Earn a Profit (or Miles) Paying Your Taxes with a Credit Card

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Tax BreaksYes, you can pay your taxes with a credit card.  There is a fee, but that can be more then offset, and it is even possible to earn a PROFIT paying your taxes with your credit card.  I can make about $1,000 in profit on a $5,000 tax bill.

First, see that you can charge your taxes for roughly an 1.87% fee: IRS Pay Taxes by Credit Card

Now if you have a credit card that has more then 1.87% in cash back, you make a profit.  Here are 2 cards that offer 2%:  Barclays Arrival+, and Fidelity Investment Rewards Amex.  That will net you a whopping 0.13% profit!  NOTE: Barclays does pay you back 10% of redeemed rewards, so this can actually be 0.33% profit:  Say your taxes are $1,000.  Paying by credit card will cost you $18.70, but you get $20.00 back in rewards.  Plus when you claim that $20 cash back, you will be getting an additional $2.00 back from Barclays Arrival +.  Making it a grand total of $3.30!  WooHoo!  BORING?  Well if you just signed up for a new Barclays Arrival Plus, you would also get 40,000 bonus points worth $400.  Grand Total: $403.30 for signing up for the card and paying your taxes with it!  Each mile is worth 1 cent.  Worried about how signing up for new card will hurt your credit? Well, it might actually increase your credit score to sign up for a new credit card.


Time For TaxesI want to earn more then $400 bucks – and I can.  I will sign up for a new card, and pay my taxes with it to meet the spend requirement and earn the big bonus.  Here is how I do it (say my taxes are $4,000):

  1. Get a new card like the Chase Sapphire Preferred (with a big 40K sign-up bonus after $4,000 in spend on the card).
  2. OPTIONAL: Find the best portal to purchase American Express Gift Cards.  Purchase $4000 in Amex gift cards using the portal.
    • Purchasing AMEX gift cards is optional. Buying the AMEX gift Cards in a portal gets you cash back to offset the fee for paying taxes with a credit card. So if you do buy the gift cards, you essentially offset the fees charged for paying your taxes with credit card. Get it?
  3. Pay taxes using Amex gift card(s). Or if you skipped step 2 just pay the taxes directly with your new credit card.

Math: As of this writing, buying $4,000 in Amex gift cards gets me 1.5% cash back from the portal (or $60).  But, it will cost me 1.87% to pay my taxes via credit card ($74.80).  So after all is said and done, it costs me $14.80 to pay my taxes.  I may be out $14.80, but I earned 44,000 miles on my new card (4,000 from buying the AMEX cards and 40,000 bonus).  If I turned that in for cash that is $440 – so I actually profited $425.20!  But I want MORE…

Personally, I am not interested in cash back, so those 44K miles are almost worth a round trip ticket to Hawaii worth over $1,000!!  Click that link to see how.

NOTE:  This is how I personally would (and do) pay my taxes.  I am just telling you my experience, as I am a travel hacker, not a tax advisor nor financial advisor, so be sure to do your own research before engaging in travel hacking of any kind.
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By | 2017-05-18T12:46:51+00:00 April 9th, 2015|Travel Tips|0 Comments

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