Can You Pay Taxes with a Credit Card to Earn Points?
If you’ve wondered whether paying taxes with a credit card is possible and worthwhile, the short answer is yes—and the reasons might surprise you! While there’s typically a processing fee involved (around 1.75%–2.95%), savvy users often leverage these fees to hit spending thresholds for lucrative sign-up bonuses, achieve elite status, and maximize travel rewards. If you’re looking for the best way to pay taxes with a credit card, you’re in the right place. Here’s how to earn points on taxes and maximize your benefits.
Quick Summary of How to Earn Points on Taxes:
- Yes, you can earn points on taxes with a credit card.
- Processing fees range from 1.75%–2.95%.
- Best cards for paying taxes include Chase Ink Business Preferred, Hyatt Business, and Chase Sapphire Preferred.
- Ideal for earning sign-up bonuses and elite status.
- Always calculate net rewards vs. fees to ensure it’s worthwhile.
Earn Points on Taxes with a Credit Card Sign-Up Bonuses
The biggest incentive to pay your taxes with a credit card is to hit high spending thresholds required for generous sign-up bonuses (SUB). Particularly beneficial are business credit cards offering large bonuses, such as:
- Chase Ink Business Preferred: Earn 100,000 points after spending $8,000 in the first three months.
- The Business Platinum Card® from American Express: 150,000 Membership Rewards points after spending $15,000 in the first three months.
- Hyatt Business Credit Card: Earn 75,000 Hyatt points after spending $7,500 within three months.
These substantial welcome bonuses often far exceed the value of the processing fee and annual fee of the card.
Best Business Credit Cards for Paying Taxes
Chase Ink Business Unlimited® Credit Card
The Chase Ink Business Unlimited® Credit Card offers a compelling rewards structure for business owners:
- Sign-Up Bonus: Earn $750 bonus cash back after spending $6,000 on purchases in the first three months after account opening.
- Earning Rate: Unlimited 1.5% cash back on every purchase made for your business.
- Annual Fee: $0.
Example:
If you have a tax bill of $6,300, paying it with this card would incur a 2.95% processing fee, totaling $6,485.85. This expenditure would help you meet the sign-up bonus threshold and earn:
- Sign-Up Bonus: $750.
- Cash Back on Tax Payment: $6,485.85 x 1.5% = $97.29.
- Total Rewards: $847.29.
- Processing Fee: $185.85.
- Net Gain: $847.29 – $185.85 = $661.44.
By paying your taxes with this card, you can achieve a net gain of $661.44 after accounting for the processing fee. If you use a Chase Sapphire or Ink card that earns Ultimate Rewards, you’ll earn points instead of cash back. This transaction would get you 75,000 + 9729 = 84729 Ultimate rewards. That’s worth a minimum of $1200 and a maximum of $3,500 if redeeming for international business class flights.
Best Personal Credit Cards for Paying Taxes
If you’re not eligible for a business credit card, consider these personal cards:
- Chase Sapphire Preferred: 80,000 points after spending $4,000 in three months.
- Capital One Venture X: 75,000 miles after $4,000 spent in three months.
These cards offer exceptional value through their flexible redemption options. In most cases transferable currency is king. With these cards, you can strategically transfer your points to achieve maximum value.
Delta SkyMiles® Reserve American Express Card
For frequent Delta flyers, the Delta SkyMiles® Reserve American Express Card offers opportunities to earn Medallion Qualification Dollars (MQDs) by making purchases with the card:
- Earning MQDs: Effective January 1, 2024, cardholders earn 1 MQD per $10 of eligible purchases.
- MQD Headstart: Cardholders receive a $2,500 MQD Headstart each Medallion Qualification Year, regardless of spend.
Example:
Paying a $50,000 tax bill with this card would incur a 2.95% processing fee, totaling $51,475. This expenditure would earn:
- MQDs from Spending: $51,475 / $10 = 5,147.5 MQDs.
- Total MQDs with Headstart: $2,500 (Headstart) + 5,147.5 = 7,647.5 MQDs
This positions you well toward achieving Gold Medallion Status, which requires 10,000 MQDs. Additionally, this status offers benefits such as complimentary upgrades, priority boarding, and bonus miles.
Chase Sapphire Preferred® Card
The Chase Sapphire Preferred® Card is a popular choice for personal credit card users:
- Sign-Up Bonus: Earn 60,000 bonus points after spending $4,000 on purchases in the first three months from account opening.
- Annual Fee: $95.
If you’ve held the Sapphire Preferred for over four years, you might consider downgrading to a Chase Freedom® card (which has no annual fee) and then reapplying for a new Sapphire Preferred to take advantage of the bonus.
Important Considerations
- Credit Utilization: Large payments can impact your credit utilization ratio, potentially affecting your credit score. However, business credit cards like the Chase Ink Business Unlimited® typically do not appear on personal credit reports, mitigating this concern.
- Cash Flow: Ensure you can pay off the credit card balance in full to avoid interest charges that could negate the rewards earned.
- Processing Fees vs. Rewards: Always calculate whether the rewards earned justify the processing fees incurred.
By strategically using credit cards to pay your taxes, you can unlock significant rewards and benefits, turning a mandatory expense into a valuable opportunity. Rembemer always try to earn points on taxes, if the numbers make sense!
Frequently Asked Questions
Can you pay taxes with a credit card?
Yes, via IRS-approved processors Pay1040 and ACI Payments.
When paying through the IRS, approved processors like Pay1040 and ACI Payments typically charge 1.75% or 1.85% for personal cards and 2.89% or 2.95% for business cards. A helpful tip: if you check out via PayPal and add your business card as a payment method on your PayPal, it often processes at the lower personal card rate, reducing the processing fee.
Is it worth paying taxes with a credit card?
If you are getting a SUB, then it is almost always worth it to pay a portion of your taxes on your new card. Beyond that, it depends on what credit cards you hold. If you are getting more than 4% back in travel rewards, it’s worth it to earn points on taxes. Remember Amex and Chase points are valued around 2c each, so if you get 2% or 2 points per dollar spent, you’re getting a total of 4% back in travel rewards.
Example of paying taxes without getting a new credit card:
You hold the Blue Business Plus from Amex which gets 2x on all purchases up to 50k spend.
If your tax liability is $25,000 you would earn 50,000 points and pay a transaction fee (if you use PayPal) of $437.50. If you have a Charles Schwab account linked with your Amex card you could cash those points out for $550 (1.1c each), netting over $100 – but this is always a poor way to redeem points. ALWAYS transfer points to a travel partner for maximum value.
Instead, we would recommend using those 50,000 points for flights. When redeemed for Airfare, you could expect those points to allow you to book round trip economy flight with a value of about $1,000. or a one-way business class ticket to Europe with a value of $3,500 to $5,000. For example, you can use 42,500 Avios miles to book an off-peak business class ticket from Dallas Fort Worth International Airport to the Madrid Airport in Spain.
Other cards that get 2% cash back (transferable currency)
- Citi Double Cash
- Capital One Venture Rewards
- Capital One Venture X and Venture X Business
Honorable mention:
If you have the Ink Business Cash card ($0 annual fee) you could buy visa gift cards when they are on sale at OfficeMax or Staples for no activation fee, as this is a frequent occurrence. This would earn you 5% back in ultimate rewards, not bad considering those points are worth at least two cents each. If you strategically transfer and redeem them with Hyatt, you could get 4-6 cents each, netting you 20-30% back in travel rewards.
Which credit cards are best to earn points on taxes?
Choose cards with large sign-up bonuses or those offering status benefits, like the Chase Ink Business Preferred or Hyatt Business Card.
How much does it cost to pay taxes with a credit card?
The IRS-approved processors charge approximately 1.75% to 2.95% per transaction.
Does paying taxes with a credit card affect my credit score?
It can temporarily lower your score due to higher credit utilization. However, the impact is usually minimal and short-lived, particularly if you pay off the balance quickly.
Can I pay my quarterly estimated taxes with a credit card to earn points?
Absolutely. Quarterly payments can help you consistently meet spending thresholds for ongoing credit card rewards and status benefits.
Can I get a business card if I don’t have a business?
Probably. If you have a side hustle, that’s your business. You can apply as a sole proprietor and use your social security number in lieu of an EIN. If you don’t have a side hustle, now is a good time to start! Some mileage entrepreneurs sell beaded bracelets on Etsy, resell items on Facebook marketplace, or sell their children’s artwork on eBay. Keep in mind you only need to intend to open the business to get the card and there are no specifications on how much business you do.
How many different cards can I pay with?
Two. You are limited to two transactions per approved processer per quarter.
Final Thoughts on How to Earn Points on Taxes
While paying taxes with a credit card isn’t always the best choice, it can be incredibly beneficial for earning significant rewards, points, and elite status benefits. Always calculate your net gain and ensure the value outweighs the associated fees.
I always pay with my Amex Blue Plus Business and then look for favorable deals to redeem the points for international first class or business class, netting me an average of eight cents back in travel rewards per dollar I pay in taxes. When you find sweet spot awards you can get four to eight cents per point. I always earn points on taxes, and you can earn points on taxes too!
Feel free to contact us if you want to discuss maximizing travel with Miles and Points. We offer custom itineraries and consultations about the best strategies to use your Miles and Points to achieve your travel goals, and to find the credit cards that best align with your lifestyle.
Need personalized advice? Email us at cvpoints@proton.me
