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Earn Free Nights & Flights When You Pay Taxes With a Credit Card – Here’s How

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Earn Free Nights & Flights When You Pay Taxes With a Credit Card – Here’s How

Jasmin BaronEarn Free Nights & Flights When You Pay Taxes With a Credit Card – Here’s HowMillion Mile Secrets Team

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It’s that time of year again.  This tax season, you might be wondering if you can earn miles, points, or cash back for paying taxes with one of the best travel credit cards.

If you owe money, it’s a good time to consider a strategy for earning the most rewards for spending you’ll have to make anyway.  Many Million Mile Secrets team members and readers have used paying taxes as a way to meet credit card minimum spending requirements or hit a spending threshold to earn elite status or other perks.

It’s not free to pay taxes with a credit card.  At a minimum, you’ll pay a convenience charge of 1.87% through one of the IRS’s approved payment processors.  But this can be worth it if it means unlocking a big welcome bonus or racking up points worth more than the fees you’ll pay.

It’s Never Fun to Owe at Tax Time.  But You Can Soften the Blow by Paying Taxes With a Credit Card to Earn Lucrative Travel Rewards

Paying taxes with a credit card doesn’t always make sense.  I’ll show you how to do it and whether or not it’s a good idea for your situation.

How to Pay Taxes With a Credit Card

The IRS lets you pay taxes with a credit card, but you can’t pay them directly.  Instead, you’ll have to go through a 3rd-party payment processor.

The cheapest processor is Pay 1040, which works for personal and business taxes.  They charge a 1.87% fee and allow payments with Visa, MasterCard, American Express, and Discover (there are a couple of other processors but their fees are slightly higher).

The Cheapest Payment Processor, Pay1040, Charges 1.87% for Credit Card Payments

Don’t worry.  You will not be charged cash advance fees when you pay with a credit card.  It’s even in the payment processor FAQs:

Will I be charged a cash advance fee?

No, your tax payment will be treated like a retail purchase and not a cash advance.

I’ve paid taxes using Pay1040 several times and have never been charged a cash advance fee.  Each time, the process was easy and painless.

When Should You Pay Taxes With a Credit Card?

If you can’t pay your balance in full and on time, paying taxes with a credit card usually does not make sense.  You’ll pay interest that will negate any rewards you earn, on top of the payment processing fee.

However, it’s a good strategy in some situations.  For example, if you:

  • Want a fast and convenient way to meet minimum spending requirements for a new credit card welcome bonus
  • Need to meet a spending threshold to earn elite status, elite qualifying miles, or other big spender perks like free hotel nights
  • Can earn more cash back than the fees you’ll pay with certain cash back cards (or miles and points worth more than the fee)
Unlock a Big Credit Card Bonus by Using Your Tax Payment to Meet Minimum Spending Requirements

But if you have certain cards or card combinations, you can actually profit from your tax payments.

For instance, if you have a business tax payment to make, the Capital One® Spark® Cash for Business earns 2% cash back on all purchases, so you’d actually make a slight profit of 0.13% on your payment (2% cash back – 1.87% payment processing fee).  That’s not much, but it’s better than not earning anything.

Use This Card Combination to Earn a Profit Paying Taxes

Read how to earn a profit paying taxes with Chase Sapphire Reserve & Freedom Unlimited

Apply Here:   Chase Sapphire Reserve

Read our review of the Chase Sapphire Reserve

If you have both the Chase Sapphire Reserve and Chase Freedom Unlimited cards, you can earn a profit paying your income taxes, even with a 1.87% fee.

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

Then, you can boost the value of the points earned from your Chase Freedom Unlimited by transferring them to your Sapphire Reserve account.  Each point in your Sapphire Reserve account is worth 1.5 cents when you redeem them for travel through the Chase portal.

Upgrade the Value of Your Chase Ultimate Rewards Points When You Move Them to Your Chase Sapphire Reserve Account

Here’s the math on how you can earn a profit paying taxes when you have the Chase Sapphire Reserve and Chase Freedom Unlimited.

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 per $1)

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’ll get ~$115 worth of travel.  That’s a ~$21 profit (~$115 points value – ~$94 tax payment fee).

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

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

You might consider using other Chase Ultimate Rewards points earning credit cards (like the Chase Sapphire Preferred Card) to pay taxes if you have a very specific redemption in mind.  By transferring your points to airline and hotel partners, you could get a value that far exceeds the fees you’ll pay.

For example, suppose you have 20,000 Chase Ultimate Rewards points in your account, and need another 10,000 points to transfer to Hyatt for a free night at a luxury category 7 Hyatt hotel like the Park Hyatt Paris – Vendome.  Room rates there are sometimes over $1,000 per night in the high season.

If you have an upcoming $10,000 tax payment, it could make sense to pay the convenience fee to top off your account and make the award booking possible.

Paying Taxes With a Chase Ultimate Rewards Card Could Help You Book a Luxurious Award Stay at Hotels Like the Park Hyatt Paris – Vendome

Meet the Minimum Spending on a New Travel Credit Card

Check out our list of the best travel credit cards

If you know you’ve got a substantial tax payment coming up, you might consider applying for a new rewards credit card.  You might be able to meet the minimum spending requirement in one shot and quickly earn a valuable welcome bonus.

Here are a few of our favorite current offers:

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


60,000 Chase Ultimate Rewards points (worth $600 in cash back or $750 in travel) after you spend $4,000 on purchases in the first 3 months from account opening
The Business Platinum® Card from American Express


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. Terms Apply.
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
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

Bottom Line

Don’t write a check to pay your taxes and earn nothing!  Instead, consider paying your taxes with a rewards credit card to earn valuable miles, points, or cash back.

It’s not free – there’s a small convenience fee when you pay your taxes through IRS-approved 3rd-party payment processors, like Pay 1040.  It can be worth paying a fee if the rewards you earn get you more value, especially if you use the payment to meet the minimum spending and unlock a lucrative welcome bonus on a new credit card.

With the right card or card combination, you can actually earn a profit paying taxes, for example, if you have the Chase Sapphire Reserve AND Chase Freedom Unlimited cards.

Have you paid taxes with a credit card?  Which one did you use and why?

Chase Sapphire Reserve®

Chase Sapphire Reserve®

  • Earn 50,000 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®
  • Named "Best Premium Travel Credit Card" for 2018 by MONEY® Magazine
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year
  • 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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The IRS only permits two payments/month with a credit card. I have substantial taxes due because of a capital gain on a home sale, and my credit limit doesn’t come close to what I need to pay. Any ideas on how to process six figures of taxes via a credit card as cost effectively as possible?

Plus, there is the lag time between charge, bill, and payment to rinse and repeat. Any thoughts on how to tighten up the timeline?

Is anyone else having issue processing via Plastiq?

I’m in the same position! Curious about the answer to this.

Is it two times per processor for 1040 payment? Does that mean you can pay 6 times per year?

Last yr I got Delta Amex gold card and was told by them that only the filing fee, not the taxes owed would count toward my spend. Was this incorrect? Also, can a Chase card (ie.Southwest) be used to pay taxes and get credit toward the spend req. for sign-up bonus?

Did this last year with two cards to meet min. spend. Now that I have an Amex Business Platinum I’m wondering if taxes can trigger the 1.5 points per dollar for purchases over $5000?

Author

Hi J. Galt – I don’t see why it wouldn’t; it’s treated like any other purchase.

Does Pay1040 allow to pay even state taxes for North Carolina? Are they a licensed partner with state revenue departments? Please advise.

Author

Hi John – Pay1040 is for federal taxes. I’m not familiar with North Carolina state taxes – their department of revenue website would be a good starting point to find out your payment options.

I pay my quarterly estimated tax with multiple $500 Mastercard debit gift cards. Depending on how much have to pay, you can save a lot this way. Best way is to use a category bonus or online cashback portal to buy the gift card for free or at a about $20 profit (e.g. this quarters Discover grocery store 5% or Altitude Reserve digital wallet bonus). Then, pay your tax with an IRS approved site with a flat debit fee that works out to less than 1%.

Can you use unlimited debit cards or are you limited to 2 per 1040 form (like the limit on credit card charges)?

I think most (all?) payment providers allow 2 per quarter. IRS has no limit. So, if you used 3 different providers you could submit about $3,000 in payments per quarter based on $500 gift card value.

5% – about 1% gift card fee – about 1% debit fee = 3% profit! This is definitely the best way to pay tax! Thank you Nathan.

Author

Hi Nathan – That’s a good tip. Thanks for sharing.

I used my Credit Card last year to make an estimate payment in case I owed taxes. It was quick and an easy way to help meet the minimum spend.

Author

Hi chris – That’s great! Thanks for sharing.