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Disclaimer: I am NOT a tax professional, so please consult YOUR tax professional before you make any tax-related decisions. Information in this post continually changes, so please double check before applying for cards or making any payments. I get a referral for some of the cards in this post.
Many folks who are self-employed have to pay estimated taxes to the IRS. However, they can make up to 2 payments a quarter using a credit or debit card, but have to pay a convenience fee.
The IRS website suggests that you can only make 2 payments a quarter using a credit card, but it isn’t clear if that is 2 payments per quarter per credit card service provider or if it is a blanket restriction on the number of payments you can make through any credit card service provider.
However, the website for paying my Kansas state taxes did NOT have a restriction on the number of payments which I could make per quarter. So I’d use multiple cards with lower credit limits to pay my state taxes and “save” my cards with larger credit limits to pay my federal taxes.
For paying federal taxes, the lowest fee for using a Visa or MasterCard credit card is 1.89% through Pay USA Taxes and the lowest fee for using an American Express credit card is 2.29% from Value Tax Payment. For Kansas state tax, the lowest fee which I could find was 2.25% for all card types from Pay KS Tax. So try to use your American Express cards for state payments first, and save your Visa/MasterCard for federal payments to take advantage of the lower convenience fees.
For most folks, it could be worth it to pay a convenience fee just to meet the minimum spending requirement for a credit card sign-up bonus. If you’ve got a small tax payment you could even earn 5X points by using a Vanilla Visa and following Frequent Miler’s instructions.
But Big Spenders get to choose from additional benefits! I’ve drawn from my series on Big Spenders to list the best ways to pay your taxes with a credit card if you’ve got tens and hundreds of thousands of dollars in tax payments.
I’ve listed the options according to cost (so American Express cards end up at the bottom because of the additional fee), my preferences and what I value.
But your needs will be different so choose the best option for you!
1. Delta Debit Card – $3.49 for Up t0 35,00 Delta Miles
Link: Delta Debit Card
PayUSATax lets you pay your taxes using a debit card for a flat fee of only $3.49. I made a tax payment in June 2012 using the Delta debit card and earned miles for my payment.
Note that the debit card has a transaction limit of $35,000 per day. Also note that giving away thousands of miles for a $3.49 fee is almost certainly unprofitable for someone and that this could end without notice.
Net Result: Pay $3.49 in debit card convenience fees and earn up to 35,000 Delta miles (1 mile per $1 spent) for paying up to $35,000 in taxes in 1 transaction with the Delta personal debit card.
My Thoughts: $3.49 for up to 35,000 Delta miles is a pretty good value, even if Delta miles are much harder to use than other types of miles and points.
2. Citi Hilton REserve – $756 for 120,000 Hilton Points + Top Tier Hilton Diamond Status + 1 Free Weekend Night
Both the Citi Hilton Reserve and the American Express Surpass card let you earn Hilton Diamond status by spending $40,000 within 1 year, but the convenience fee for using an American Express card is more than for using a Visa/MasterCard.
Moreover, the Citi Hilton card does not have a foreign transaction fee, and gets you 1 free weekend night for spending $10,000 within a year.
With the 1.89% convenience fee from Pay USA Taxes for using a Visa/MasterCard, you’re effectively paying 0.63 cents per Hilton point for paying $40,000 in taxes in a calendar year with the Citi Hilton Reserve card.
Net Result: Pay $756 in credit card convenience fees and earn 120,000 Hilton points (3 Hilton points per $1 spent) + top-tier Hilton Diamond status +1 free weekend night (which could be worth 50,000 Hilton points) for paying $40,000 in taxes within 1 calendar year.
But having the American Express Hilton card, gets you access to discounted AXON awards, so the best option could be spending $40,000 on the Citi Hilton Reserve, but keeping a fee-free version of the American Express Hilton card to get access to the discounted AXON awards and stretch the value of your Hilton points.
My Thoughts: This is the best credit card, in my opinion, to pay taxes with. For $756 you get 120,000 Hilton points which is enough for 2 nights in a top category Hilton hotel and you get 20,000 points left over.
You also earn 1 free weekend night, so you’ve got at least 3 free nights in a top category Hilton AND you earn top tier Diamond status which means free breakfast, free internet, and a better shot at room upgrades.
Even if you redeem your 3 free nights for a room costing $200, you’re effectively paying an extra $156 for top-tier Hilton Diamond status.
3. Chase Southwest – $2,079 for 110,000 Southwest Points & 1 Companion Pass
Spend $110,000 within a calendar year on the Chase Southwest credit card and earn the Southwest Airlines Companion Pass, which lets you fly free with a companion, for up to 2 years. This is by far the best perk of any airline in my opinion!
The Southwest Companion Pass is valid for the entire year in which you earn the 110,000 points necessary to get the Companion Pass, AND for the following year. This means that you could get a Companion Pass for almost 2 years if you spend $110,000 in January on your Chase Southwest credit card.
Each Southwest Airline point is worth 1.67 cents when redeemed for Wanna Get Away flights, so spending $110,000 a year earns you $1,837 (110,000 points X 1.67 cents per point) worth of Wanna Get Away flights.
But if your companion flies with you for free, you’ve effectively earned twice that or at least 220,000 Southwest points or $3,674 ($1,837 X 2).
With the 1.89% convenience fee from Pay USA Taxes for using a Visa/MasterCard, you’re effectively paying 1.89 cents per Southwest point for the 1st $110,000 paid in taxes in a calendar year with the Southwest credit card.
But that’s like getting at least 220,000 Southwest points (when you redeem your 110,000 Southwest points) because your companion can fly free with you so you’re effectively paying only 0.95 cents per Southwest point.
Since each Southwest point can be used towards 1.67 cents of airfare, you’ve bought Southwest points for a 43% discount AFTER accounting for the 1.89% convenience fee.
Net Result: Pay $2,079 in credit card convenience fees and earn 110,000 Southwest Points + 1 Companion Pass. Earning the Companion Pass doubles the value of your 110,000 Southwest points.
And if you buy a Southwest ticket and fly a companion for free with your Southwest Companion Pass, your return will likely be higher.
My Thoughts: I ranked this #3 instead of #2 only because spending $110,000 within a calendar year on taxes is tough to do. But this is a great deal if you have $110,000 to pay in taxes and don’t mind flying Southwest Airlines.
Emily and I have used our Southwest Companion Pass way more than we expected to!
4. Chase United Explorer personal and business credit cards – $473 for 35,000 United Miles
The Chase United Explorer personal and business card gives you an extra 10,000 United miles when you spend $25,000 within one calendar year.
This means that you earn 35,000 United miles (25,000 miles for regular spending + 10,000 bonus miles) after spending $25,000 in a calendar year or a return of 1.4 miles per $1 spent on the card.
With the 1.89% convenience fee from Pay USA Taxes for using a Visa/MasterCard, you’re effectively paying 1.35 cents per United mile for the 1st $25,000 paid in taxes in a calendar year with the United Explorer cards.
Net Result: Pay $473 in credit card convenience fees and earn 35,000 United miles for paying $25,000 in taxes within 1 calendar year.
My Thoughts: It costs 25,000 miles for a low-level ticket within the US, so this isn’t a great deal for travel within the US, unless you use United miles for tickets to expensive destinations or for last minute travel.
But paying 1.35 cents per United mile could be a great deal for business or first class tickets to Europe or Asia. For example, you’d pay only $1,350 for a business class ticket (subject to award availability) if you could buy 100,000 United miles at 1.35 cents per mile.
5. Chase United Club personal and business credit cards – 1.5 miles per $1 spent
If you’re a Big Spender who wants United miles, you may be better off with the United Club card which offers 1.5 United miles per $1 spent on the card with no limit on the maximum amount of miles earned.
With the 1.89% convenience fee from Pay USA Taxes, you’re effectively paying 1.26 cents per United mile (1.89 cents convenience fee / 1.5 United miles per $1 spent) for ALL the tax you pay with the United Club cards.
The United Club card has a $395 annual fee, but does get you free access to United Clubs, 2 free bags, and waived late ticketing fees and Premier Access.
Net Result: Pay 1.89 cents in credit card convenience fees and earn 1.5 United miles for paying $1 in taxes. For example, you’ll pay $189 for a $10,000 tax payment, but will earn 15,000 United miles.
My Thoughts: This is the best credit card to use for paying a large amount of taxes if you want to travel internationally in business or first class. You pay only 1.26 cents per United mile, so a business class ticket to Europe or South America is only $1,260.
There is no limit to the amount of United miles you can earn with this card. But the card has a $395 annual fee (which includes United lounge access), which is why I ranked it #5 and not #4.
6. Chase British Airways credit card – $567 for 1 Travel Together Ticket & 37,500 Avois points
Spend $30,000 within 1 calendar year on the Chase British Airways credit card and earn a Travel Together Ticket which can be used for award reservations on British Airways operated flights only.
With the 1.89% convenience fee from Pay USA Taxes for using a Visa/MasterCard, you’re effectively paying 1.51 cents per British Airways Avios point for paying $30,000 in taxes in a calendar year with the British Airways credit card.
Net Result: Pay $567 in credit card convenience fees and earn 1 Travel Together Ticket AND 37,500 British Airways points for paying $30,000 in taxes within 1 calendar year.
My Thoughts: The Travel Together Ticket does have restrictions, but can be put to good use if you’re flexible.
Expect to pay ~$400 in fuel surcharges and taxes per long-haul segment on award bookings, but that’s still cheaper than paying for a business or first class ticket. The companion pass is NOT worth it if you will be redeeming in coach because of the high fuel charges.
However, the United Club card (#5) is a much better option if you don’t want to pay high fuel surcharges on British Airways.
7. American Express Premier Rewards Gold personal card – $689 for 45,000 Membership Rewards Points
- 15,000 bonus Membership Rewards points when you spend $30,000 in 1 calendar year
This means that you earn a total of 45,000 points (30,000 for base spending + 15,000 bonus points) or 1.5 points per $1 spent for spending $30,000 within a calendar year.
With the 2.29% convenience fee from Value Tax Payment, you’re effectively paying 1.53 cents per Membership Rewards point for the 1st $30,000 paid in taxes in a calendar year with the American Express Premier Rewards Gold card.
Net Result: Pay $687 in credit card convenience fees and earn 45,000 Membership Rewards points for paying $30,000 in taxes within 1 calendar year.
American Express Membership Rewards points can be transferred to many different airlines including Delta, British Airways, Aeroplan, & ANA and frequently have transfer bonuses, so your net cost could be lower.
My Thoughts: 1.53 cents for 1 Membership Rewards points seems expensive to me. But you can transfer Membership Rewards points to other airlines and hotels, and American Express does have transfer bonuses to partners which make it more palatable to pay 1.53 cents for 1 Membership Rewards point.
8. American Express Starwood Preferred Guest (SPG) – $458 for 25,000 Airline miles OR $687 for 30,000 SPG Points + SPG Gold Status
• Earn an extra 5,000 points when you transfer in increments of 20,000 SPG points to many different airlines
This means that you earn 1.25 miles per $1 spent on the SPG card. In many instances such as US Air, American Airlines, Alaska Airlines, this is a better earning rate than using the airlines’ own co-branded credit cards!
Airline Miles: With the 2.29% convenience fee from Value Tax Payment, you’re effectively paying 1.83 cents per airline mile when you pay your taxes in increments of $20,000 with the American Express Starwood card and transfer 20,000 Starwood points to 25,000 airline miles.
Airline Miles – Net Result: Pay $458 in credit card convenience fees and earn 20,000 Starwood points (convertible to 25,000 airline miles) for every $20,000 in taxes.
Airline Miles – My Thoughts: Paying 1.83 cents per airline mile seems expensive, and isn’t worth it for most coach redemptions.
But this could be useful to transfer to American or US Air to top off for an award, or to transfer to Alaska Airlines, Singapore Airlines or other airline partners for international first and business class awards.
SPG Points & Gold Elite Status: With the 2.29% convenience fee from Value Tax Payment, you’re effectively paying 2.29 cents per Starwood point when you pay $30,000 in taxes within a calendar year.
SPG Points & Gold Elite Status – Net Result: Pay $687 in credit card convenience fees and earn 30,000 Starwood points & Starwood Gold elite status for spending $30,000 in taxes within calendar year.
SPG Points & Gold Elite Status – My Thoughts: 30,000 SPG points will get you 3 nights at a category 4 Starwood hotel. Gold elite status is good for 4 pm late check out and free internet, but not much else.
9. Bank of America Virgin Atlantic credit card – $573 for 52,500 Virgin Atlantic Miles (Or 105,000 Hilton POints)
- Earn 7,500 miles after spending $15,000 within a calendar year
This means that you can earn 30,000 Virgin Atlantic miles (22,500 miles for regular spending because you earn 1.5 miles per $1 spent + 7,500 bonus miles) after spending $15,000 in a calendar year or a return of 2 miles per $1 spent on the card.
With the 2.29% convenience fee from Value Tax Payment for using an American Express card, you’re effectively paying 1.15 cents per Virgin America point (or 0.58 per Hilton point) for the 1st $15,000 paid in taxes in a calendar year with the Bank of America Virgin Atlantic credit card.
Net Result : Pay $344 in credit card convenience fees and earn 30,000 Virgin Atlantic miles (or 60,000 Hilton hotel points) for spending $15,000 in taxes within calendar year.
- Earn another 7,500 miles after spending $25,000 within a calendar year
This means that you can earn 52,500 Virgin Atlantic miles (37,500 miles for regular spending because you earn 1.5 miles per $1 spent + 15,000 bonus miles) after spending $25,000 in a calendar year or a return of 2.1 miles per $1 spent on the card.
With the 2.29% convenience fee from Value Tax Payment for using an American Express card, you’re effectively paying 1.09 cents per Virgin America point (or 0.55 per Hilton point) for the 1st $25,000 paid in taxes in a calendar year with the Bank of America Virgin Atlantic credit card.
Net Result : Pay $573 in credit card convenience fees and earn 52,500 Virgin Atlantic miles (or 105,000 Hilton hotel points) for spending $25,000 in taxes within calendar year.
Virgin Atlantic charges fuel surcharges for award flights, and there is a very stiff penalty (25% of the miles if cancelled outside of 7 days of departure or 100% of the award miles if cancelled within 7 days of departure) for cancelling award bookings.
But Virgin Atlantic miles could be useful for upgrading paid tickets on Virgin Atlantic or for transferring to Hilton, because you get 2 Hilton points for 1 Virgin Atlantic point.
My Thoughts: This is the best card to actually earn Hilton points with since you pay 0.55 cents per point (up to $25,000 per calendar year) instead of 0.63 with the Citi Hilton Reserve.
But you don’t earn Hilton Diamond status or the free night with the Virgin Atlantic card, so I’d use this card only after spending $40,000 on the Citi Hilton Reserve. And the difference in point earning may not be worth the annual fee.
10. American Express DElta Platinum & Reserve – Silver to Diamond Medallion Status & 80,000 to 410,000 Delta miles
I listed how to earn all levels of Delta Medallion status in an earlier post on earning airline elite status with a credit card.
Here’s the net result after paying a 2.29% convenience fee from Value Tax Payment,
- $1,260 for Silver Medallion Status & 80,000 miles after spending $55,000 within 1 calendar year
- $2,519 for Gold Medallion Status & 160,000 miles after spending $110,000 within 1 calendar year
- $3,893 for Platinum Medallion Status & 250,000 miles after spending $170,000 within 1 calendar year
- $6,412 for Diamond Medallion Status Status & 410,000 miles after spending $280,000 within 1 calendar year
My Thoughts: I don’t value airline elite status because I don’t fly on paid tickets very much, but this could be useful for folks who fly often and want to maintain Delta elite status.
Bottom Line: Sometimes the extra miles and points could be worth the convenience fee to pay your taxes with a credit card.
But do the math for yourself to be sure you aren’t overpaying for the miles and points!