April 15. The day for the deadline of tax payments. However, if you are a freelancer or self-employed, then you will have to make an estimated tax payments every three months, with the late payment due on January 15.
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You might want to consider charging your taxes so that you are able to earn points, miles, or cash back if you are playing around with credit card rewards. However, there is also a cost when it comes to using your credit card. In this guide, we will cover the many pros and cons of paying your taxed with your credit card.
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Table of Contents
Choose Which Way To Pay Your Taxes
There are many ways in which you can make tax payments to the federal government. This include checks by mail and via debit or credit card. To process debit and credit card payments, the IRS authorizes three different companies:
|Debit Fee: $2.55||Debit Fee: $2.58||Debit Fee: $2.00 or $3.95*|
|Credit Fee: 1.96%
|Credit Fee: 1.87%
|Credit Fee: 1.87%
Paying By Check
The least expensive way to pay your taxes is mailing a check to the IRS. There is no “convenience” fee. The only cost is to provide the envelope ad stamp
Paying By Debit Card
When paying your taxes with a debit card, it involves a flat convenience fee that cost between $2 to $3.95. It depends on the payment processer that you choose and whether your tax payment is over $1,000. This is one of way to pay your taxes that is inexpensive because your fee will always be less than $4.
Paying By Credit Card
The method of paying your taxes using a credit card comes with convenience fee. This is a percentage of the tax amount. The fee costs are between 1.87% to 1.99%.
Besides credit cards, all three processors now accept digital wallet payments:
|American Express Checkout||X||X||X|
Why You Should Pay Taxes With Your Credit Card
There are advantages when it comes to paying taxes using your credit card, although, it is he most expensive way.
- You will earn reward on your tax payments. This is like any other charge to your rewards card. When using the right card, the value of the points, miles or cash back you earn on your tax payments will overall more than cover the cost of the processing fee.
- Charging your tax payments to your credit card could also bring the sign-up bonuses within reach. This is also the same way for unlocking any card benefits that would require any spending threshold.
- To pay off your taxes over time and without interest, you can used a credit card with interest-free financing on new purchases.
Why You Shouldn’t Pay Taxes With Your Credit Card
The one thing that we do not recommend is financing a tax payment using your credit card if your interest rate is high. As a reminder, if you cannot pay your statement balance in full then do not charge taxes to your credit card. This is unless you have a zero-interest introductory rate.
We advise you to talk to your accountant or tax advisor and go over all of your options. There is a possibility that the IRS will let you make a payment plan with lower interest than most credit cards.
Best Credit Cards For Tax Payments
|Credit Card||Earning Rate||Potential Return|
|The Blue Business® Plus Credit Card from American Express||2X Points||4%|
|American Express EveryDay Credit Card||1X Points||3%|
|The Business Platinum Card® from American Express||1X Points||3%|
|Chase Freedom Unlimited®||1.5% Cash Back||3%|
|Ink Business Unlimited? Credit Card||1.5% Cash Back||3%|
|Discover it Miles Card||1.5X Miles||3%|
|Alliant Visa||2.5% Cash Back||3%|
|Capital One® Venture® Rewards Credit Card||2X Miles||2.8%|
|Capital One® Spark® Cash for Business||2X Miles||2.8%|
The Best Among Those Credit Cards
The Ink Business Unlimited Credit Card offers $750 bonus cash back after you spend $7,500 on purchases in the first 3 months from account opening.
You'll earn an unlimited 1.5% cash back on every purchase made for your business and you'll receive employee cards at no additional cost.
This card carries no annual fee.
The The Business Platinum Card® from American Express has a welcome offer of 120,000 Membership Rewards points after you spend $15,000 on eligible purchases with your Card within the first 3 months of Card Membership.
Plus, 0% Intro APR for 12 months from the date of the account opening on purchases eligible for Pay Over Time. After that, your APR will be 14.24% to 22.24% based on your credit worthiness and other factors as determined at the time of account opening.
• 5X Membership Rewards® points on flights and prepaid hotels on amextravel.com. In addition, you'll get 50% more Membership Rewards® points.
• 1.5X Membership Rewards points on eligible purchases in key business categories, as well as on purchases of $5,000 or more everywhere else. Cap applies.
Get $200 Airline Fee Credit: Get up to $200 in statement credits per calendar year toward baggage fees and more at one qualifying airline.
This card does come with a $595 annual fee ($695 if application is received on or after 01/13/2022). (See Rates & Fees)
With the Blue Business® Plus Credit Card from American Express, you'll get rewarded for business as usual. Earn 15,000 Membership Rewards® points after you spend $3,000 in eligible purchases on the Card within your first 3 months of Card Membership.
Earn 2X Membership Rewards® points on everyday business purchases such as office supplies or client dinners. You'll earn 2X applies to the first $50,000 in purchases per year, 1 point per dollar thereafter. You’ve got the power to use your Card beyond its credit limit* with Expanded Buying Power.
More buying power allows for your business means more opportunities to earn points. That’s everyday business with the Blue Business Plus Card. *The amount you can spend above your credit limit is not unlimited. It adjusts with your use of the Card, your payment history, credit record, financial resources known to American Express, and other factors.
There card comes with no annual fee (See Rates & Fees).
It is solely up to you if you decide to make your tax payment with a credit card. It is a great idea to do so if you can pay your balance in full, your rewards supersede the convenience fee, or if you have 0% intro APR card. Read the information above to review the best options for you.