Note: The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. You may view our current offers here.
Disclosure: Basic Travel Couple, LLC has partnered with CardRatings for our coverage of credit card products. Basic Travel Couple, LLC and CardRatings and MileValue may receive a commission from card issuers. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. 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 that you can earn points & miles when filing your taxes every year? This is an often overlooked aspect of earning valuable credit card rewards due to the fees involved. Below I’ll break down whether it’s worth it and the best-earning strategy to take!
Join Our Basic Travel Facebook Group to Stay in the Loop on the Latest Travel & Finance News!
A Basic Disclaimer – This is not legal advice. You should seek a Tax Attorney or CPA’s counsel for legal advice pertaining to filing your taxes.
Who should pay their taxes with a credit card?
The perfect candidate is someone who struggles with meeting the minimum spending requirement for a new credit card via their day-to-day purchases. In an ideal situation, a person could open one or more cards to pay their taxes every year. This person could then score a discounted vacation with the points & miles earned.
How do you pay your taxes with a credit card?
There are four different options available that will allow you to pay your taxes. The IRS is technically not allowed to collect fees on tax payments which brings in these various processing companies. There are three processing options plus Plastiq which all allow you to make these tax payments and earn points & miles.
PayUSATax.com – This is the best option which includes a 1.96% Credit Card fee.
Pay1040.com – This option is tied at the second-best option which includes a 1.99% Credit Card fee.
ACIPayments.com – This is the other second-best option which also includes a 1.99% Credit Card fee.
Plastiq – This is the last option due to the 2.85% credit card fee.
It’s important to note that all of the options above do accept credit cards from all of the major issuers like Visa, Master Card, etc.
Which cards should you not use to pay your taxes?
Any card that earns 2% or below in purchases does not make sense in this situation. Given the extra steps involved in using a credit card to pay a tax bill, it doesn’t make sense to break even or earn a nominal number of points & miles. For example, using a 2% credit card at PayUSATax (1.96%) to pay a $15,000 tax bill will result in earning $6 in cash back ($300 in cashback -$294 in fees = $6).
A small exception to the cards not to use would be for folks who are chasing a specific airline or hotel status. For example, if someone was only 25,000 points away from earning the Southwest Companion Pass. Essentially they could pay a $490 fee to earn buy-one-get-one-free flights.
NEW Bonus- Our best points offer- You can earn up to 100,000 Southwest Rapid Rewards Points. Earn 50,000 bonus points after spending $2,000 in the first 3 months your account is open, PLUS 50,000 more points after spending $12,000 total on purchases in the first 12 months. $99 annual fee. Learn More Here.
Which cards should you use to pay your taxes?
In my opinion, this is a prime opportunity to open a new credit card and use the tax payment to help meet the minimum spending requirement. Most credit card offers come with spending requirements between $3,000 and $5,000 dollars in order to earn the welcome bonus. Depending on the size of a tax bill, a person could easily open two to three new credit card offers every year.
Check out the Top Credit Cards of this Month here for some inspiration!
Depending on the size of your tax bill, you may be able to take advantage of this quarterly. Even better, despite the IRS accepting a maximum of two payments per quarter, it’s possible to use each one of the processors for a total of six payments per quarter. In most cases, the credit card fees for tax payments are also taxed deductible for businesses. Of course, check with your accountant about your specific tax situation. Be sure to check our Top Credit Cards list to find the best business cards available for a decent welcome bonus to get some cash back or points off of your taxes!
I know a handful of people who only open credit cards around tax time every year in order to take advantage of the unique earning opportunity. Accounting for the credit card fees, most people are looking at around a 7-9% return on making their tax payment versus zero with a debit card or cash. For me, it’s another tool in my points & miles earning toolkit!
Let us know!
Have you paid your tax bill with a credit card? I’d love to hear from you down in the comments or over in the 4,700+ Member Basic Travel Facebook Group!
More Basic Reading
- How to Earn Bonus Points and Miles in Q1 of 2021
- 2021 Credit Card Strategies and Goals with the Basic Travel Team
- Top Travel Credit Card Offers of the Month
- How to Complete the Atlantic City Status Match – Step by Step
- How to book a $4,386 two night stay at Miraval Arizona for $50
- Earn Free Money with these Sofi Bank Promotions!
Basic Travel Couple, LLC has partnered with CardRatings and MileValue.com for our coverage of credit card products and may receive a commission from card issuers. Editorial Disclaimer: Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.
The comments section below responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.