Throughout the year, taxes are typically taken out of your paycheck. But there are times when not enough money is withheld — thanks to changes in your tax situation or other factors — and you end up owing. You could also owe taxes if you’re self-employed and don’t have an employer to withhold taxes from your checks.
When you owe taxes to the IRS or another government entity, there are a number of ways you could pay, including sending in a check. Credit cards may also be among the payment methods available to you, depending on who you owe. Yes, paying taxes with a credit card is not only possible, but there could also be benefits under the right circumstances. On the other hand, there could be costs and downsides.
This guide to paying taxes with a credit card will help you determine both whether charging your taxes on your card is possible — and whether it’s advisable given your specific situation.
- Can you really pay taxes with a credit card?
- Why would you use a credit card to pay taxes?
- To earn credit card points or cash back
- To meet spending requirements for a new cardmember bonus
- To become eligible for special cardmember benefits or a special status
- To save on interest
- Is it worth it to pay taxes with a credit card?
- How to pay federal taxes with a credit card
- How to pay state taxes with a credit card
- How to pay local taxes with a credit card
- How to pay quarterly taxes with a credit card
- The best credit cards for paying taxes
Can you really pay taxes with a credit card?
While it’s often possible to pay taxes with a credit card, not all taxing authorities are set up to allow this. The IRS and most state governments are, but local governments or municipalities may not be.
Even when taxing agencies accept credit card payments, they tend to do so through third-party processors — all of which charge fees. You’ll need to pick one of these processors and pay the requisite cost if you want to charge your tax payment.
If you use tax-filing software, the program may also give you the option to pay taxes with a credit card. However, you’re generally limited to paying only federal taxes, you must efile to pay with a card, and you’ll still be charged a processing fee. For example, TurboTax charges a 2.49% fee if you pay your taxes with a card using its service.
Why would you use a credit card to pay taxes?
There are a number of reasons why you may decide to use a credit card to pay your taxes. Here are a few:
To earn credit card points or cash back
Many credit cards give you points or miles for each dollar you spend. If you have a hefty tax bill, getting rewarded for the money you spend on it would be nice.
The Citi Double Cash Card one example of a card with generous cash back. You could up to 2% cash back on all purchases: 1% as you buy and 1% as you pay. That means if you owe $10,000 to the IRS and put it on your Citi card, you could earn $200 cash back. If you pay a 1.87% processing fee (which is the lowest currently available as of July 2019) to pay your $10,000 tax bill, the fee would equal just $187. So you’d still come out with an extra $13.
To meet spending requirements for a new cardmember bonus
Many credit cards provide a generous bonus if you open a card and spend a certain amount of money in a specific time period. For example, with the Capital One Venture Rewards Credit Card you can earn 60,000 bonus miles after spending $3,000 in the first 3 months. Depending on how you redeem those bonus miles, that’s worth at least $500 in free travel.
If you don’t usually charge much, earning this spending bonus might not be possible. But if you pay $3,000 of your tax bill on your card, you could fulfill the requirement. If you pay a 1.87% fee to charge this $3,000, you’d pay $56.10. You’d still be $443.90 better off thanks to the $500 in free travel you’d earn.
To become eligible for special cardmember benefits or a special status
Some cards offer special bonuses and perks once you spend a certain amount each year. For example, the Delta SkyMiles Platinum Credit Card offers 10,000 bonus miles and 10,000 Medallion Qualification Miles (MQMs) if you spend $25,000 or more in eligible purchases in a calendar quarter and an additional 10,000 of each if you spend $50,000 total. MQMs allow you to earn Silver, Gold, or Platinum Medallion status, with different status levels conferring perks such as priority upgrades, waived baggage fees, waived change fees, and more.
Paying your taxes with a card is a good way to fulfill this type of spending requirement. This could open the door to free flights, free nights in a hotel, or other generous perks that outweigh the comparably small fee you pay for the tax payment to be processed.
To save on interest
You could potentially use a credit card to buy yourself time to pay taxes without incurring interest or penalties.
If you pay your taxes late, you owe both penalties and interest starting immediately after the deadline. The penalty for late payments is 0.5% of the unpaid tax balance for each fraction of a month that you’re late — up to a maximum of 25% of the unpaid tax amount. Interest rates on unpaid taxes are set quarterly and equal the federal short-term rate plus 3%. The IRS Newsroom publishes the latest interest rates. While you can set up IRS payment plans, interest and penalties still accrue, and you sometimes have to pay a fee to set up the plan.
State and local governments also typically charge interest on delinquent payments, although the specific amount will vary.
Incurring costs and fees for being late on your taxes can be much more expensive than the fee associated with paying taxes on a credit card. Of course, credit card interest would normally be much higher than the interest the IRS or your state’s revenue department charges — unless you get a card with a 0% promotional APR (annual percentage rate).
Many cards charge 0% interest for a limited period of time for new account members. The Discover It Cash Back, for example, offers 0% APR on purchases for 14 months. In addition, if you open a Discover it Cash Back Card and charge your taxes on it, the 1% cash back you’d get on your purchase could reduce your fee for processing your tax payment down to just 0.87%. If you’re a new cardmember, Discover also matches cash back earned in the first year with no limits, which means the fee would be fully covered with cash back to spare.
And you’d have 14 months to pay off the tax bill at 0% interest — instead of paying a late payment penalty and interest from day one.
Is it worth it to pay taxes with a credit card?
To decide if paying taxes on a credit card is worth it, simply compare the fee you pay for payment processing with the benefits from using your card. As the examples above showed:
- If you can get more in cash back or rewards than the fee, it’s worth it.
- If you can qualify for a new cardmember bonus or other perks that require a certain amount of spending and the bonus or perks are worth more than the fee, it’s worth it.
- If the cost of processing the tax payment is below the interest and fees for late taxes and you can qualify for a 0% APR credit card, it’s worth it.
The more cash back you receive or the higher the value of your rewards or cardmember perks, the more beneficial there is to paying your taxes on a card.
For example, with some Bank of America credit cards — including the Bank of America Premium Rewards credit card — you can qualify for a Preferred Rewards bonus if you have $20,000 or more invested across Bank of America and Merrill Lynch accounts.
The Preferred Rewards bonus boosts the 1.5 points this card offers for everyday purchases by 75% if you have at least $100,000 invested with Bank of America and Merrill Lynch. So you could get as much as 2.63 points per dollar spent. Points can be redeemed as a statement credit or deposit into Bank of America or Merrill Lynch accounts. So when subtracting a 1.87% fee for processing your tax payment, you can still get 0.76% back per dollar spent. If you charge a $10,000 tax bill, you’d make $76, even after accounting for fees.
Be sure you can pay off your balance in full
There’s one big caveat when deciding if paying taxes on a credit card is worth it: Credit cards charge very high interest. The standard credit card interest rate would be well above the interest the IRS charges if you’re late paying taxes. And it would dwarf the value of any rewards earned.
So, unless you can pay off your credit card bill when the statement is due or before the 0% rate expires, never pay your taxes on a credit card.
Be careful of your credit score
There’s one other downside to paying taxes on a credit card: You could hurt your credit utilization ratio. This is an important factor in your credit score. You calculate it by dividing your balance used by credit available. If it goes above 30%, your credit score suffers.
If you have $10,000 in available credit and charge a $10,000 tax bill, you’re using 100% of credit available to you — so your utilization ratio becomes 100%. This could lead to a big drop in your credit score until you’ve paid down your debt.
How to pay federal taxes with a credit card
The IRS lets you pay taxes with a credit card regardless of whether you efile, submit paper returns, or receive a tax bill. But you have to use an approved payment processor, and each processor charges fees.
Approved processors include:
|PayUSAtax.com||844-729-8298||1.96% (minimum $2.69)|
|Pay1040.com||888-729-1040||1.87% (minimum $2.59)|
|OfficialPayments.com/fed||888-872-9829||1.99% (minimum $2.50)|
Using an integrated efile and epay service can also streamline the process of paying with a card, as you can both submit your taxes and submit your payment using the same software. The IRS provides information on efiling services that integrate epayments. The table below shows the services you can use:
|TurboTax with Pay1040.com||888-658-5465||2.49% (minimum $3.95)|
|Fileonline.1040.com||888-877-0450||2.35% (minimum $3.95)|
|FileYourTaxes.com||805-644-9398||3.93% (minimum $2.00)|
How to pay state taxes with a credit card
State governments also sometimes allow you to pay taxes using a credit card. When they do, they also require you to use third-party payment processing services. The rules vary by state, as do the payment processors you can use.
To find out if your state permits you to charge tax payments, use the following resources:
- Your state’s Department of Revenue: The Federation of Tax Administrators has a listing of taxing authorities for each state. Find your state’s site to check the rules for paying taxes online.
- Mastercard’s list of how to pay taxes online or via phone: This list specifies whether you can pay state income tax, business tax, or both using a card. It also provides links to the third-party payment processors to make your payments.
If you use tax filing software to efile your state taxes but want to pay with a credit card, you may have to indicate that you’re going to pay your tax bill with a check in order to complete the efiling process. You could then go to the website of the state’s approved payment processors to submit your card payment.
How to pay local taxes with a credit card
You may also owe local taxes. These could be owed to your township or municipality. Visit the website of the local taxing authority or contact it via phone to find out whether you can pay your taxes with a credit card.
For example, if you live in Hillsborough County, Florida, search “Hillsborough county taxes.” This would bring you to the website of the Hillsborough County Tax Collector. On this website, you’d see services you could use to process payments, including:
- TouristExpress to pay tourist development taxes
- RenewExpress to pay vehicle renewal taxes
- BTExpress to pay business taxes
Each county tax website will have its own payment processors, some of which may facilitate credit card payments.
How to pay quarterly taxes with a credit card
If you’re self-employed, you’re expected to pay taxes to the IRS as you earn income. Because your employer doesn’t withhold these taxes, you have to pay them yourself four times per year in April, June, September, and January.
Quarterly taxes can generally be paid to the IRS or to your state using the same payment processors you use to pay annual taxes. Most payment services give you the option to specify which type of taxes you’re paying when you submit your credit card info for the payment to be processed.
The best credit cards for paying taxes
Some of the best credit cards for paying taxes include the following:
If you can qualify for the Preferred Rewards program by putting at least $20,000 into Bank of America or Merrill Lynch accounts (or both), this is one of the best rewards credit cards for paying taxes. This card will offer you not just 1.5 points per dollar spent on your taxes but also a rewards bonus between 25% and 75%. With this bonus, the cash back should cover or exceed the fees you pay. The card also offers:
- 50,000 bonus points after spending $3,000 in the first 90 days
- $100 in statement credits for airline incidentals and a $100 statement credit for TSA PreCheck or Global Entry
While it has a $95 annual fee, those statement credits more than cover that fee.
This card is ideal for paying your taxes because you get 1% cash back on your tax payment, Discover matches cash back earned during the first year, and you get to take advantage of a 0% promotional APR for 14 months. Your fee will be fully covered thanks to the matched cash back, and you’ll get lots of time to pay taxes interest-free. The card offers other great features, too, including:
- 5% cash back in quarterly rotating categories (including gas stations, grocery stores, restaurants, and Amazon.com), up to quarterly maximum; 1% cash back on all other purchases
- No annual fee
This card gives you a 3% cash back (on the first $10,000 in purchases) for 12 months, then unlimited 1.5% cash back on all purchases. That makes this an ideal card to pay taxes since you’ll get enough cash back to cover your fee and have some left over. It also provides a 0% introductory APR on purchases for 12 months, as well as:
- A 10% discount when booking with participating high-end rental properties in select cities
- No annual fee
This card also provides 1.8% cash back on purchases made with a qualifying mobile wallet for the first 12 months, then unlimited 1.5% cash rewards on everyday purchases, which almost covers the tax payment processing fee. And you get a 0% APR for 15 months, so you have a long time to pay your taxes interest-free. All of this, plus a $150 cash reward after spending $500 in the first 3 months, make this an ideal card for paying taxes. The card provides other perks, too, including:
- No annual fee
- Rewards can be redeemed at Wells Fargo ATMs
Now you know all about how to pay your taxes with a credit card
Now you know about the options for paying taxes on a card, as well as the fees you may pay. If you decide that using a card is a good idea, check out the options mentioned here. One of these cards may be the perfect credit card to use to pay the IRS or your state or local tax bill.