How to Pay Taxes with a Credit Card (and Earn Points)

pay taxes with a credit card

Paying taxes is inevitable, but what if you could turn this annual obligation into an opportunity? Imagine getting round-trip airfare and free hotel nights, or extra cash in your pocket… just for paying your taxes! You can indeed satisfy your tax bill and receive cash back, points, and juicy sign-up bonuses in exchange, just by paying taxes with a credit card. In this article, we’ll explain how this works, when it makes sense, and how to do it.

So, You Can Pay Taxes with a Credit Card?

Yes, the IRS allows you to pay federal taxes with a credit card through approved third-party payment processors. These processors charge a fee for their service as a percentage of your payment amount, typically ranging from 1.75-1.85% for personal cards and 2.85-2.95% for business cards. While this fee might seem like a downside, it can be offset by strategically using a card with a valuable sign-up bonus or rewards structure.

You can also pay state taxes with a credit card in most states, but the rules and fees vary depending on the state and the payment method.

Benefits of Paying Taxes with a Credit Card

Using a credit card to pay taxes can offer several advantages like convenience, rewards, extended payment terms, and flexibility.

Earn a sign-up bonus

Many credit cards offer large sign-up bonuses in the form of points or cash back after meeting a specific spending threshold. Tax payments can help you hit these targets quickly, which is helpful if you don’t naturally have high credit card expenses, or you just want to get the most out of paying your tax bill.

Example: Your tax bill is $5,000. With 1.75% processing fee, your total tax payment is $5,087.50. You sign-up for the Amex Gold Card, pay your total tax payment with it, and spend another $1,000 on regular purchases within 6 months (to meet the minimum spend requirement of $6k). The estimated first year value of that welcome bonus, the card benefits, and after subtracting the annual fee is $2,140. 

$2,140 – $87.50 = $2,052.50 approximate value

Maximize rewards

Some rewards programs offered by credit card issuers let you earn points, miles, or cash back rates that are greater than the card processing fees. So in this scenario, you would offset any card payment fees and net out ahead on the tax payment, which could be significant on a larger transaction. 

Example: Your tax bill is $5,000. With 1.75% processing fee, your total tax payment is $5,087.50. You have a high flat-rate earning card like the PayPal Mastercard which earns 3% back on all payments made through PayPal. After you subtract the processing fee (1.75%) from the earning rate (3%), the gain is 1.25%.

1.25% x $5,087.50 = $63.59 profit

Flexible payment option

Credit cards let you roll your tax payment by a month, which is helpful if you need a month to gather your funds. This strategy would ideally be used with a new card welcome offer or high-earning flat rate card to offset the processing fee. Any type of credit payment should only be used if you can pay off the balance quickly to avoid high interest charges.

When It Makes Sense to Pay Taxes with Credit

Paying taxes with a credit card isn’t for everyone. Here are some examples of when it makes sense, and when it doesn’t:

Who should consider it:

  • Individuals aiming to meet a large credit card sign-up bonus requirement.
  • Taxpayers who can fully offset the processing fee with rewards or bonuses.
  • Those who can pay off their balance in full to avoid interest charges.

Who should avoid it:

  • Individuals carrying a balance or struggling with credit card debt.
  • Taxpayers who don’t have a high-value rewards card or welcome bonus to offset the fees.

Best Credit Cards to Pay Taxes

If you’re ready to leverage your tax payment to earn rewards, here are some of the best credit cards to consider. We compiled this list based on three approaches: business cards with high sign-up bonuses, personal cards with high sign-up bonuses, and cards with a high flat earning rate.

All of the new card prospects have ongoing value with boosted earning categories and benefits, so after tax season, you’ll have a card that could maintain a permanent spot in your wallet. When you review new cards to pay your taxes, remember to also consider what could be a good fit for your lifestyle.

You’ll also find that most of the cards with larger bonuses will come with an annual fee (and this is usually not waived). While that and any card transaction fees may factor into the overall reward value, it’s usually still worth it as you’ll gain much more in return.

Tip!: If you’ve recently applied for a credit card, or have opened multiple new accounts recently, remember to check our credit card application rules to understand your approval odds.

New Business Cards with High Sign-up Bonuses

Some business credit cards come with very large minimum spending requirements, which can be a stretch to achieve for the average small business spender. Pairing a new card with tax time could make a serious dent to help you reach the massive welcome bonuses. Remember, you might have a business and not know it. 

American Express® Business Gold Card

Earn up to 200,000 Membership Rewards® points after you spend $15,000 within 3 months.

1st year value: $4,000 (estimated)

Annual fee: $375

Why it’s great: Earn 4x points on your top two spending categories (Advertising, Electronics Retailers, Software & Cloud Providers, Dining, Gas Stations, Local Transit, and Phone) each billing cycle. Points are transferable to airlines and hotels like Delta, Emirates, JetBlue, Hilton, and Marriott for even more value. You’ll also get a $240 flexible business credit (includes FedEx, Grubhub, and Office Supply Stores), $155 Walmart+ credit, and more.

Chase Ink Business Preferred®

Earn 90,000 Ultimate Rewards® points after you spend $8,000 within 3 months.

1st year value: $1,780 (estimated)

Annual fee: $95

Why it’s great: Earn 3x points on Shipping, Advertising, Internet / Cable / Phone, & Travel. Points are transferable to travel partners like JetBlue, Southwest, United, Marriott, and Hyatt for even more value. You’ll also get a 25% points discount for travel booked with Chase Travel.

Chase Ink Business Cash®

Earn a $750 cash bonus or 75,000 Ultimate Rewards® points after you spend $6,000 within 6 months.

1st year value: $1,460 (estimated)

Annual fee: $0

Why it’s great: Earn 5% back on Office Supply Stores & Internet / Cable / Phone, and 2x on Dining & Gas. Get a 0% intro APR on purchases for 12 months. Points are transferable to airlines and hotels if you hold a personal Chase Sapphire or business Chase Ink Preferred.

New Personal Cards with High Sign-up Bonuses

These personal cards have higher than average minimum spending requirements and robust welcome bonuses. Paying your taxes with these credit cards will make achieving the welcome offers easier. Depending on the size of your tax bill, it may satisfy requirements with a single transaction. 

The Platinum Card® from American Express

Earn up to 175,000 Membership Rewards® points after you spend $8,000 within 6 months.

1st year value: $3,680 (estimated)

Annual fee: $695

Why it’s great: Earn 5x points on Flights. Points are transferable to airlines and hotels like Delta, Emirates, JetBlue, Hilton, and Marriott for even more value. You’ll also get a long list of premium benefits like airport lounge access, $200 airline fee credit, $200 Uber Cash, Hotel and car rental elite status, CLEAR Plus, and more.

American Express® Gold Card

Earn up to 100,000 Membership Rewards® points after you spend $6,000 within 6 months.

1st year value: $2,140 (estimated)

Annual fee: $325

Why it’s great: Earn 4x points on Dining and Groceries, and 3x on Flights. Points are transferable to airlines and hotels like Delta, Emirates, JetBlue, Hilton, and Marriott for even more value. You’ll also get $120 in Uber Cash, $120 Dining credit, $100 Resy credit, and more.

Capital One Venture Rewards

Earn 75,000 Capital One Miles after you spend $4,000 within 3 months.

1st year value: $1,270 (estimated)

Annual fee: $95

Why it’s great: Earn 2x points on All Purchases – a flat rate for everyday simplicity. Points are transferable to airlines and hotels like Air Canada, British Airways, Emirates, Choice, and Wyndham for even more value. 

Citi Strata Premier®

Earn 75,000 ThankYou® Points after you spend $4,000 within 3 months.

1st year value: $1,230 (estimated)

Annual fee: $95

Why it’s great: Earn 3x points on Dining, Grocery, Gas, Airfare and Hotels. Points are transferable to travel partners like Air France-KLM, Emirates, JetBlue, Choice, and Wyndham for even more value.

Chase Sapphire Preferred®

Earn 60,000 Ultimate Rewards® points after you spend $4,000 within 3 months.

1st year value: $1,150 (estimated)

Annual fee: $95

Why it’s great: Earn 3x points on Dining & Online grocery, and 2x on Flights & Hotels. Points are transferable to travel partners like JetBlue, Southwest, United, Marriott, and Hyatt for even more value. You’ll also get a 25% points discount for travel booked with Chase Travel, and best-in-class travel protections.

High Flat Earning Rate Cards

If you don’t want to open a new card (or can’t), check your wallet for one of these high earners that could still make paying taxes with a credit card profitable. This is especially true when you have a larger tax bill. While this list is not exhaustive, these options would get you over 2% (above the 1.75-1.85% card processing fee for personal cards). You’ll earn on the tax payment and the processing fee.

Tip!: Since business credit cards are charged a higher processing fee of 2.85-2.95% for tax payments, they are usually better as new card sign-ups for the welcome bonuses. 

Cash back cards

Earn rate

After fee

Return per $1,000

4.00%

+2.25%

$22.50

3.00%

+1.25%

$12.50

3.00%

+1.25%

$12.50

2.62%

+0.87%

$8.70

2.50%

+0.75%

$7.50

The chart above shows an example of cash back card earning rates after 1.75% fees, per $1000 of taxes charged.

Reward cards

Earn rate

Est. value

After fee

Return per $1,000

2x

3.2%

+1.45%

$14.50

2x

3.2%

+1.45%

$14.50

1.5x

2.7%

+0.95%

$9.50

The chart above shows an example of transferable point earning rates after 1.75% fees, per $1000 of taxes charged, based on estimated points value when transferring to travel partners.

Tips for Maximizing Rewards

Calculate the fee-to-reward ratio

Ensure the rewards and/or sign-up bonus outweighs the processing fee. For example, paying $10,000 in taxes with a 1.85% fee costs $185 (10,000 x .0185). In this scenario, if the rewards and/or bonus value exceeds $185 it’s worth it. 

Time your payment and new card

If you want to get a new card welcome bonus, plan to do your taxes at least a month before they are due. If you owe money, this will allow you enough time to apply for and receive the new card. Remember that welcome bonuses usually require minimum spending to be completed within 3-6 months (depending on the card). 

Redeem transferable points wisely

Maximize the value of transferable points by using card transfer partners such as airlines and hotels to unlock the highest value for the rewards.

How to Pay Taxes Using a Credit Card

1. Choose an approved payment processor

The IRS lists several approved processors, such as Pay1040 and ACI Payments. Compare their fees before selecting one.

2. Verify your credit card rewards

Be sure to use your new card with the sign-up bonus or high-earning rate card for the payment amount.

3. Complete the payment

Follow the processor’s instructions to pay your taxes securely online. You won’t need to mail the payment voucher.

Pay Your Tax Bill, Get Rewards

Paying taxes with a credit card can be a smart and profitable move when you plan ahead. By aligning tax payments with a card that offers a generous sign-up bonus or if a card you already have has a high earning rate, you can turn a significant expense into an opportunity to earn valuable rewards or cash back. Just make sure the fees don’t outweigh the rewards and that you pay your credit card balance in full to avoid interest charges.

If you’re ready to explore this strategy, choose a card that works for you and make the most of your tax payment!

Tax Credit Card Payments: Frequently Asked Questions

What are the fees involved in paying taxes with a credit card?

When you use a credit card to pay your taxes, expect to pay a percentage of your tax bill as an added processing fee of 1.75-1.85% for personal cards, and 2.85-2.95% for business cards.

Will paying my taxes with a credit card impact my credit score?

It could increase your credit utilization ratio for a statement period, which can ding your credit score in the short term by a couple of points. No matter what, always pay off your balance to avoid interest charges.

Are there any other options besides credit cards for paying taxes?

You can pay your taxes via direct debit from your bank account, a debit card, or even by check. It all depends on what works best for you and how you want to handle your tax bill.

Can I use a business credit card to pay my taxes?

You can use a business credit card to pay your taxes just like a personal card. Just make sure you’re aware of the fees and any potential impact on your business credit utilization. 

How many tax payments can I make by credit card?

The IRS allows up to two payments per tax period for each type of tax (e.g., two quarterly estimated payments and two annual payments). However, this limit applies per payment processor, so could technically make up to four.

Is there any other information about paying taxes with a card?

Visit the IRS.gov dedicated card payment page for more about fees, transaction limits, refunds, and other details related to using this payment method for paying your tax bill.

Editor’s note: Opinions shared in this article are solely the author’s and do not represent the views of any bank, credit card issuer, hotel, airline, or other organization. The content has not been evaluated, approved, or endorsed by any of the mentioned entities. These are our recommendations but it isn’t financial advice. We may receive a commission if you click through any of the links in this article.

Share this article: