I’m going to owe a lot of money in taxes, too.
- I owe money to the IRS every year, because I don’t like giving the government an interest-free loan of my money.
- I’ll be paying my taxes with a credit card this year so I earn credit card rewards.
Every year, I owe the IRS money. I do this because I’d rather slightly under-pay my taxes rather than overpaying them. I don’t like to give the government an interest-free loan of my money or make my cash inaccessible to me throughout the year until refund time comes along.
Since I’ll need to send funds to the IRS when I submit my tax returns, I have to decide how to pay the money. And, for me, it’s a no-brainer. I’ll be using my credit card in 2023 to pay my 2022 taxes, just as I have done every year for the past few years.
There’s a simple reason why I’m putting my taxes on a credit card
When I make my tax payment, I will be putting the amount on a credit card because doing so will enable me to earn credit card rewards.
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Now, there is a fee for paying taxes using a credit card. There are a few different services available that you can use to charge your taxes, but the cost for them ranges from 1.85% to 1.98%. I choose the cheapest one every year, but I have to take this cost into account when deciding if paying my taxes on a card is worth it.
Fortunately, I have a credit card that gives me 2.62% cash back on all of the purchases I make. I get these extra rewards because I’m part of the card’s loyalty program since I have quite a bit of money in a bank account and brokerage account affiliated with the card issuer.
Since the rewards I can earn exceed the fee that I pay for paying my taxes with a card, it’s absolutely worthwhile for me to charge my taxes and get that extra cash back. And this would be true for me even if my card wasn’t so generous and I got just 2% cash back. That’s because it’s really easy to pay my taxes with a card and there’s no real downside to doing so, so I figure why not get the rewards on offer.
Since I usually owe quite a bit of money when I end up submitting my tax forms, even that little bit of cash back ends up making a difference. And, since I pay off my credit card balance in full before I end up owing interest, the rewards I earn are essentially free money in my pocket just for doing something I’d have to do anyway.
Other reasons to pay taxes with a card
There are a lot of good reasons to pay taxes with a credit card. If you’re trying to earn a new cardmember sign-up bonus, for example, paying your tax bill could help you to meet the spending requirements.
If you don’t have quite enough money to fully pay your tax bill when it’s due, paying your taxes on a card offering a 0% APR for purchases for a set period of time (such as 12 months) can also allow you more time to cover the costs without interest charges.
Ultimately, though, you do need to remember there’s a fee involved — and you don’t want to pay interest on your tax bill — so think carefully to decide if paying your taxes with a credit card makes sense for you.
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