By: Spencer Howard, Editor in Chief
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Let’s be honest, no one enjoys tax season. You put in so much effort just to make sure everything is exactly right and you get very little gratification from doing them. Now, I’m not here to give you tax advice so I’ll leave that to a professional.
However, we are going to talk about how you can use credit cards to earn some miles and points on your tax payments. Before you know it, you’ll be using the miles and points you earn to book your next vacation.
Let’s dive in!
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 2.5% processing fee, but there are three payment processors offered on the IRS website with fees between 1.87% and 1.99%.
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.
|Processor||Debit Card Fee||Credit Card Fee||Digital Wallets Accepted|
|Pay1040.com (Link2GovCorporation)||$2.59 flat fee||1.87% fee; minimum $2.59||Visa Checkout, MasterPass, Amex Express Checkout|
|PayUSAtax.com (WorldPay US, Inc.)||$2.58 flat fee||1.97% fee; minimum $2.69||Visa Checkout incl. Android Pay and Samsung Pay, MasterPass, Amex Express Checkout, PayPal|
|OfficialPayments.com/fed (Official Payments)||$2.00 flat fee||1.99% fee; minimum $2.50||Visa Checkout, Amex Express Checkout|
Clearly, using Pay1040 is the best option if you are paying with a credit card as it has the lowest processing fee at 1.87%. This will be the easiest fee to offset when using a credit card.
For those paying quarterly estimated taxes, you can make 2 payments per quarter as well as 2 payments for your annual payment. While not officially stated, this 2 payment limit seems to be per processor. While 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 so you can rest assured that you will earn points.
Why Should You Pay Taxes With A Credit Card?
I don’t know about you but, if I’m going to make any kind of large payment, I’m going to try to earn some miles or points from it and taxes are no different. With fees between 1.87% and 1.99%, we have an opportunity to offset the fee with the rewards we can earn. If you can make the numbers work for you, why let this opportunity pass you by?
Here are some of the best reasons for paying taxes with a credit card.
Knock Out A Minimum Spend Requirement To Earn A Bonus
Without a doubt, earning a sign-up or welcome bonus when paying taxes with a credit card is going to get you the best return. This can be especially useful when working on a higher minimum spend requirement for cards such as the Business Platinum Card from American Express.
Check out our list of top card offers for March for some ideas on the best signup bonuses available right now.
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 up to $50,000 in spend per calendar year.
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, Chase Sapphire Preferred or Chase Ink Business Preferred.
If you don’t have the Blue Business Plus Credit Card, you can potentially earn 1.5X Membership Rewards points with the Amex EveryDay Preferred Credit Card or The Business Platinum Card from American Express OPEN.
To earn 1.5X with the Amex EveryDay Preferred, you must use the card 30 (or more) times during the statement period to get the 50% bonus which brings you to 1.5X. With The Business Platinum Card, you only earn 1.5X if your payment is at least $5,000.
You can read more about these cards and others by visiting our credit cards page.
Progress Toward Big Spend Bonuses
In some very 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 10xTravel readers is the Southwest Companion Pass which allows you to book 2-for-1 tickets whether you’re paying with cash or booking an award flight. To earn the Companion Pass, you need to earn 110,000 Rapid Rewards points within a calendar year.
Many people apply for two of the co-branded Southwest cards—Southwest Rapid Rewards Plus Card, Southwest Rapid Rewards Premier Card, Southwest Rapid Rewards Business Card—provided by Chase at the beginning of the year.
Earning the Southwest Companion Pass at the beginning of 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 hit the necessary 110,000 Rapid Rewards points.
Elite Status Qualifying Dollar Waiver
This one is for those who travel for work. If work is paying for your travel, it sometimes makes sense to pick an airline and earn elite status. However, most airlines in the states have added spend requirements so even if you’ve reached the qualifying flight miles requirement, you might not earn elite status.
For Delta flyers, you have six credit card options that can provide a waiver of the spend requirement:
- Delta Gold SkyMiles Credit Card from American Express
- Platinum Delta SkyMiles Credit Card from American Express
- Delta Reserve Credit Card from American Express
- Gold Delta SkyMiles Business Credit Card from American Express
- Platinum Delta SkyMiles Business Credit Card from American Express
- Delta Reserve for Business Credit Card from American Express
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 status. A waiver for Diamond stats requires you to spend a massive $250,000.
United Airlines has a similar set-up 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, Premier Gold or Premier Platinum status. There isn’t a spend waiver for Premier 1K elite status.
To be clear, these are not going to apply the most travelers. Rarely is chasing status worth it for people in the U.S. unless you have regular work travel.
As you can see, there are several ways that you can make the most of paying taxes. Using your tax payments to hit a minimum spend 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 2X or 1.5X points per dollar.
While you probably aren’t excited these payments, at least you’ll know that they are helping you earn your next award flight or hotel stay—perhaps a relaxing vacation in Hawaii where you can forget all about taxes for awhile.
See You In the Sky,