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The best rewards credit cards for paying your taxes in 2022
Getting hit with a tax bill is never pleasant, but you can make the most of it by paying with the right credit card and earning extra rewards.
Whether you’re hoping to meet a minimum spending requirement to earn a generous credit card welcome bonus or simply looking to earn rewards on your spending, tax season can be an opportunity to boost your cash back, miles, or points balances.
However, there are fees involved, so you’ll want to make sure it’s worth it before you hit pay. You also want to be sure you can pay your card balance in full to avoid interest fees, as they’ll effectively negate the value of any rewards you earn.
Here’s everything you need to know about paying your taxes with a credit card and the best cards to use.
We’re focused here on the rewards and perks that come with each card. These cards won’t be worth it if you’re paying interest or late fees. When using a credit card, it’s important to pay your balance in full each month, make payments on time, and only spend what you can afford to pay.
How to pay taxes with a credit card
You’ll have to pay your taxes through a third-party payment processor if you want to use a credit card, and they all charge credit card processing fees. The IRS uses three different payment processors for paying federal taxes, all of which charge just under 2% and accept all the major credit card payment networks.
I previously paid my quarterly taxes with PayUSATax because they charged a slightly lower fee of 1.96%, which comes out to $19.60 for every $1,000 I had to pay. Last year, when I ended up owing several thousand dollars in taxes, paying with a credit card helped me earn 75,000 points.
Pay1040 currently has the lowest processing fee of the three payment processors, at 1.87% with a $2.50 minimum fee.
You’ll pay through the website and receive payment confirmation in your email along with a confirmation number. It can take about a week for the IRS to post the payment to your account, but the date that your payment is confirmed by the payment processor counts as your payment date.
If you want to pay state taxes or local taxes (like property taxes) with a credit card, you can try seeing if your tax agency accepts credit cards and charges reasonable fees. You can also try paying them with Plastiq, a service that lets you pay almost any merchant with a credit card for a 2.85% fee.
When is it worth it to pay your taxes with a credit card?
The rewards are worth more than the fees you’ll pay
Paying your taxes with a credit card is only worth it if the rewards you’re earning outweigh the fees you’ll pay. Figure out how much you’ll earn in cash back or points — if it’s points, estimate the value of those points — and then calculate how much you’ll have to pay in processing fees.
Read Insider’s guide to points and miles valuations to find out what your airline miles, hotel points, and credit card rewards are worth. Here’s our methodology for assigning a cash value to your rewards.
It’s rare that a credit card offers a high enough rewards rate on a tax payment to net you more than what you’d pay in fees based on that alone. For example, the Chase Freedom Unlimited® is one of the most generous cash-back cards out there, but even earning 1.5% back on regular purchases isn’t enough to make up for a 1.87% processing fee.
That said, if you have a Chase Ultimate Rewards travel card like the Chase Sapphire Reserve® or Chase Sapphire Preferred® Card and transfer rewards to it from the Chase Freedom Unlimited®, it might be worth it, depending on how you redeem your Ultimate Rewards points.
You need help earning a credit card welcome bonus
The most profitable reason to pay your taxes with a credit card is to earn a welcome bonus. Lots of rewards credit cards offer big welcome bonuses to new cardholders, but you usually have to spend a certain amount within a certain timeframe to earn it. Paying your taxes with one of these cards can help you get that much closer to snagging the bonus.
For example, the Ink Business Preferred® Credit Card currently offers 100,000 points after spending $15,000 on purchases in the first 3 months from account opening. That’s a big minimum spending requirement, but if you have a hefty tax bill, it could get you that much closer.
You’re trying to unlock a benefit like the Southwest Companion Pass
There are some rewards credit cards that require you to spend a certain amount in a year to earn some of the card’s more enticing benefits. The Southwest Companion Pass — which lets you take a designated companion with you on paid and award flights for just the cost of taxes and fees — is probably the most coveted. However, you have to earn 125,000 qualifying points in a calendar year to qualify for it.
Any points you earn from a Southwest credit card, including welcome bonuses, count toward this requirement.
Other credit cards offer extra rewards like free hotel nights if you spend enough in a year:
Hilton Honors American Express Surpass® Card — Complimentary weekend night after you spend $15,000 on eligible purchases in a calendar yearHilton Honors American Express Aspire Card — Earn a free weekend night after you spend $60,000 on eligible purchases in a calendar yearThe Hilton Honors American Express Business Card — Complimentary weekend night after you spend $15,000 in a calendar year, and another after you spend a total of $60,000 in a calendar yearThe World Of Hyatt Credit Card — Free night at any Category 1-4 hotel after you spend $15,000 during your cardmember anniversary year
Paying taxes with a credit card in 2022
Here are some of the best credit cards to pay your tax bill and earn valuable rewards that make up for the processing fees.
Citi® Double Cash Card
The Citi® Double Cash Card is a personal card that earns 2% cash back on all purchases (1% when you buy, 1% when you pay your bill). While this alone makes paying your federal taxes marginally profitable, you can get even more value out of this card by transferring your rewards to a Citi card that earns ThankYou points (like the Citi Premier® Card) at a rate of 100 points per dollar.
Read more: Citi Double Cash card review
That means you can effectively earn 2 ThankYou Points per dollar spent on the Citi® Double Cash Card, and depending on how you redeem them, this could yield a good value.
Chase Freedom Unlimited®
The Chase Freedom Unlimited® currently has a welcome offer that can prove quite lucrative for new cardholders. You’ll earn Chase Freedom Unlimited®.
Because tax payments don’t fall into any of the card’s bonus categories, they’d normally earn 1.5% cash back — but with the new cardholder bonus, you could earn a total of 3% cash back on your tax bill, on up to $20,000 in spending the first year.
Read more: Chase Freedom Unlimited card review
Similar to the option with the Citi® Double Cash Card, if you have a Chase travel credit card like the Chase Sapphire Reserve®, Chase Sapphire Preferred® Card, or Ink Business Preferred® Credit Card, you can transfer points from the Chase Freedom Unlimited® to that account and get a higher value for your points on certain redemptions. Chase also has a long list of airline and hotel transfer partners that can help you get up to 3 or 4 cents per point with a strategic transfer.
Capital One Venture X Rewards Credit Card
The new Capital One Venture X Rewards Credit Card offers a massive welcome bonus of Capital One Venture X Rewards Credit Card. With its high minimum spending requirement, it can be worth paying your taxes with this card, because the bonus is worth at least $1,000 in travel. New cardholders can receive up to $200 in statement credits toward vacation rental purchases (like Airbnb and VRBO) made with their card in the first year.
Read more: Capital One Venture X card review
The Capital One Venture X Rewards Credit Card earns 2 miles per dollar on most purchases, including tax payments. Each mile is worth 1 cent in credit toward travel purchases, so you can come out marginally ahead with this card even if you don’t consider the welcome bonus.
It’s packed with premium benefits that can more than offset the Capital One Venture X Rewards Credit Card annual fee, including up to $300 per year in statement credits toward travel booked through Capital One, Priority Pass and Capital One airport lounge access (even for authorized users), a 10,000-mile bonus on each account anniversary (worth $100 in travel), and Visa Infinite travel and purchase benefits.
The Blue Business® Plus Credit Card from American Express
The Blue Business® Plus Credit Card from American Express has no annual fee (See Review) and offers 2x Membership Rewards points for every dollar spent on up to $50,000 in purchases per calendar year (then 1x). It’s also offering a rarely seen welcome bonus: The Blue Business® Plus Credit Card from American Express.
Since you can redeem Membership Rewards points for flights through the Amex Travel Portal at a rate of 1 cent each, that’s at least 2% back, which beats the processing fee by a hair.
Read more: Amex Blue Business Plus card review
However, you can also transfer Membership Rewards points to more than 20 different airline and hotel partners, and this can easily net you 3 or 4 cents per point. This is a small-business card, so you need to qualify as a small-business owner or a freelancer.
Ink Business Preferred® Credit Card
If you’re a fan of Chase Ultimate Rewards points, the Ink Business Preferred® Credit Card is a great option for small-business owners. It’s currently offering a welcome bonus of Ink Business Preferred® Credit Card, which is easy to unlock if you have a substantial tax bill.
Read more: Ink Business Preferred card review
You can redeem points for cash back, transfer them to frequent flyer and hotel loyalty partners, or use them to purchase travel through Chase with a 25% bonus. The card also comes with excellent travel and purchase protections, including cell phone insurance.
The Business Platinum Card® from American Express
While it doesn’t offer a high rewards rate on regular spending, The Business Platinum Card® from American Express currently has one of the most generous welcome bonuses it’s ever offered — 75,000 Membership Rewards® points after you spend $15,000 within your first 3 months of account opening.
Read more: Amex Business Platinum card review
If you need a little help hitting that minimum spending requirement, your tax bill might do the trick. The card also offers 1.5x points on single purchases of $5,000 or more (on up to $2 million of purchases per calendar year across 1.5x categories combined), so if your tax bill is over that amount, your transaction is even more lucrative.
Be careful paying taxes with a credit card
While credit card rewards can be exciting to earn, they can also be dangerous. You should only pay your taxes with a credit card if you can afford to pay off your credit card bill immediately. Carrying a balance from month to month, especially on rewards credit cards with high interest rates, will result in hefty charges and can land you in unmanageable debt.
If you don’t have the money to pay your taxes right away, talk to the agency about setting up a payment plan instead of floating the bill on your credit card.
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