Posted by Karen Munoz, EA

Paying Your Taxes With a Credit Card: How and When

Paying Your Taxes With a Credit Card: How and When

Paying taxes with a credit card presents a rare opportunity to get points if you use a credit card. While many employees only have to deal with taxes once a year (April 15), self-employed and contract workers need to make and pay their estimated quarterly tax throughout the year.

This post will explore everything you need to know about paying taxes with a credit card.


Fees of Paying Taxes Using a Credit Card

Uncle Sam states on its website that taxpayers can pay taxes with their credit cards in three ways. First, depending on the card used, there are fees for tax payment.

  1. ACI Payments, Inc – Minimum of $2.5 with a fee of 1.99%

  2. PayUSAtax – Minimum of $2.69 and a fee of 1.96%

  3. Pay1040 – Minimum of $2.58 and a fee of 1.99%

There is a table on Uncle Sam’s website that helps you compare the credit and debit card payment alongside the processing fee. 

Rewards from Paying Tax With Credit Card

The value of your tax debt alongside the type of credit card is a significant factor in determining how to pay taxes. Here are strategies for taxpayers that want to maximize the reward they get from their federal tax payment:

Get a Signup bonus 

Over the years, there has been a gradual rise in the signup bonus offered by credit cards. It is now common to have up to 100,000-point bonuses for a signup, which will require you to spend up to $15,000 over three months. 

This is precisely what you get from using Ink Business Preferred Credit Card: 100,000 points on spending $15,000 on expenses in the maiden three months.

Paying Taxes Allow you Hit Spending Threshold 

If you are not requesting a new credit card, other milestones can get you a special travel bonus. For instance, if you spend up to $15000 on various purchases on your Hilton Honors American Express card, you earn a Weekend Night Reward.

Get Cash Back When you Pay Taxes with a Credit Card.

With the restrictions in travel and mobility, miles with points might not be the best for most taxpayers. As a result, a credit card that offers cashback rewards from their spending seems like a good choice. Unfortunately, many credit card companies give up to 2% or more cashback for all purchases. 

On all your purchases, you get an unlimited 2% for cards like Citi Double Cash, Capital One Spark Cash for Business, etc. In addition, you also get a 2% cashback by using the American Express Blue Business Cash card for purchases that qualify. This reward can get up to $50,000 in a calendar year.

People with the Platinum Rewards Credit Card of the Bank of America can earn above the 2% cashback. You get 1.5% cashback on all your general purchases. If you, however, have huge assets with this bank, alongside a related account that gets you an earning of up to 75% bonus on such earnings. The implication of this is that when you pay taxes, you get up to 2.625%. The excessive asset requirement, however, does not make this asset for everyone.

Is Paying Taxes Advisable with a Credit Card?

Taxpayers that use a credit card can derive some gain, but this is hinged on meeting two conditions. 

  1. When the credit card charge is due, you should be able to pay it off completely.

  2. Also, the reward value you earn from your payment should be more than the processing fee.

Getting slammed with a fee of 1.96% makes no sense if your reward will not be up to 1.96%. However, this comes down to being smart about the choice of card to use so you can quickly meet the requirement. 



Karen Munoz, EA
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