Yes, you can pay your taxes by credit card, but it isn’t free. In order to pay your taxes by credit card, you must use one of three payment processors. They charge slightly different fees to process your credit card tax payment.
How Much Will It Cost to Pay My Federal Income Taxes with a Credit Card?
Depending upon the credit card processor you use to pay your federal income taxes with, the fee will range from 1.87% to 1.98% with a minimum payment of $2.50.
If you owe $3,000 on your federal taxes, your fee will be $56.10 to $59.40. That is a lot of money and probably not worth it unless you are doing it for some special reason.
Is It Worth It to Pay My Income Taxes with a Credit Card to Get Credit Card Points or Miles?
As a former financial planner, I still get a lot of money questions and have a lot of money conversations with friends and colleagues, like, “Can I pay my taxes with a credit card?” The number one reason people tell me they pay their taxes with a credit card is to earn credit card reward points or credit card miles.
Unfortunately, under normal circumstances, it is not worth it to pay income taxes with your credit card to earn miles or points.
Most credit card rewards are worth around 1%. So for most cards, you are actually losing money by trying to earn points by paying your taxes with cash. Some credit card reward points are worth closer to 2%. For these cards, you are simply breaking even.
So, When IS it Worth It to Pay Taxes with Your Credit Card?
It can be worth it to pay your taxes with your credit card to take advantage of special offers. For example, if you earn special benefits, or a higher travel status by spending a certain amount of money, a big tax payment can get you there faster. Some credit cards offer a 40,000 or 50,000 or even 100,000 bonus if you spend a certain amount in a certain amount of time.
For example, if a new card offers 40,000 bonus points if you spend $4,000 in three months, then paying your $4,000 tax bill earns you way more than the 2% fee.
The same thing goes for qualifying for upgrade status, or free hotel rooms, or doing a double points offer.
Before you pay your federal income taxes, or state income taxes with a credit card be sure to calculate what those points are worth in cash, or you just might be losing more money.
About the Author
By Brian Nelson – Brian is a former Certified Financial Planner and financial advisor. He writes for the Finance Gourmet and other financial publications. The material provided on this website is for informational use only and is not intended for financial or tax advice. ArcticLlama, LLC, FinanceGourmet.com, and Brian Nelson assume no liability for any loss or damage resulting from one’s reliance on the material provided. – Material may not be continuously updated verify all tax numbers and regulations.