As the old saying goes, there’s no sure thing in life except death and taxes. And while most people have their taxes withheld by their employer, as a freelance writer I have to make my own tax payments to the IRS. And as a credit card expert, I know there are several advantages to paying those taxes with my credit card.
This strategy only works if you already have the money for your tax bill saved. I can earn rewards like points, miles or cash back by using a credit card to pay my tax bill. I pay at least $10,000 quarterly in taxes, allowing me to earn 30,000 points, or 120,000 points annually.
This year, I chose the Chase Freedom Unlimited® to pay my taxes for a few reasons. Not only does it have a nice welcome bonus, but it also works in tandem with another card that earns Chase Ultimate Rewards points. Using the two together, I knew I'd get a higher value from my rewards.
If you're looking to do the same, here's the method I'd recommend for choosing the right card -- and why I chose the Freedom Unlimited.
Figure out how much paying your taxes with a card will cost
When you pay your taxes with a credit card, you’ll incur a “convenience fee” imposed by the companies that are authorized to accept payments on behalf of the IRS. These fees range from 1.82% to 1.98%.
That fee could be inconsequential depending on your card's rewards program. For example, if your card earns 2% cash back for all purchases, you could cover that cost after paying off the bill.
Why I paid my taxes with the Chase Freedom Unlimited
For me, the primary reason to consider using a credit card to pay for something is to earn rewards. Unfortunately, there are no credit cards that offer elevated rewards for tax payments, so the standard rewards rate will apply.
The Chase Freedom Unlimited, for example, offers 1.5% cash back on general purchases. You might be wondering why I would choose a card with a rate lower than the convenience fee of paying online.
Since I also have the Chase Sapphire Reserve®, I can pool these points as Ultimate Rewards points. Instead of earning the traditional 1 cent per point (which would mean I paid more to use this card to pay my taxes than I received in rewards), I get a value of 1.5 cents per point.
But since I can pool these as Ultimate Rewards points through my Sapphire Reserve card, I get an additional 50% redemption bonus when redeeming them through Chase Travel℠. These points can be transferred between Chase Ultimate Rewards cards.
This means I earned a value of 2.25% back on my tax spending which is significantly more than the convenience fee I was charged to pay my tax bill. If I transfer those rewards to Chase's airline miles or hotel partners, I may be able to redeem them for high-value reservations. I can often get a per-point value of 2 cents or more.
I also applied for this credit card earlier this year when Chase had a limited-time offer to match the points earned during the account’s first year. This means I'll ultimately earn three points per dollar spent, which is worth a minimum of 4.5% back in rewards when redeemed through Chase Travel -- or perhaps much more.
Other credit cards I'd recommend for your tax bill
If you have a Chase card that earns Ultimate Rewards points, using that one or opening another one to pool your points could make sense. Here are a few other options you might consider.
The Business Platinum Card®️ from American Express
The Business Platinum Card®️ from American Express* has a welcome offer of 150,000 points for spending $20,000 on eligible purchases within the first three months. When you make a charge of over $5,000, you earn 1.5 points per dollar (on up to $2 million of these purchases per calendar year). Therefore, a single charge of $20,000 will earn 30,000 points, plus the welcome offer, for a total of at least 180,000 points.
When these points are transferred to airline partners and redeemed for business-class international flights, they can be worth thousands of dollars. There’s a $695 annual fee for this card, but it offers many valuable benefits that compensate for this expense.
Capital One Venture X Rewards Credit Card
The Capital One Venture X Rewards Credit Card* currently offers new applicants 75,000 bonus miles after spending $4,000 on new purchases within three months. However, this card also offers 2x miles on all purchases, so it’s a great choice even for those who are no longer eligible for the welcome bonus.
These miles are worth a minimum of 1 cent each as statement credits toward travel purchases, so you’ll always earn rewards that are worth at least the cost of the fees. But as with American Express points, Capital One miles can be much more valuable when transferred to airline miles and hotel points and redeemed for pricey reservations.
Wells Fargo Reflect®️ Card*
If extending payment is your goal, consider this card that offers an industry-leading 0% introductory APR offer on purchases and qualifying balance transfers for 21 months from account opening (then 18.24%, 24.74%, or 29.99% variable APR), with no annual fee.
The bottom line
You’ll always have to incur a fee to pay your taxes with a credit card, but the advantages can be worth it, and help cover it entirely. By choosing the card that offers the most valuable rewards or the best promotional financing offer, you can take a little bit of the sting out of the inevitable task of paying your taxes.
For rates and fees of the Business Platinum Card from American Express, click here
*All information about the Wells Fargo Reflect Card, Capital One Venture X Credit Card and The Business Platinum Card from American Express has been collected independently by CNET and has not been reviewed by the issuer.
