Yes, 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.
I 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):
- Get a new card like the Chase Sapphire Preferred (with a big 40K sign-up bonus after $4,000 in spend on the card).
- 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?
- 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.