you.

How Much it Costs to Pay Taxes with a Credit Card

So how much does it actually cost to pay your taxes with a credit card?

The IRS has three approved payment processors where you can pay your taxes with a credit card. You can pay either online or by phone. Each of these processors has their own set of fees.

Weighing the fees

If you’re only earning 1 point per dollar spent, a fee of 1.82-1.98% will end up costing you more than you earn. If that’s the case, it’s probably not worth it to pay the fee.

For example, if you’re paying a $5,000 tax bill using a credit card that earns 1 point per dollar spent, you’ll earn 5,000 points on that purchase. If the processing fee is 1.87%, it will cost you $93.50 to pay with a credit card.

5,000 points may not be worth $93.50. If you’re redeeming those points for cash, they’ll only be worth about $50 (it varies a bit depending on the bank you earned the points with.)

What if my card earns 2 points per dollar?

If you’re paying with a card that earns 2 points per dollar such as the Capital One Venture X Rewards Credit Card, you’ll earn 10,000 points on that same $5,000 tax bill. Now, 10,000 points might not be worth paying a $93.50 fee but if you know how to leverage your points, it could be.

For example, you could take those 10,000 points and turn them into a one way plane ticket to Hawaii that might otherwise cost several hundred dollars. In this case, you’re saving money even after paying the fee.

Meeting a Minimum Spend

Where it really makes the fees worth it is if you can use your tax bill to help you meet a minimum spend requirement on a new credit card.

Let’s use the examples from above. You sign up for a new credit card that offers 80,000 points after spending $5,000 in 3 months. You use the credit card to pay a $5,000 tax bill and you’re charged an additional $93.50 for the processing fee. If your new card earns 1 point per dollar, you’ll earn 5,935 points on the purchase.

Since you also met the minimum spend with that purchase, you’ll get 80,000 bonus points for a total of 85,935 points. You now have enough points to take your family on a great trip!

Which Card Should I Use to Pay Taxes?

The right card isn’t going to be the same for everyone, but here are some recommendations.

If you’re working on a minimum spend, use that card.

If you’re wondering what card to sign up for, check out my best offers page for a list of the current best offers.

If you need help with a simple strategy — follow our Three Year Plan.

Overall, some of our favorite cards to pay for our taxes are the Ink Business Preferred® Credit Card, Ink Business Unlimited® Credit Card, and Ink Business Cash® Credit Card.

If you want to maximize the points you’re earning when paying taxes with a credit card, choose one that offers a higher point per dollar spent. For example, the Capital One Venture Rewards Credit Card and Capital One Venture X Rewards Credit Card each give 2 points for every dollar spent. If you qualify for a business card, the Ink Unlimited offers 1.5 points per dollar spent.

Getting a Credit Card Quickly

When the deadline for paying your taxes is swiftly approaching, you might think you don’t have time to wait for a new card. Thankfully, there are a number of ways to get a card quickly!

Expediting a Card

Many banks will expedite a new credit card free of charge, all you have to do is ask. After your application has been approved, just call the bank and let them know you’d like the card to be expedited.

Most expedited cards will be shipped overnight and you’ll receive your new card in 1-2 days.

Cards that Give Instant Card Numbers

Some banks and credit cards provide you with a card number as soon as you’re approved. That way you can use the card right away without waiting for the physical card to come in the mail.

You may be able to get an instant card number with:

• Most American Express cards (some co-branded cards are excluded)
• Chase Sapphire Preferred® Card and Chase Sapphire Reserve® Card (use the “Spend Instantly” feature to add your new card to your digital wallet) If you can add to Paypal, you should be able to pay your taxes with it.
• Chase co-branded cards including the The World of Hyatt Credit Card and the United℠ Explorer Card (use the “Spend Instantly” feature to add your new card to your digital wallet)
• Capital One Venture and Venture X (you must already have an account and use the mobile app to get an instant card number)
• Alaska Airlines Visa Signature® card from Bank of America

Note that business cards from Chase don’t qualify for the “spend instantly” feature so you won’t be able to get an instant number with a Chase Ink or any other Chase business card.

Paying Property Taxes with a Credit Card

In addition to your annual tax bill or quarterly estimated taxes, you may also be able to pay your property taxes with a credit card.

One of the best ways to do this is with PayPal Bill Pay, as long as your local tax office accepts this type of payment. If they do, you can pay without any additional fees, even when using a credit card!

Unfortunately, not all counties accept PayPal bill pay for property tax payments.

If they don’t, you may still be able to pay with a credit card directly to your tax office but expect to pay a fee. Fees vary depending on the policies of the local office. You can call and ask what the fees are to help you determine whether paying the fee is worth it.