needs Kasheesh
Using a credit card to pay your taxes may involve extra service fees, but it could still be beneficial for a few reasons.
Key points:
- You can pay taxes by credit card through third-party services or tax software like TurboTax, but not directly on the IRS website.
- It only makes sense to use a credit card to pay your taxes for rewards or sign-up bonuses if those benefits outweigh the processing fees charged.
- There’s a smart way to pay your taxes with a credit card while avoiding paying the credit card fee (more details further down!)
With tax deadlines coming up, you might be wondering if it’s possible to pay taxes with a credit card?
After all, charging your tax bill to a rewards card could earn you cash back, points, or miles toward travel. It may also offer you some extra leeway if you’re not able to pay your taxes right now, if you’re waiting for a paycheck for instance.
Though service fees and extra charges typically apply when using a credit card for taxes, there are times when it can still be worth it–and there are even ways to get around these surcharges. Below, we’ll look at the pros and cons of paying your tax with credit cards.
Your estimated tax payments are generally due as follows:
- For taxes owed from January 1st to March 31st: payment due April 15th
- From April 1st to May 31st: payment due June 15th
- From June 1st to August 31st: payment due September 15th
- From September 1st to December 31st: payment due January 15th of the next year
Can you pay your taxes by credit card?
The short answer: yes, you can pay taxes by credit card, using one of the three IRS-approved third-party payment processors (listed below).
However, unlike check or direct bank transfer payments, credit card payments come with a transaction fee. This fee is calculated as a percentage of your tax amount and depends on the processor you use. There’s also a maximum limit on how many card payments are allowed based on your tax type and how you’re paying.
Costs of paying taxes with a credit or debit card
The IRS works with three approved third-party processors for debit and credit card payments, each with different fee structures:
PayUSAtax.com
- Credit card fee: 1.82% (minimum $2.69)
- Debit card fee: $2.14
- Accepts: Visa, Mastercard, Discover, American Express, and others.
Pay1040.com
- Credit card fee: 1.87% (minimum $2.50)
- Debit card fee: 1.87% or $2.50 (whichever is greater)
- Accepts: Visa, Mastercard, Discover, American Express, and others.
ACI Payments, Inc.
- Credit card fee: 1.98% (minimum $2.50)
- Debit card fee: $2.20
- Accepts: Visa, Mastercard, Discover, American Express, and others.
How to pay taxes with a credit card without paying a credit card fee
If you’re using PayUSAtax.com or ACI Payments, Inc., you’ll notice that their credit card fees and debit card fees differ. The debit card fees are flat rates of $2.14 (PayUSAtax) and $2.20 (ACI Payments), while the credit card fees are a percentage of the total amount you pay, with PayUSAtax charging 1.82% and ACI Payments charging 1.98%.
So say you owe $10,000 in taxes, a 1.82% credit card fee would amount to $182, which is way more than the $2 debit card fee. But there’s a way to get around this issue: the payment service Kasheesh.
Kasheesh lets you split any payment across multiple cards–including credit cards, debit cards, and prepaid gift cards; or any combination of these payment methods. You can split your tax payment across up to five cards, but you can also choose to just use one underlying credit card.
How it works:
- Step 1: Sign up for Kasheesh (it’s free) and link the credit cards you want to use.
- Step 2: Generate a digital Kasheesh debit card that acts as a stand-in for the combination of the cards you’ve selected; charging exactly how much you choose to each of your cards.
- Step 3: Use the digital Kasheesh debit card to pay your taxes, and it will automatically charge your underlying credit card(s).
Since the Kasheesh card is a digital debit card the transaction will only incur a debit card fee, and not the hefty credit card fee–however–this part is important: using Kasheesh typically incurs its own 2% transaction fee, but this can be avoided by making the tax payment during a limited time “no fee” promotion period — like this promotion for example.
Kasheesh regularly (typically monthly) runs no fee promotions where your fees will be refunded if you spend over $500 in a month. By timing your tax payment with one of these no fee promotions you can effectively avoid paying all credit card fees and only have to pay around $2 for the debit card fee.
Benefits of using a credit card for taxes
👍 Extend your time to pay off taxes
By using a credit card, you can delay the actual payment. If you make the tax payment at the start of your billing cycle, you’ll have nearly 60 days to pay off the balance without interest. Some credit cards also offer 0% APR for an introductory period, giving you more time to pay off your tax bill without interest.
👍 Earn rewards points or cash back
When you pay taxes with a rewards credit card, you can earn cash back, points, or travel miles. For example, if you owe $1,000 and use PayUSAtax.com, you'll face an $18.20 fee (1.82%). If your credit card offers 2% cash back, you'd earn $20, enough to offset the fee and come out ahead.
If you owe more, the benefits increase. And if you use the hack mentioned above to avoid paying the credit card fee altogether, it’s definitely a win-win.
Plus, this payment might help you hit the spending target needed to earn a welcome bonus on your card, such as $200 cash back after spending $500 in the first three months.
Just be sure to pay off your credit card balance to avoid interest, as those charges could erase any rewards you’ve earned. With annual interest rates around 20-25%, rewards often won't be enough to compensate if you let the credit card balance sit for too long.
👍 Welcome bonus opportunities
Many rewards cards offer sign-up bonuses worth hundreds of dollars or thousands of points if you meet certain spending requirements in a set period. Using your credit card to pay a large tax bill could easily help you reach this spending goal. Some travel cards have high thresholds for their bonuses, so a tax payment could help you unlock those perks.
👍 Meeting credit card spending thresholds
Some cards provide additional benefits once you reach specific spending levels. These rewards may be tied to the calendar year or your account anniversary. Making a large tax payment could push you toward earning extras like elite status or free night awards at hotels.
👍 Maximize rewards by splitting payments across cards
If your tax bill is substantial, you don’t have to put the full amount on one card.
The IRS allows up to two credit or debit card payments per tax period, meaning you can use different cards for separate payments.
For example, say that you owe $30,000 in tax payments. You could consider applying for both the American Express Business Platinum Card and the Ink Business Preferred® Credit Card. By spending $20,000 within three months on the Amex Business Platinum, you would meet the requirement for the 150,000-point sign-up bonus.
Additionally, because the payment exceeds $5,000, you would earn 1.5 points per dollar (up to $2 million annually, then 1 point per dollar after that), giving you 30,000 points on that transaction alone. You could then put the remaining $10,000 on the Ink Business Preferred within the same three-month window, earning its welcome offer along with 8,000 points from everyday spending (1 point per dollar spent).
Altogether, this strategy could potentially land you over $6,000 in travel rewards.
And if you want to pay your tax bill with more than two card payments, you can utilize the payment service Kasheesh–which we’ve mentioned above–to split the payment across up to five payment methods.
This would give you the ultimate flexibility in spreading out the cost of your taxes across different credit cards to maximize points and rewards even further.
Downsides of paying taxes with a credit card
👎 Processing fees
The primary downside to paying taxes with a credit card is the processing fee, which none of the money goes to the IRS. If your rewards don’t outweigh these fees, using a card may not be worthwhile.
But as we’ve mentioned above, there’s now a clever way to bypass the credit card fee by using Kasheesh to pay your taxes while taking advantage of one of Kasheesh’s regular ‘no fee’ promotional periods.
👎 Accruing interest on unpaid balances
Failing to pay off your credit card balance in full can lead to steep interest charges, quickly negating any rewards. It can also harm your credit score.
👎 High credit utilization ratio
Charging taxes to your credit card can increase your credit utilization ratio, which might lower your credit score. A high utilization rate suggests you’re using too much of your available credit, which can hurt your credit standing.
Other ways to pay your taxes
You also have several alternatives to paying taxes with a credit card:
- Direct bank payment: No extra fees apply.
- Wire transfer: May incur fees, but is another option.
- Mail a check: No fees, other than postage.
If you need extra time to pay your taxes, you can file for an extension or set up a payment plan with the IRS, though late fees and interest will apply.
Learn more about what to do if you can’t pay your IRS taxes.
FAQ
Can I use a credit card to pay taxes?
Yes, but you’ll be charged a fee. Consider whether the benefits or rewards you earn make it worthwhile.
Does paying taxes with a credit card affect my credit score?
Not necessarily, but it can indirectly affect your score by increasing your credit utilization, which may impact your credit rating. Avoid maxing out a card by splitting the payment across multiple credit cards.
What’s the best type of credit card to use for tax payments?
A 2% cash-back card is a reliable choice, but travel cards that offer transferable points can provide higher value if you maximize your rewards.
Can I pay any type of tax with a credit card?
You can pay most federal and some state taxes with a credit card, such as income taxes, quarterly estimated payments, and business taxes. However, it’s essential to verify with the tax agency or payment processor to ensure eligibility and review any potential limitations.
Can I pay taxes with my AMEX credit card?
Yes, all three payment processors accept American Express as a payment method.
Are there any limits to how much I can pay with my credit card?
The amount you can pay may be restricted by your card’s credit limit and the rules of the payment processor. Some processors may also impose caps on the amount allowed for tax transactions. If you want to pay part of your tax payment with a credit card that doesn't have enough credit limit available to cover all the taxes owed, use Kasheesh to split the payment across multiple cards.
