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Please Note: I am NOT a tax adviser and any discussion of taxes below is not intended as tax advice. Please consult your tax adviser or attorney for tax advice specific to your situation.
Top Line: You can earn miles & points for most tax transactions, and there are ways to reduce the impact of credit card convenience fees which you have to pay if you use a credit or debit card to pay your taxes. Also, the IRS usually limits use of a credit or debit card to only 2 transactions so you need to have a credit card with a credit limit large enough to pay your taxes.
But you can make paying taxes somewhat pleasurable if you like collecting miles and points! You won’t get the miles and points for free, but you could get them at a low enough cost per mile/point where it may make sense to pay a convenience fee to pay your taxes.
Million Mile Secrets reader Steve writes in to ask:
“I have a question if you don’t mind. Sounds crazy but it’s true, I have to pay a mammoth federal tax bill this month, $1,361,000. Would you be interested in helping me find the best way to make this a miles bonanza?”
I suppose if you have to fund (insert your least-favorite Washington program), you may as well earn miles & points!
Overview
One of the easiest ways to earn miles and points is to put all your expenses on credit cards which earn miles or points.
However, you have to pay a transaction fee on some transactions such as tax payments. This transaction fee could range from 2% upwards and usually does not make sense because the value of the miles and points is less than the extra cost of the transaction fee.
You can pay taxes through different payment vendors suggested by the IRS.
Here are the cheapest rates which I found among the different payment vendors.
Debit Cards:
- Visa debit cards - flat fee per transaction of $3.89 from Value Tax Payments, PayUSATax, & Pay1040.
- MasterCard debit cards - 1.9% of the transaction amount via Choice Pay
Credit Cards:
- Visa credit cards – 2.29% from Value Tax Payments.
- MasterCard credit cards – 1.9% of the transaction amount via Choice Pay
- American Express credit cards – 2.29% from Value Tax Payments.
I usually value 1 mile or point, on average, at ~1 cent per point. As you can see the transaction fees for credit card payments are high enough where it doesn’t make sense to pay, say, 1.9 cents as a processing fee to earn 1 point which is worth only 1 cent.
Deducting Payment Processing Fees
But you may be able to deduct the cost of the transaction fees for paying taxes which, depending on your situation, could make it lucrative to pay your taxes via credit or debit card.
Again, I am NOT a tax adviser so please don’t interpret this as tax advice. Please contact your tax adviser and ask if you can deduct transaction fees for paying taxes with a credit or debit card.
Individual Taxes
Per the IRS, you may be able to deduct the transaction fee for tax payments via credit card or debit card.
However, this is almost meaningless to most individuals (in my opinion), because you can only deduct them as a miscellaneous itemized deduction and you must have enough miscellaneous itemized deductions to exceed 2% of your Adjusted Gross Income (AGI).
Miscellaneous itemized deductions include tax preparation costs, job search expenses and reimbursed employee expenses.
For example, if your AGI was $50,000, you would need to have at least $1,000 (2% 0f $50,000) in other miscellaneous deductions before you were able to deduct the cost of the processing fee for paying your taxes with a debit or credit card.
Please see IRS Publication 529 on Miscellaneous Deductions for more information.
Business Taxes
Per the IRS, ” The fee is a deductible business and individual expense.”
I’m not sure if this means that the credit/debit card processing fee is 100% deductible or if only a certain percentage is deductible.
If the entire amount is deductable, then you could pay your taxes with a mile earning credit card and earn miles at a low enough rate to justify paying the transaction fee.
Again, check with your tax adviser.
Debit Cards
When I first read Steve’s email, I immediately thought of the Bank of America US Air and Alaska Air debit cards.
That’s because they are Visa cards, and Million Mile Secrets reader Cheap Lee had left a comment on the 40+ Powerful Ways To Complete Your Credit Card Minimum Spending that processing companies could NOT charge more than $3.95 per TRANSACTION for tax payments made via Visa debit cards.
This was music to my ears since you could theoretically pay a million dollar tax bill and earn a million miles and points and pay only $3.95 as a transaction fee!
Here’s what Cheap Lee (who works for Value Payment Systems which runs PayUSATax and Value Tax Payments) wrote:
“As mandated under Visa’s Tax Payment Program, the citizen can not be charged more than $3.95 flat “convenience fee” rate when using their Visa Debit Cards to make payments no matter how large the payment is. We charge $3.88. All other cards, including Visa Credit, MasterCard Credit/Debit, Amex and Discover, will be as a percentage rate.”
Most banks have stopped offering miles and points for debit card purchases, because the recent Durbin amendment limits profitability on debit cards for banks with more than $10 billion in assets. But Bank of America still issues debit cards which lets you earn either US Air or Alaska Air miles.
But I soon found out that the terms and conditions of the Bank of America debit cards don’t let you earn miles for tax transactions.
“Mileage credit will not be awarded for federal, state or local tax payments, or similar payments to federal, state and local government agencies.”
0.10% Arbitrage for using Perkstreet debit card
Perkstreet offers a MasterCard debit card which pays unlimited 2% cashback for the 1st 3 months or if you maintain a $5,000 balance, but I don’t know if there is a restriction on earning cashback for tax transactions.
The terms and conditions disqualify gift cards from earning cash back, but I couldn’t find a restriction against earning cash back for paying taxes.
If there isn’t a restriction on earning cash back for using the debit card for tax transactions, you could make money by paying your taxes using your Perkstreet debit card, as long as you pay less than 2% in tax processing fees.
For example, if you pay a 1.9% convenience fee via Choice Pay to use a Perk Street MasterCard debit card to pay your taxes, you would earn 2% cash back.
In that case, you actually earn 0.10% (2% – 1.9%) per $1 spent in taxes so you’d earn $1400 (0.10% X $1,400,000) for paying your taxes.
And if you could deduct some of the tax processing charges, you could get an added saving equal to your marginal tax rate.
But, again, I’m not sure if PerkStreet has restrictions on the maximum you can charge on a debit card and if they will let you earn cash back for tax payments.
However, if you pay a convenience fee of more than 2% you would lose money since you would pay more in convenience fees than in the cash back you received.
I’m curious if readers know of any other debit cards, preferably Visa debit cards because of the $3.89 flat fee for tax transactions, which allow you to earn miles, points, or cash back for tax transactions?
Gift Card from Big Crumbs
I next thought about buying an American Express gift card from Big Crumbs by using a miles earning credit card (Chase Sapphire etc.) and using the American Express gift card to make your tax payments.
For example, you could buy a $5,000 American Express gift card from Big Crumbs and get 1.6% cash back.
If you pay 2.29% in tax transaction fees by using your American Express card, you are effectively earning miles or points for 0.69 cents per mile/point (2.29% tax transaction fee – 1.6% cash back).
0.69 cents per mile or point is a great price for most miles and points!
However, I have NOT tried making a tax payment with an American Express gift card, so don’t know if you will be able to go through with the transaction.
The IRS also limits you to 2 transactions per year with a credit or debit card and since the largest gift card is for $5,000, you could earn miles and points only up to $10,000 per year by using this method.
Credit Cards
Fidelity Investment Rewards American Express
The Fidelity Investment Rewards American Express card lets you earn either 2% cash back or you can turn off the auto-deposit 2% cash back feature and convert points in a 1:1 ratio to Aeroplan (Air Canada’s frequent flyer program).
Now, Aeroplan has devalued their award chart and charges high fuel surcharges on award tickets, but earning cheap Aeroplan miles could make sense for some.
For example, if you pay $1,000 in taxes, you would pay $22.9 (2.29% tax transaction processing fee X $1,000 tax payment) in tax processing fees.
But you’d earn 2,000 Aeroplan points ($1,000 tax payment X 2 points per $1 spent).
That’s 1.145 cent per Aeroplan point ($22.9 tax transaction fee/ 2,000 Aeroplan points earned).
Now 1.145 cents per mile is not an outstandingdeal, but it is a good deal especially if you’d redeem your miles for business or 1st class tickets.
If Steve had a high enough limit on this card, he could earn 2.8 million Aeroplan points for paying his $1.4 million tax bill at a cost of $32,060 (2.29% X $1,400,000).
Aeroplan charges 105,000 miles for a business class ticket to Europe or 130,000 miles for a business class ticket to Asia. So Steve could get lots of business class travel on Air Canada or their Star Alliance partners.
His cost per mile would be even lower if he could deduct the entire tax processing fee as a business expense. Assuming a marginal tax rate of 35%, Steve would eventually pay 1.145 – 35% or 0.744 cents per Aeroplan mile which is a great deal!
But I’m not a tax adviser and don’t know if he will be able to deduct the entire amount as a business expense.
Charge Cards
The biggest problem which Steve will run into while paying his tax bill with a credit card, is that he may not have a large enough credit limit (how many readers have a $1.4 million credit limit on a credit card?!) for a $1.4 million tax payment on his regular credit cards.
And since the IRS has a 2 card limit for tax transactions, Steve won’t be able to split his payments into more than 2 transactions.
But charge cards (such as the Chase Ink Bold or American Express Business Gold) typically have higher limits than credit cards since they require the full balance to be paid off each month.
American Express Centurion & Business Gold Charge Card
The American Express Centurion card is a charge card for very high spenders and is by invitation only.
Since this card is for high spenders, they usually give you a high credit limit with the card. 
You also earn American Express Membership Rewards points on this card. But since you only earn 1 point per $1 charged, the cost per mile is not very attractive.
The American Express Business Gold card is another charge card which earns Membership Rewards points. Their is no sign-on bonus for this card currently, so I’d wait for a sign-bonus before applying for this card.
If you do have these charge cards, you could also call American Express and let them know that you have a big tax payment to make and if they could temporarily increase your credit line so that you could make a large tax payment.
I’m not a big fan of Membership Rewards points (I prefer Chase Ultimate Rewards points), but they could be useful especially when you factor in the transfer bonuses which they have.
For example, if you pay $1,000 in taxes, you would pay $22.90 (2.29% tax transaction processing fee X $1,000 tax payment) in tax processing fees.
But you’d earn 1,000 Membership Reward points ($1,000 tax payment X 1 point per $1 spent).
That’s 2.29 cents per Membership Reward point ($22.90 tax transaction fee/ 1,000 Membership Rewards points earned)
That’s a bad rate for Membership Reward points. But, Delta and British Airways have had bonuses for transferring Membership Reward points in to Delta and British Airways miles.
For example, if you get a 40% bonus for transferring Membership Reward points to Delta or British Airways, your cost per mile is 1.63 cents per mile.
1.63 cents per mile is still pretty high since you can get Delta miles for 1.1 cents by transferring miles between accounts.
But it could make sense since buying Delta miles at 1.63 cents per mile means that you could get a Business Class ticket to Europe for 100,000 Delta miles or $1,630. This is much cheaper than paying full price for a business class ticket from Delta or its SkyTeam partners.
But if Steve is comfortable with paying ~$1,600 for a business class ticket to Europe he should consider paying part of his tax bill with his American Express Centurion or Business Gold card and earn Membership Reward points which he could later transfer to Delta or British Airways.
However, since he could potentially earn over 1 million miles, he should be careful to use the miles before they devalue or factor in the risk of his miles devaluing before paying a tax transaction fee to use his credit card.
But the cost per mile could be even further reduced if Steve could deduct the tax transaction fee as a business expense.
Summary Chart
Here’s a summary chart (click to enlarge) which lists the different options above.
Bottom Line: Paying a transaction fee to earn miles and points doesn’t usually make sense, since you pay a high amount for the miles and points.
But if you regularly buy business class or first class tickets or see value in paying only $1,600 to $2,500 for international business or first class tickets, this could be a great deal for you!
I won’t be able to get to the comments since I am traveling, but I hope this helps some of you with upcoming tax payments!
Please comment if you know of any way to earn miles and points by using a credit or debit card to pay taxes. And if you know of a Visa debit card which allows you to earn miles and points for tax payments since you only pay a flat fee of $3.89 per transaction.
Disclosure: I don’t get paid any commission for the links to credit cards in this post.
* If you liked this post, why don’t you join the 3,000+ readers who have signed-up to receive free blog posts via email (only 1 email per day!) or in a RSS reader …because then you’ll never miss another way to earn miles and points with a credit card!
I have earned and redeemed millions of airline miles and hotel points to travel the world for free. Now I'm blogging to help more people do the same! 
Chase AARP card 5% cash back unlimited for the first six months…? Though I don’t know what kind of credit limit they’d offer, you’d need to charge, pay off, charge, pay off, etc…
There’s been reports that if you use BigCrumbs, special codes for AmEx Gift Card to remove the activation fee (not shipping) will not work. If this is the case, go back to BigCrumbs to activate the referral link again… Otherwise, you may risk losing your cash back.
With PerkStreet, you also have to make sure that it is a signature based transaction and not PIN nor PINless (e.g. Verizon Wireless let’s you pay through the ATM network without having you enter your PIN). If you pay using a PIN or PINless method, you will not get cash back. The big question though is being able to pay $1.4 million though as one transaction…
I’m impressed with how thought out and researched the response to the question was. Bravo.
I second Jason’s praise, this is a masterwork.
I hope someday I face Steve’s dilemma, too!
bravisimo!
One note on deducting the processing fee – remember that it’s a deduction (that reduces your income), not a credit (that reduces taxes directly). Paying 1.9% on $1MM would cost $19K. If his top dollar tax bracket is 33%, then his taxes will be reduced by $6.3K, not by $19K. Still, in that bracket, it effectively drops the 1.9% down to about 1.3%, not free but perhaps a bit more worthwhile.
PerkStreet said their maximum transaction amount is $5,000. If this was last year, I would have loved all of this to be paid in cash using loose dollar coins!
Great post. I can’t wait to see whether people succeed with the Big Crumbs / Amex gift card approach. Can we prepay taxes this way (overpay) and get cash back from the IRS?
I have the same tax “problem” and have studied this exact topic a lot.
One thing to remember is that you can make quarterly estimated tax payments. So, if your annual tax bill is say $1 million, you can break it up into quarterly estimated tax payments of $250k. The IRS lets you make 2 credit card payments per quarter, so you can make 8 payments per year. If you have a card with a high limit you can end up charging a pretty large percentage of your annual tax bill.
Some sites (like pay1040.com) offer a reduced fee if you make a large tax payment (over $100k) using your Amex. This can bring the Amex fee down to 2.1% from the 2.29% listed in your chart.
I have searched high and low for a miles-earning Visa debit card that would work with tax payments for a $3.89 flat fee. I have not found one. Before the Durbin amendment, there were a few but I think they have been stamped out. If anyone knows of any, I would pay miles and miles for this info.
$5k gift cards are an interesting theoretical idea but it is impractical to pay a $1 million tax bill with $5k gift cards.
These credit card convenience fees are deductible. According to page 9 of http://www.irs.gov/pub/irs-pdf/p529.pdf they’re deductible other expenses on line 23 of schedule A, subject to the 2% limit. You might have other items in that category that help put you over the threshold. My tax advisor affirmed this but consult with your own to see if it applies to your personal tax situation. If you’re in the 35% bracket this can bring the after-tax cost of these fees down substantially.
I have also done a lot of research on this. While they did exist in the past, I have yet to find a current Visa debit card that earns points on tax payments. Finding one would make the $3.89 convenience flat fee a huge opportunity. Anyone who has found such a card please post in the comments here!
Less attractive, but still worthwhile is that there are times when a credit card has a bonus. For instance a short term 2x promo on a card where miles worth 1.5c would generate an eff rebate of 3% less 1.9-2.29% paid, for a decent net gain.
I split up my reply because it is rather long and I was afraid of losing it before I finished.
The key here is to find the highest earning card you can. The AARP 5% card is a good candidate, if they are still running that offer. However, the 5% promo rate only lasts for 6 months I think so this isn’t a permanent solution.
If you’re lucky enough to have the old Travelocity card, you earn points worth 4% back on everyday spending. This is a pretty big premium over the fee for paying taxes with an Amex. This is my main card that I pay taxes with.
I also use the Fidelity Amex that you mentioned. Earning aeroplan miles in bulk at 1.145 cents per mile pretax is pretty fantastic.
I think a lot of people value their Starwood points highly enough that paying the convenience fee and putting it on the SPG Amex would make sense. I don’t do this however.
The Amex Business Gold gives you 25k bonus points per $50k of annual spend. So, you can think of your earn rate as 1.5 MR points per $1 of tax paid. If you make a large tax payment to reduce the fee to 2.1% then it’s 1.4 cents per MR point pretax. So this is 0.91 cents per MR after tax at the 35% bracket. And if you factor in the MR bonuses for transfers to programs like Delta, this can be a really low source of miles acquisition. Similarly the Amex PRG gets a 15k point bonus for $30k of spend per calendar year.
I think some of the better cards to use are Mastercards because of the reduced fee charged for MC by the tax processors @ 1.9%. Some of the cards that come in Visa format can also be applied for in MC format, so I always get the MC where possible. The Continental Mastercard gives you 10k bonus miles per $25k of spend so that is a 1.4 mile earn rate. This is 1.36 cents per mile pretax or 0.88 cents per mile after tax.
The Chase Ink Bold is available as a MC. If you have the old rewards structure which was offered until just recently, you get 47.5k bonus UR points if you spend $100k per year. So, this is a 1.475 UR pt per $1 earn rate. At a 1.90% fee, this is 1.29 cents per point pretax or 0.84 cents per UR after tax. Many people value UR points highly so this is a pretty solid deal.
Lastly if you have the Chase British Airways card, you could argue that putting $30k of tax payments on that card to get the free voucher represents a pretty good earn rate after factoring in the payment fee. I calculated it to be comparable to some of the earn rates above, but I personally have chosen not to put any of my tax payments on the BA card.
Great stuff bluto.
I forgot a couple other things:
There is a BankAmericard Cash Rewards card that offers 2.5% cash back. It is targeted but ask around, maybe a relative has one and would be willing to add you as an additional user. My wife was targeted and would have thrown it away but luckily I saw the offer. It is a Visa so the Visa rates apply.
The Fidelity Amex has been mentioned but the Fidelity Visa has the same earn rate for spending above $15k (might want to check that $15k figure). If you’re paying $1.361 million in taxes the $15k at the lower 1.5 mile per $1 earn rate is not a big deal. Importantly the Fidelity cards have no cap on the number of miles that can be earned.
Amex is pretty familiar with large tax payments so if you have an Amex charge card, I think it’s reasonably easy to get a temporary limit increase to make a big tax payment. The process is described here: https://www.officialpayments.com/so_amex.jsp?JSESSIONID=tpS2T6FMvtlhTSJ!-1766411585!-1922567961
A quick clarification…the original post says “The IRS also limits you to 2 transactions per year with a credit or debit card”
The limit is 2 payments, per quarter, per service (pay1040, VTP, Official payments). I’ve made 6 tax payments via credit/debit cards in the past few months.
Great discussion and timely, too.
If you are paying $1.5M in taxes…
you are prob buying full fare J happily to your condo in milano….
and not worrying about getting 5+cpp
It’s worth mentioning that the Aeroplan Business reward to Europe is not really 105K. Aeroplan breaks up Europe into Europe1 and Europe2. Europe2 is Russia and Greece, and Europe1 is pretty much everything else. The reward rate for Europe1 is just 90K.
I did not read the full post here as this does not apply to me regular 99% person with only a five figure tax bill, lol. But I just could not avoid shaking my head seeing a guy with such a high tax bill around here!!!
@asdfasdf
not paying full fare J and not having a condo in milano, while focusing on how to get 5+cpp is how you eventually get to paying that much in taxes.
@gpapadop
I think a lot of his post works for “regular” tax bills too.
Bravo to the writer! I’ve figured out how to pay my mortgage through ChargeSmart. And this article & coments are awesome for giving options on rewards. I pay a thousand a week to piss off my mortgage holder and especially lower my principle every week. So now it’s all about capturing back the service fee & earning the miles.
About AMEX/BigCrumbs, I joined BC to do just this but after doing the research I hear you have to wait, call, and bug BC sometimes to get the cash back. I decided my time was better used in other ways, but bluto has me calculating the pretax vs post tax implications of making my IRS tax payments with a card.
Bluto, love your comment about how you get to the point of paying a lot of taxes.
Brian(J) – That has not been my experience. It takes less than a week for the AmEx Gift Card purchases to appear on BigCrumbs. You can see a screenshot here:
http://i.imgur.com/NmrNn.png
Where is the $5k gift card? I only see $3k max though.
This is recent list of debit reward cards (unfortunately before Dodd-Frank w/ Durbin amendment passed)…
http://www.bankrate.com/finance/banking/compare-debit-cards.aspx
As a temporary solution, how about pre-paying $1 mil on the 5% AARP card so your balance is -$1mil. Then charge $1mil to that card.
Thanks for the info. I just paid my January quarterly tax payment using value payments and my AMEX business gold. This solves two problems–takes care of most of my $10K spend over 5 months for the 50,000 MR point signup bonus for this card and given the payment date for the card gives me a few more weeks to make the payment.
Sun,
Thank you for the information about BigCrumbs, I guess I will try that out. Did you then pay taxes with those cards?
Bluto, to follow up on your comment that some people find Chase UR points valuable, if it is indeed true that the after tax net cost of miles is .84 cents, the points could be transferred to Hyatt and used at a top hotel (Andaz Wall Street is very nice) for a net cost of $185. This could be compared to the $240 ‘trick’ that has been shown to work using Priority Club.
I will have to go through the list of debit cards that Sun posted. I think I have checked out most of them but maybe there is one I missed that works.
In my earlier comment, I was referring to the old Amex Business Gold. That card has a 25k bonus for $50k of annual spend. I don’t know if the new Amex Business Gold Rewards has the same bonus. Maybe somebody can chime in.
I noticed on the Amex website that there is a New Blue for Business credit card. It has no annual fee and appears to offer a 10% point bonus at the end of the year. So, you can get 1.1 points per $1 of taxes paid. The site also says that in the 2nd year you have the card the bonus is 20% and in the 3rd year it is 30%. So you could eventually get a 1.3 MR per $1 earn rate. This card isn’t part of the normal MR program (it is MR Express) but if you have a card like the Amex Platinum then all of these MR points earned by the New Blue become normal MR points, which can be converted to airline and hotel miles.
I was thinking that a lot of folks who do not have big tax bills can still take advantage of a lot of these mile/point opportunities by making estimated tax payments that are over what they expect to owe. I believe that on April 15 these overpayments will simply result in a refund, which the IRS pays back to you via normal means (check or direct deposit). They don’t credit back your credit card. The downside is you are giving the government a free loan but if you don’t mind letting them hold your money for a few months, you can buy some miles cheaply through the methods described in this thread. You should factor in some opportunity cost for not having the money between the payment date and the refund date, though.
Lastly, I wanted to emphasize that the 2% AGI threshold applies to a lot of taxpayers. So, the credit card fees are deductible but if the total of your “2% AGI” deductions don’t exceed the threshold then practically speaking you’re not going to get any tax savings. This is important when considering whether the pretax cost per mile figures or the aftertax cost per mile figures apply to you.
> Did you then pay taxes with those cards?
Sorry, I used them for other purposes. Hopefully, someone can chime in about the billing address for AmEx Gift Cards.
> by making estimated tax payments that are over what they expect to owe.
My tax professional asks me this every year. If you have a business, it is reasonable to assume that your business will do better next year so you can pay more in estimated taxes.
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congrats to your reader who apparently had a great year.
I think the value prop changes a bit when you factor in status miles. In my case I’m planning on paying $30K on Delta Reserve Amex which will generate 30K miles, 15K bonus miles by reaching the tier plus 15K status miles (MQMs in the case of delta). $870 for 45K miles would be a bit steep, but with 15K qualification miles, that pushes this over.
If one is able to successfully charge a $1 million or more on their credit cards, does this mean you are actually part of the million mile club?
I want to thank everyone for their input. I’m the taxpayer. Good news is that I was a decades long employee of a public company that was sold in 2008. I paid $4.5 mm in taxes then and just went through an audit producing an additional amount due of nearly $1.5mm. My salary is $75,000 a year. You can decide for yourself if I’m in the 1% or the 99% but I bought more stock than I could afford for many, many years. It helped that the company financed stock purchases, interest free for up to 9 years, (I paid income tax on the foregone interest as imputed income). Regardless, I love earning points and miles!
Wow! Great story Perihelion! Congratulations on working for such a successful company. I love hearing stories like this. It seems to always pay to invest in your future, and sometimes win big! Best of luck to you and yours!
Props to you for a very thorough, well researched post! Wow!
I would definitely appreciate a followup post to see what option Steve ultimately chose, and why. And I’m sure I’m not the only one that is curious about the circumstances that leads to such a tax bill (if Steve would be willing to share — even at a high level would be appreciated.)
regarding itemizing deductions:
not only do you have to meet the 2% rule, but you have to have more total deductions than the standard deduction that everyone gets, in order to make it worthwhile.
if you only have $5000 itemized and the standard deduction is $11400 then you just wasted money on your CC fees.
when planning deductions you want to incrementally increase them only if you are already beyond the standard. Usually this doesnt work for most people making 50k/year on a W2.
When’s the next post? The audience wants more!
OK GG,
I’ll bite. I decided to try the BigCrumbs 1.6% cash back AMEX gift card to pay estimated tax. I became miles-obsessed 10 months ago and collected 450K miles (900K if I include my wife) and a rule I have had was never to pay anything for any miles. However I have decided to not only pay a tiny amount for miles but also to do the math based on Bonus miles. I just got an SPG card with a $5,000 for 30K sign up bonus I need to get out of the way quickly so that we can get a similar deal for her, and the math has become $5,000 with a 2.29% fee = $114 for 35K miles = .0033 cents per mile. The thinking is that if we ‘buy’ the spend in this way we will be able to sign up for cards at a faster rate with a lot less stress, and it seems one can never have quite enough hotel points.
The Big Crumbs experiment which would reduce the fees somewhat is an experiment and we will see how that goes.
More on topic with the thread is looking into paying my S corp payroll taxes with the company Ink Bold card. I understand it is doable and my payroll is something like $80 to $100K per year, but if the after tax cost is $1,500 per 100000 points it doesn’t really pencil. Really it doesn’t start to work for me until it gets to about $1,100 per 100K points.
So for now I will make IRS Estimated Tax payments with or without BigCrumbs for my SPG card, one for my wife, and a business one as well if it exists. I think that might get me to 95K SPG points for $343.50 worst case. For anyone following the math it is for (1) 30K miles offer and (2) 25K miles offers as I think the 30K offer has expired.
Most of the bloggers, mommy points/ frugal travel/ points guy haven’t stopped posting for the holidays.
You’re getting lazy Darius.
Darius – Happy new year to you! I hope you’re enjoying a well deserved break and are spending time with family and friends. All the best, and here’s to a successful and happy 2012!
I pay my taxes every quarter with credit cards. I mostly use an AMEX or MC with Citi AA when I have a 50% bonus on those cards (which makes the miles 1.5 cents per mile). If I do not have an AA 50% bonus available I use my SPG AMEX (transferred to AA means I pay 1.8 cents per mile). The cost of the miles is cheap and a great deal if you use those miles for a bus/first ticket international. Additionally as pointed out in one of the comments–you may make 2 credit card transactions per quarter per service–and if you need to make any additional transactions you can call the service on the phone and make an additional payment. I just did 5 credit card transactions for my 4th quarter estimate (helping a friend meet his minimum spending to get the large bonuses). One last comment about the credit limit–you can always “prepay” your credit card to get the available credit limit you need. I do this to buy cars, rebuild my house, pay taxes, etc. You just have to mail them a check and it will increase your available credit limit within a few days and you may charge what you want.
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Skynerd points out that payusatax.com now charges 1.89% for Visa. Mastercard is also now at 1.89% there.
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How do you use amex gift cards to pay for taxes? Thank You.
grandpa – You have to register the gift card online and then pay your taxes using the gift card via https://payusatax.com/
Guys,
Somebody please help me with the math here because I’m obviously missing something.
I read above that points/miles are worth 1 cent each. However, when I book a Delta Business Class round trip ticket from my home to Paris (BOI to CDG) the price is $5562 or 200K points which works out to 2.78 cents per point. Last year I got the same seats for 100K points or 5.56 cents per point.
If I can use my AMEX for 2.29 cents per point to pay my taxes, why wouldn’t I want to do this ?
Thanks in advance,
John
@John – 1 cent per point is MY valuation since I don’t pay full price for business class tickets. But if you would pay the full price for business class tickets or if paying 200K points for a business class ticket is worth it for you, then go for it!
I’m assuming you’re talking about using an AMEX Delta card to earn miles and to then redeem those miles to book a flight on Delta, correct?