Client – “I owe $15,000 in Income Tax!!  Should I use my credit card to pay the tax?”

Savvy CPA Says………Maybe

With the April 15 deadline, you may wonder if charging your taxes to a rewards credit card to earn cash back or points toward travel is worth it.

Yes, you can use your Credit Card to pay your IRS Taxes – or you can use your debit card.

Transaction Fees

Using your credit card to pay taxes isn’t free. The IRS payment processors—let’s call them the “tax bill collectors”—ask for a service charge. This fee is about 1.82% to 1.98% of your payment. So, if you’re paying $15,000 in taxes, the cost would be between $273 and $297.

Now, you might be thinking, “Is it worth it?”

Despite those surcharges, there are plenty of reasons why paying your taxes with a credit card can make sense.

How Much 1,000 Reward Points Are Worth

Rewards ProgramValue of 1,000 Reward Points
Capital One Miles Rewards$7.70
Wells Fargo Rewards$10
Chase Ultimate Rewards$10.10
Bank of America Travel Rewards$8.50
Citi ThankYou Rewards+$8.40
Radisson Rewards$6.10
World of Hyatt$26.30
JetBlue TrueBlue$13.70
Southwest Airlines Rapid Rewards$13.40

The allure of credit card points lies in their versatility, but remember, not all points are created equally.

Their value oscillates wildly across different programs. For instance, 1,000 points in one program might barely get you a coffee, while in another, it’s your ticket to a luxury hotel stay.

On average, 1,000 points is equivalent to a $10 bill, with some programs offering a plush $26.3 (looking at you, World of Hyatt) or a measly $6.1 (no offense, Radisson Rewards).

Reasons to pay your taxes with a credit card

  • Earning a big credit card sign-up bonus or welcome offer
  • Meet a credit card spending threshold.
  • Spend toward elite status.
  • Use multiple cards to maximize earnings.

The downside of using a credit card to pay your taxes.

Despite the benefits listed above, using a credit card to pay your taxes can be a reckless strategy, as the interest rate on most rewards credit cards can severely hurt your finances should you have to pay it. If you don’t have a no-fee, 0% APR option and cannot pay your statement balance in full after charging your taxes to your credit card, you probably shouldn’t consider doing so.

Bottom line

Paying your taxes with a credit card can be a lucrative way to earn points and miles as part of a large welcome offer or on an everyday basis. But do your math to ensure your benefits are worth the cost — especially if you have a hefty bill to pay off.

Are you not getting this kind of advice from your CPA or other financial professional?

Maybe it is time to Make a Change. If this idea of making your money work smarter, not harder, speaks to you, perhaps it’s time to look at your finances with fresh eyes. You don’t have to figure it all out alone. What if you had someone to help you make Savvy Money moves, like how to pay less tax and get more rewards?

If you’re nodding along, thinking, “Yes, I need this,” let’s chat.

Schedule your appointment now

Together, we can ensure you’re getting the most out of your money and maybe even make tax season more rewarding.

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