How to Meet Minimum Spending Requirements Paying Taxes

How to Meet Minimum Spending Requirements Paying Taxes

Million Mile SecretsHow to Meet Minimum Spending Requirements Paying TaxesMillion Mile Secrets Team

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It’s tax time again!  April 18, 2017, is the IRS filing deadline this year.

While it’s nice to get a refund, if you owe taxes, you can ease the pain of paying your tax bill by meeting the minimum spending requirements on a new credit card.  Or hitting a spending threshold to unlock bonus miles, points, or elite status!

Just remember, you’ll usually pay a processing fee of ~2%, so do the math to see whether it’s worth it.

Pay Taxes With Credit Card
It Might Be Worth Paying Your Taxes With a Credit Card to Get Big Travel With Small Money When You Unlock Elite Status Levels or Big Sign-Up Bonuses

I’ll show you how to pay your taxes with a credit card.  And help you decide if it makes sense for you!

Pay Taxes With a Credit Card

Link:   IRS-Approved Payment Processors

The IRS allows you to pay your tax bill with a credit card.  And I’ve written about how to pay income taxes with a credit card, and whether you’ll be charged a cash advance fee (you won’t!).

But the government does NOT accept credit card payments directly.  You must use an approved 3rd-party payment processor or a bill payment service like Plastiq.

The 3rd-party payment processors will charge a fee of 1.87% to 2% of your bill when you use a credit card.  And Plastiq charges a flat 2.5% fee for credit cards and a 1% fee for debit cards (unless they’re running a promotion).

Here’s a list of approved IRS payment processors, and their fees:

Payment ProcessorCards AcceptedCredit Card FeeDebit Card Fee
Pay USA Tax Visa, MasterCard, American Express, Discover1.98% (Minimum Fee $2.69)$2.65
Pay 1040Visa, MasterCard, American Express, Discover1.87% (Minimum Fee $2.59)$2.59
Official Payments Visa, MasterCard, American Express, Discover2% (Minimum Fee $2.50)$2.25 ($3.95 for payments over $1,000)

If you use one of the approved IRS payment processors and pay by debit card, you’ll be charged a flat fee of ~$3 to ~$4.

Choosing a Payment Processor

The main difference between the 3 payment processors and Plastiq is the fees they charge.  Otherwise, there isn’t a huge advantage to using one over another.

The least expensive for credit card payments is Pay 1040, which charges 1.87%.  And the cheapest option for debit card payments is a $2.25 fee through Official Payments, if your bill is under $1,000.

For tax bills over $1,000, Pay 1040 charges the lowest processing fee for debit card payments ($2.59).

Pay Taxes With Credit Card
Do the Math to Make Sure Paying the Fee Is Right For You. And Be Sure to Pay Your Balance Off at the End of the Billing Cycle to Avoid Paying Interest!

If you need to meet the minimum spending requirements to unlock a big sign-up bonus on a card (like the The Business Platinum® Card from American Express OPEN or Chase British Airways Visa Signature Card), it could make sense to pay the fee.

As always, I suggest doing the math to see what makes sense for you.

For example, say you have a $5,000 tax bill.

Using Pay 1040 you’d pay:

  • $5,093.50 with a credit card ($5,000 x 1.87% = $93.50)
  • $5,002.59 with a debit card ($5,000 + $2.59 flat fee)

So if the value of the miles, points, or cash back you’re earning is more than ~$94, it could make sense to pay your tax bill with a credit card.

You can use the Pay 1040 Fee Calculator to check your fees.

Just remember, not all debit (or gift) cards are accepted.  In the past, some gift cards have worked, but I haven’t tried this year!

And you will NOT be charged cash advance fees when you pay with a credit card.  The FAQs for all payment processors say your tax payment will be treated like a retail purchase and not a cash advance.

That said, you should NOT pay taxes with a credit card if you can’t pay your account off in full.  If you carry a balance, the interest you’ll pay will negate the value of the miles and points you’d earn.

Is It Worth It?

Here are a few examples where paying a fee to pay your tax bill could make sense.

1.   Meet Minimum Spending Requirements

It might make sense to pay your taxes with a credit card if you have a large minimum spending requirement to meet on a card.

For example, you can earn 80,000 Chase Ultimate Rewards points after spending $5,000 on purchases within 3 months of opening a Chase Ink Business Preferred card.

80,000 Chase Ultimate Rewards points is worth at least $1,000 in travel booked through the Chase Travel portal.

From the example above, you’d pay a ~$94 fee with Pay 1040 to use your Chase Ink Business Preferred to pay a $5,000 tax bill.  That’s definitely getting Big Travel with Small Money!

Pay Taxes With Credit Card
The Ink Business Preferred 80,000 Chase Ultimate Rewards Point Sign-Up Bonus Is Enough for 3 Free Nights at the Andaz Maui at Wailea Resort! Or Transfer Points to Other Fantastic Chase Travel Partners for Big Travel!

Or, you could consider getting the The Business Platinum® Card from American Express OPEN.

You’ll earn a total of 75,000 AMEX Membership Rewards points after meeting tiered minimum spending requirements.  To get the full bonus, you’ll have to spend:

  • $10,000 on purchases within the first 3 months of opening your account to earn 50,000 AMEX Membership Rewards points
  • An additional $10,000 on purchases within the same timeframe, to earn an extra 25,000 AMEX Membership Rewards points

That’s a lot of spending to earn the full bonus!  But depending on your travel goals, it might be worth it.

Here are a few ways to get Big Travel with the 50,000 AMEX Membership Rewards points you’ll earn from spending at least $10,000 on purchases within the first 3 months of opening your AMEX Business Platinum account:

2.   Big Spending for Elite Status or Bonus Points

If paying your tax bill with a credit card will put you over the spending threshold to earn elite status, elite qualifying miles, or bonus points, it could be worth it to pay a fee.

You can check out my Big Spender series for an overview of which cards offer perks for spending a lot (tens of thousands of dollars) per year.

Pay Taxes With Credit Card
Delta Will Waive Their Cash Requirement to Earn Elite Status If You Spend $25,000+ on a Delta Credit Card in a Calendar Year

Here are some of my favorite cards with big spending bonuses:

Card NameSpending RequirementBonusNotes
Gold Delta SkyMiles® Credit Card from American Express$25,000 per calendar yearMedallion Qualifying Dollars (MQD) requirement waived to earn elite status
American Express Platinum Delta Skymiles$25,000 per calendar yearMedallion Qualifying Dollars (MQD) requirement waived to earn elite status
American Express Delta Reserve$25,000 per calendar year

$30,000 per calendar year

$60,000 per calendar year
Medallion Qualifying Dollars (MQD) requirement waived to earn elite status

15,000 Medallion Qualifying Miles, 15,000 Bonus Miles

Another 15,000 Medallion Qualifying Miles, 15,000 Bonus Miles
Hilton Honors Surpass Card from American Express$40,000 per calendar yearHilton Diamond status until end of next calendar year
Starwood Preferred Guest® Credit Card from American Express$30,000 per calendar yearStarwood Gold status for 12 months
Bank of America Virgin Atlantic$15,000 per card anniversary year
$25,000 per card anniversary year
7,500 Virgin Atlantic points

7,500 Virgin Atlantic points
Bank of America Virgin America Premium Signature $10,0005,000 Virgin America status pointsMaximum 15,000 points per calendar year
Barclaycard Hawaiian Airlines$10,000 per card anniversary year5,000 Hawaiian Airlines miles
Chase British Airways Visa Signature Card$30,000 per calendar yearTravel Together Companion Ticket
The Hyatt Credit Card$20,000 per calendar year

$40,000 per calendar year
2 stay / 5 night credits toward Diamond status

3 stay / 5 night credits toward Diamond status
Marriott Rewards® Premier Credit Card$3,0001 elite creditNo limit to the number of elite credits you can earn
Southwest Rapid Rewards® Premier Credit Card$10,0001,500 Tier Qualifying PointsMaximum 15,000 Tier Qualifying Points per year
Chase Ritz Carlton Rewards$10,000 per card anniversary year

$75,000 per card anniversary year
Maintain Gold Elite status after 1st year of having card

Platinum Elite status through December 31 of following year
Chase United MileagePlus® Explorer Card$25,000 per calendar year10,000 bonus United Airlines miles
Citi® / AAdvantage® Executive World Elite™ Mastercard®$40,000 per calendar year10,000 Elite Qualifying Miles (EQMs)
Citi® Hilton HHonors™ Reserve Card$10,000 per card anniversary year

$40,000 per calendar year
1 free weekend night at almost any Hilton

Hilton Diamond Elite status until end of next calendar year

3.   2% Cash Back Cards Could Be (Almost!) Worth It

You could earn a small profit by using a cash back card that pays more than 1.87% to pay your taxes.

For example, the Citi Double Cash Card earns 1% cash back on your purchases and 1% cash back on your payments.  Here’s my review of the card.

If your tax bill is $5,000, for example, you’d pay ~$94 in fees ($5,000 X 1.87%).  But you’d earn $102 cash back, for a profit of ~$8.

That’s not a lot of money, but it’s better than nothing!

Pay Taxes With Credit Card
You’ll Only Earn a Few Bucks When You Use a 2% Cash Back Card to Pay Your Taxes. But It Can Help Build Your Relationship With the Bank. Plus, It All Adds Up!

Plus, spending with a card and paying your bills off on time helps build your history with the bank.  And some banks (like Barclaycard) want to see you using their cards before they’ll issue you more credit.

When Is It NOT Worth It?

Using a card just to earn points doesn’t always make sense.

If you used your Chase Sapphire Preferred to pay your $5,000 tax bill (after earning the sign-up bonus), for example, you’d pay a total of $5,093.50 ($5,000 x 1.87% = $93.50).  And earn 1 Chase Ultimate Rewards point per $1, or ~5,094 Chase Ultimate Rewards points.

You could convert those points to cash at a rate of 1 cent per point, so ~5,094 points is worth ~$51.  But you would be losing money!

If you used those points to pay for travel through the Chase Ultimate Rewards travel portal, they’d be worth 1.25 cents each.  So you’d get ~$64 worth of travel (5,094 points x 1.25 cents per point) from the transaction.  That’s still NOT a good deal.

You’ll likely do better by transferring the points to travel partners like Hyatt.  For example, a night at a Category 1 Hyatt hotel costs 5,000 Hyatt points.  Or if you needed to top off a certain account for an award.

But I wouldn’t do this unless I had a specific use in mind for the points!

Can You Split Payments Between Cards?

If you’re trying meet minimum spending requirements for more than one credit card, the IRS allows you to split your payment.  The number of separate payments you can make with a credit card depends on what type of tax bill you’re paying.

For income taxes, you can make 2 separate payments per year.  And if you’re paying estimated income taxes for the following year, you can make 2 payments per quarter!

Pay Taxes With Credit Card
You Can Make 2 Payments With 2 Different Credit Cards When Paying Your Income Taxes

If you’re using Plastiq, however, there’s no limit to the number of payments you can make.  Because each payment will be sent to the IRS via a check.

Depending on how much you owe, you could meet the minimum spending requirements on 2 different cards!

Or, you could hit a spending bonus on one card and meet the minimum spending on another.  That way, you get 2 bonuses instead of one. 😉

Bottom Line

You can pay your IRS tax bill with a credit card.  But it will cost you 1.87% to 2% in fees, depending on which IRS-approved payment processor you choose.  Or use the bill payment service Plastiq, which charges 2.5% for credit card payments.

The cheapest option is Pay 1040, which charges a 1.87% fee.  

That said, using a credit card to pay your taxes is usually NOT worth it.  Unless you need to meet a card’s minimum spending requirements.  Or you’re close to meeting a bonus spending requirement to earn extra miles, points, or perks on certain cards.

You can make 2 separate income tax payments per year to the IRS with a credit card.  So depending on your travel goals, you could get a lot of Big Travel with Small Money from the points you earn on 2 different cards!

If you liked this post, why don’t you join the 25,000+ readers who have signed-up to receive free blog posts via email (only 1 email per day!) or in an RSS reader …because then you’ll never miss another update!

Chase Sapphire Preferred® Card

Chase Sapphire Preferred® Card

  • Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
  • Chase Sapphire Preferred® named a 'Best Travel Credit Card' by MONEY® Magazine, 2016-2017
  • 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
  • Earn 5,000 bonus points after you add the first authorized user and make a purchase in the first 3 months from account opening
  • No foreign transaction fees
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Get 25% more value when you redeem for travel through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel.
  • No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards

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Thanks so much for the help. I'm going to get near the 3K for the Marriott card 80K bonus points.

On a same note, but paying the mortgage, I am looking into Blue Bird, which is free but you have to purchase pin activated gift cards (how you meet spend reqs) Have you or anyone else done this? Can you do a post about it? Thanks!

I'm a self-employed tax attorney and make all my payments by credit card because it's more convenient and I always have cards that yield better than a 2% return. There are a few issues to address with this post and one of the comments.

1. "The only difference between the 3 payment processors and Plastiq is the fees they charge."

This statement is flat out wrong. The fee difference alone is reason enough not to use Plastiq but the big issue is that Plastiq isn't an approved processor. With the approved processors, your payment is credited to your account the moment your payment is processed. With Plastiq, they charge your card and then Silicon Valley Bank in San Jose issues a paper check that is mailed to the IRS. You have no guarantee of when the payment will be processed or for that matter, any guarantee it will actually be received.

2. The fees paid are deductible but on a personal tax return they are a miscellaneous itemized deduction subject to the 2% AGI floor. That means that if you have an Adjusted Gross Income of $100,000 and no other miscellaneous itemized deductions you would have to pay $2000 in fees before getting one dollar of deduction. That's equivalent to a tax payment of $100,000. It's a pretty easy rule of thumb, your AGI has to equal your tax payment in order to use the deduction. That being said, this works when you have a huge year followed by a modest one as long as you get the timing right.

3. Paying business taxes by credit card is severely limited through the official processors.

4. In California, if you ever have a tax liability over $80,000 or have estimated/extension payment in excess of $20,000 you can't write checks for any payments from that point forward. In CA, you are stuck paying by direct debit, debit or credit card if you fall into this category.


Thank you for sharing your expertise! This info will certainly help other readers. And I hear you regarding Plastiq not being an official processor. That said, folks have reported using Plastiq to pay their taxes without issue. Everyone can decide what they're most comfortable with!

Until Plastiq lowers their fees to undercut the official guys I can only see one reason to use them. Plastiq mails a check so you would not be subject to the yearly and quarterly transaction limits that are imposed by the official processors.

While this is something I won't be doing this year, I want to write and say how much I appreciate your thoughtful analysis of so many things related to miles and points. Your site is really very good at this and helps me to see options I would not think of otherwise. Keep up the good work!


Thanks! We love helping our readers. 🙂

Travel Photographer

"$5,093.50 with a credit card ($5,000 x 1.87% = $93.50)"

$93.50, in your example, can be business deduction.

Say your tax bracket is 30%...

$93.50 x 0.7 = $65.45 after "bank fees" deduction...?

(not sure if "bank fees" is proper category)

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