Pay Taxes by Credit Card and Earn Big Travel Rewards!

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Pay Taxes by Credit Card and Earn Big Travel Rewards!

Million Mile SecretsPay Taxes by Credit Card and Earn Big Travel Rewards!Million Mile Secrets Team

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Update: One or more card offers in this post are no longer available. Check our Hot Deals for the latest offers.

Did you know you can earn miles, points, or cash back by paying your income taxes with a rewards credit card?

With this year’s IRS filing deadline coming up (April 18, 2018), folks who owe taxes might consider a strategy to earn rewards for a payment you’re already planning.  Million Mile Secrets readers Cindy and Rick say they ALWAYS pay their taxes with a credit card.

This Airline Cards Increased Sign Up Bonus Will Survive While The Others Drop Next Week
Take the Sting Out of Your Income Tax Payments by Earning Travel Rewards to Save Money on Your Next Vacation!

Using a credit card to pay taxes doesn’t make sense for everyone.  But if you have certain cards or card combinations, you can actually profit from your tax payments.

And if you recently took advantage of a top card offer, paying taxes with a card can be an easy way to meet minimum spending requirements.  Or it might help you reach a spending threshold to unlock bonus miles, points, or elite status!

How to Pay Taxes by Credit Card

Link:   IRS Pay Taxes With a Credit or Debit Card 

The IRS allows you to pay taxes with a credit card.  But you must use a 3rd-party payment processor.  You can NOT pay the government directly using a credit card.

There are 2 approved IRS payment processors that charge a 1.87% fee when paying with a Visa, MasterCard, American Express, or Discover credit card:

There are other approved processors, but you’ll pay higher fees, so I wouldn’t recommend them.  Million Mile Secrets team members Keith and Jasmin use Pay 1040 and say it’s very easy to make a payment.

How To Meet American Express Minimum Spending Requirements
Pay1040.com, an IRS-Approved Payment Processor, Is the Best Choice for Credit Card Payments. You’ll Pay a 1.87% Convenience Fee, Which Can Be Offset by the Rewards You Earn!

Note:  You will NOT be charged cash advance fees when you pay with a credit card.

Even with the 1.87% convenience fee, it can make sense to pay taxes with a credit card if you:

And some folks don’t mind paying a small convenience fee to generate miles & points.  It’s better than earning no rewards by making payments directly from your checking account!

But using a card just to earn points does not always make sense.  For example, if you carry a credit card balance, the interest you’ll pay will negate the value of any credit card rewards you’d earn.

I’ll share examples of when it makes sense to pay taxes with a credit card.

Earn a Profit Paying Taxes With This Card Combination!

Link:   Earn a Profit Paying Taxes With Chase Sapphire Reserve & Freedom Unlimited

Link:   Chase Sapphire Reserve

Link:   Chase Freedom Unlimited

If you have both the Chase Freedom Unlimited AND Chase Sapphire Reserve cards, you can earn a profit paying your income taxes with a 3rd-party processor like Pay 1040, even with the fees.

With the Chase Freedom Unlimited card, you earn 1.5X Chase Ultimate Rewards points per $1 you spend on all purchases with NO limit.

And you can get more value for your Chase Freedom Unlimited points by transferring them to your Sapphire Reserve account.  Because each point in your Sapphire Reserve account is worth 1.5 cents when you redeem them for travel through the Chase portal.

Drop Shopping For Credit Card Miles
Chase Ultimate Points Are Worth More Through the Chase Portal When They’re in Your Sapphire Reserve Account. So You’ll Use Fewer Points When Booking Travel, Like JetBlue Mint Business Class Tickets!

Here’s how you can earn a profit with your tax payment.

For example, on a $5,000 tax payment, you’d pay:

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

If you pay with the Chase Freedom Unlimited, you’d earn:

  • ~7,640 Chase Ultimate Rewards points ($5,093.50 x 1.5X Chase Ultimate Rewards points)

Then, transfer the points to your Sapphire Reserve account to redeem for travel through the Chase travel portal.  You’ll get:

  • ~$115 worth of travel (~7,640 points X 1.5 cents per point)

So you’ll pay ~$94 in fees for your tax payment.  But you will get ~$115 worth of travel.  That’s a ~$21 profit (~$115 value of points – ~$94 fee for tax payment)!

Here’s how you’d benefit using different tax payment amounts.

The information for the Chase Freedom Unlimited® has been collected independently by Million Mile Secrets. The card details on this page have not been reviewed or provided by the card issuer.

Tax Payment AmountTax Payment with 1.87% FeeEarn 1.5X Chase Ultimate Rewards Points With Freedom UnlimitedRedeem for Travel With Sapphire ReserveProfit
$5,000~$5,094~7,640~$115~$21
$10,000~$10,187~15,281~$229~$42
$15,000~$15,281~22,921~$344~$63
$20,000~$20,374~30,561~$458~$84

Folks with other Chase Ultimate Rewards points earning credit cards (like the Chase Sapphire Preferred® Card) might use a card to pay taxes too.  Because you can transfer the points you earn directly to terrific airline and hotel partners and get incredible value.

For example, let’s say you currently have 20,000 Chase Ultimate Rewards points in your account.  That’s 10,000 points shy of what you would need to transfer to Hyatt and book a free night at a top-tier Category 7 Hyatt hotel like the Park Hyatt Sydney.  Room rates there are regularly $900+ per night!

So if you have an upcoming $10,000 tax payment, it might make sense to pay a small convenience fee to top off your account and make the award booking possible!

Save 2000 On Hotels From Just One Credit Card Bonus Ill Show You The Trick
Making a Tax Payment With a Chase Ultimate Rewards Credit Card Can Potentially Top Off Your Account so You Can Book Luxurious Award Stays, Like a Free Night at the Park Hyatt Sydney!

Meeting Minimum Spending on Top Card Offers or Unlock Valuable Spending Bonuses!

Link:   Best Travel Credit Cards

Before making your tax payment, you might consider applying for a new card.  This way, the tax payment can put a dent in the minimum spending requirement and get you closer to earning a valuable new cardmember sign-up bonus!  Taking advantage of great card offers is the fastest way to get Big Travel with Small Money!

Here’s a look at my favorite offers:

Some of the offers in the table below are unavailable.

Card Name Welcome Bonus
Ink Business Preferred℠ Credit Card
80,000 Chase Ultimate Rewards points (worth $800 in cash back or $1,000 in travel) after you spend $5,000 on purchases in the first 3 months from account opening
Chase Sapphire Preferred® Card


50,000 Chase Ultimate Rewards points (worth $500 in cash back or $625 in travel) after you spend $4,000 on purchases in the first 3 months from account opening
The Business Platinum® Card from American Express OPEN


Up to 75,000 AMEX Membership Rewards points

Earn 50,000 Membership Rewards points after you spend $10,000 on purchases and an extra 25,000 points after you spend an additional $10,000 on purchases in the first 3 months from account opening
Southwest Rapid Rewards® Premier Business Credit Card


60,000 Southwest points after you spend $3,000 on purchases in the first 3 months from account opening
Southwest Rapid Rewards® Premier Credit Card

or

Southwest Rapid Rewards® Plus Credit Card

50,000 Southwest points after you spend $2,000 on purchases in the first 3 months from account opening



50,000 Southwest points after you spend $2,000 on purchases in the first 3 months from account opening

Capital One® Venture® Rewards Credit Card
50,000 Capital One Venture miles (worth $500 in travel) after you spend $3,000 on purchases in the first 3 months from account opening
Capital One® Spark® Miles for Business

or

Capital One® Spark® Cash for Business



50,000 Capital One Spark miles (worth $500 in travel) after you spend $4,500 on purchases in the first 3 months from account opening



$500 cash back after you spend $4,500 on purchases in the first 3 months from account opening

And some of y’all might already have a card that offers bonus miles & points or other perks for spending a certain amount during the year.  So paying taxes with one of the below popular rewards cards might make sense if it will get you closer to reaching the threshold.

Card NameSpending RequirementBonus
Starwood Preferred Guest® Credit Card from American Express$30,000 per calendar yearStarwood Gold status for 12 months
Chase British Airways Visa Signature Card$30,000 per calendar yearTravel Together Companion Ticket
Marriott Rewards® Premier Credit Card$3,0001 elite credit
Southwest Rapid Rewards® Premier Credit Card$10,0001,500 Tier Qualifying Points for every $10,000 (up to a maximum of 15,000 points)
Ritz-Carlton Rewards® Credit Card$10,000 per card anniversary year

$75,000 per card anniversary year
Maintain Gold Elite status after first 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)
Hilton Honors American Express Business Card$15,000 per calendar year

$45,000 per calendar year

$40,000 in a calendar year
A free weekend night

A 2nd free weekend night

Hilton Diamond status

Bottom Line

Instead of paying taxes with a bank account and earning nothing, you might consider using a rewards credit card to earn valuable miles, points, or cash back!

You’ll pay a small convenience fee when paying through IRS approved 3rd-party payment processors, like Pay 1040.  But it can be worth paying a fee if the rewards you earn get you more value.

For example, you can actually earn a profit paying taxes if you have the Chase Sapphire Reserve AND Chase Freedom Unlimited cards.  Or you can take advantage of a new card offer and use the tax payment to meet minimum spending requirements and unlock a lucrative sign-up bonus!

Do you pay taxes with a credit card?  If so, which card do you use and why?

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Chase Sapphire Reserve®

Chase Sapphire Reserve®

  • Earn 50K bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year
  • Named a ‘Best Travel Credit Card for 2017’ by MONEY® Magazine
  • 3X points on travel immediately after earning your $300 travel credit. 3X points on dining at restaurants & 1 point per $1 spent on all other purchases. $0 foreign transaction fees.
  • Get 50% more value when you redeem your points for travel through Chase Ultimate Rewards. For example, 50,000 points are worth $750 toward travel
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Access to 1,000+ airport lounges worldwide after an easy, one-time enrollment in Priority Pass™ Select
  • Up to $100 application fee credit for Global Entry or TSA Pre✓®

More Info

Editorial Note: We're the Million Mile Secrets team. And we're proud of our content, opinions and analysis, and of our reader's comments. These haven’t been reviewed, approved or endorsed by any of the airlines, hotels, or credit card issuers which we often write about. And that’s just how we like it! :)

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1-With Masterpass’ current promotion, you can earn points with no charge by prepaying your taxes.

2-Alliant’s card gives 3% return for the first year so wouldn’t that card provide even a more significant benefit?

it seems like using my Reserve card (3X points) would be better than charging to Unlimited (1.5X points) then transferring to my Reserve account for the 1.5X on travel purchases? i might be missing something? thanks

Million Mile Secrets

Unfortunately, paying your taxes with your Chase Sapphire Reserve card will not earn 3X Chase Ultimate Rewards points. The Chase Sapphire Reserve card’s 3X categories are travel & dining.

WHICH card do you recommend that I could actually get if I am over 5/24?

Would paying taxes with the Spark Business card count as a purchase toward spend to get the cash back?

Is American Express Business Plus get more value than Chase Sapphire Reserve since the first $50,000 is 2x points?

Million Mile Secrets

Great question! It depends on your travel goals. But I think earning 2X AMEX Membership Rewards points with the Business Plus card is probably a better deal.

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