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Nobody enjoys tax season, but it’s one of those necessary annual pop-ups that we all go through together. While tax season blossoms in tandem with daffodils and tulips, we typically garner far less gratification from doing our taxes than we do from collecting a colorful bunch of flowers. 

Nevertheless, there is a sunny side to tax season. If done correctly, you may stand to earn a fair bit of points and miles by using a credit card to pay your taxes. Before you know it, you’ll be able to book a much-needed vacation using the extra points and miles you earn.

If this sounds like a good deal to you, read on!

How to Pay Taxes With a Credit Card

Previously, we’ve talked about using Plastiq to pay any bills you have that don’t accept credit cards. You could use Plastiq to pay your taxes with its 2.85% processing fee, but there are three payment processors offered on the IRS website with fees between 1.87% and 1.98% of the total payment.

Payment Processor Options

Each payment processor has its own fee structure for both debit card and credit card payments. Additionally, each accepts a number of digital wallet payments.

ProcessorDebit Card FeeCredit Card FeeDigital Wallets Accepted
Pay1040.com$2.50 Flat Fee1.87%; $2.50 minimumVisa, Mastercard, Discover, American Express, STAR, Pulse, NYCE, Accel, AFFN, Cirrus, Interlink, Jeanie, Shazam, Maestro; Click to Pay
PayUSAtax.com$2.55 Flat Fee1.96%; $2.69 minimumVisa, Mastercard, Discover, American Express, STAR, Pulse, NYCE, Accel; PayPal, Click to Pay
ACIPayOnline.com$2.20 Flat Fee1.98%; $2.50 minimumVisa, Mastercard, Discover, American Express, STAR, Pulse, NYCE; PayPal, Click to Pay; Pay With Cash

Using Pay1040 is the best option if you’re paying with a credit card as it has the lowest processing fee at 1.87%. This will be the easiest fee to offset with the rewards earned from a credit card. 

For those paying quarterly estimated taxes, you can make two payments per quarter as well as two payments for your annual payment. While not officially stated, this two-payment limit seems to be per processor. Although this might not be necessary for most, it might be useful to a few of you who submit multiple payments.

None of these options will hit you with a cash advance fee so you can rest assured that you will earn points.

Why Should You Pay Taxes With A Credit Card?

When it comes to earning points and miles, taxes are no different than any other large purchase you can use as a good earning potential. With fees ranging from 1.87% to 1.98%, there is ample opportunity to offset the fee with the rewards you can earn. If you can make the numbers work for you, why let this opportunity pass you by?

In case you aren’t convinced yet, here is a list of the perks of using your credit card to pay your taxes this year.

Knock Out a Minimum-Spending Requirement to Earn a Welcome Bonus

Without a doubt, earning a sign-up or welcome bonus when paying taxes with a credit card is going to yield the best return. If you’ve played your cards right (literally), you might consider opening a new account in early spring and taking care of the welcome bonus immediately upon filing your taxes. 

This can be especially useful when working on a higher minimum-spending requirement for cards like the Business® Platinum Card from American Express.

Earn Valuable Miles and Points

If you’re not working toward a minimum spend, one card stands out as the best option for paying taxes: the Blue Business® Plus Credit Card from American Express. Every year, you will earn 2X Membership Rewards points per dollar on up to $50,000 per calendar year and 1X thereafter.

The American Express Blue Business Cash™ Card earns 2% cash back on the first $50,000 in annual spending (and 1% back thereafter).

If you’re OK with waiting a little while for your bonus, the Citi Double Cash Card offers 2X ThankYou Points per dollar, but you earn 1X point when you spend and 1X point when you pay off your balance.

It’s best practice to pay your bills in full anyway, and Citi has a great way to incentivize that. These points can be redeemed for cash back at a rate of 1 cent per point, meaning you’re effectively earning 2% cash back. This means you’ll come out slightly ahead when using any of the three IRS-authorized payment processors. 

You also have a few options for earning 1.5X points per dollar. With the Chase Freedom Unlimited®, you can earn valuable Ultimate Rewards points, which can be transferred to airline and hotel partners if you also have the Chase Sapphire Reserve®, the Chase Sapphire Preferred® Card or the Chase Ink Business Preferred® Credit Card.

Business owners should consider the Business Platinum Card® from American Express as it earns 1.5X on eligible purchases of $5,000 or more on the first $2,000,000 spent per year, and 1X after that

Progress Toward Big Spend Bonuses

In some specific circumstances, it might be worth paying taxes with a credit card that will help you earn a big spend bonus. Several cards provide bonuses once you earn a certain number of points or reach a spend threshold.

Southwest Companion Pass

One of the most popular perks among our readers is the Southwest Companion Pass that allows you to book two-for-one tickets whether you’re paying with cash or booking an award flight. To obtain the Companion Pass, you need to earn 125,000 Rapid Rewards points within a calendar year.

Many people apply for two of the co-branded Southwest cards issued by Chase at the beginning of the year:

  • Southwest Rapid Rewards® Plus Credit Card
  • Southwest Rapid Rewards® Premier Credit Card
  • Southwest Rapid Rewards® Priority Credit Card
  • Southwest Rapid Rewards® Performance Business Credit Card
  • Southwest Rapid Rewards® Premier Business Credit Card

Earning the Southwest Companion Pass early in the year will provide you with the pass for the remainder of the year plus the following year. Sometimes, the sign-up bonuses on two of the cards are high enough to get you the Companion Pass outright, but if not, paying taxes can help you earn the necessary 125,000 Rapid Rewards points.

Elite Status Qualifying Dollar Waiver

This one is for those who travel for work. If your employer is paying for your travel, it sometimes makes sense to pick a carrier and earn elite status. However, most U.S.-based airlines have added spending requirements, so even if you’ve reached the qualifying flight miles requirement, you might not earn elite status.

Delta Air Lines flyers have four credit card options that can provide a waiver of the spend requirement:

  • Delta SkyMiles® Platinum American Express Card
  • Delta SkyMiles® Reserve American Express Card
  • Delta SkyMiles® Platinum Business American Express Card
  • Delta SkyMiles® Reserve Business American Express Card Card

If you spend $25,000 in a calendar year on any of these cards, you will receive a waiver for Delta’s Medallion Qualification Dollars (MQDs) requirement for Silver, Gold or Platinum Medallion status. A waiver for Diamond Medallion status requires you to spend a massive $250,000.

United Airlines has a similar setup with its co-branded cards from Chase. If you spend $25,000, you’ll get a waiver for United’s Premier Qualifying Dollars (PQDs) requirement for Premier Silver, Gold or Platinum status. There isn’t a spend waiver for Premier 1K elite status.

To be clear, these are not going to apply to most travelers. Rarely is chasing status worth it for people in the U.S. unless you travel regularly for work.

Final Thoughts

As demonstrated above, there are several ways to make the most of paying taxes. Using your tax payments to hit a minimum-spending requirement is definitely the top choice, but if that’s not an option right now, you might be able to get some big value by using a credit card that earns 1.5X to 2X points per dollar.

Although tax season isn’t the most wonderful time of the year, it’s an excellent time to leverage the necessary payments to your maximum benefit. By finding a lucrative way to offset credit card fees with big rewards, you’re one step closer to a relaxing vacation in Hawaii where you can forget all about taxes for a while.